8-K: Surf Air Mobility Reports Full Year 2023 Results, Exceeds Revenue Guidance

Surf Air Mobility announced its full year 2023 financial results, exceeding revenue guidance and achieving adjusted EBITDA targets, while also highlighting key partnerships and technological advancements.

Summary

• Surf Air Mobility reported a full year 2023 GAAP revenue of $60.5 million and a pro forma revenue of $112.9 million, which is a 12% increase year-over-year and exceeded their 2023 guidance.
• The company's full year 2023 GAAP net loss was $(250.7) million, while the pro forma net loss was $(185.0) million, which includes significant investments in research and development, stock-based compensation, impairments, and transaction costs.
• Surf Air Mobility achieved its 2023 guidance for pro forma adjusted EBITDA, reporting a loss of $(50.9) million.
• The company is providing unaudited pro forma results for the fourth quarter and year to date period ended December 31, 2023, which assumes the acquisition of Southern Airways closed as of the beginning of 2022.
• For the first quarter of 2024, Surf Air Mobility expects revenue to be in the range of $28.5 million to $29.5 million and pro forma adjusted EBITDA to be in the range of $(17.0) million to $(14.0) million.

Sentiment

Score: 6

Explanation: The document presents a mixed picture. While the company exceeded revenue guidance and achieved adjusted EBITDA targets, the significant net losses and ongoing operational losses are concerning. The progress in technology development and partnerships is positive, but the risks associated with the company's early stage and reliance on unproven technology temper the overall sentiment.

Positives

• The company exceeded its revenue guidance for 2023, demonstrating strong sales performance.
• Surf Air Mobility achieved its adjusted EBITDA guidance for 2023, indicating effective cost management.
• The company has secured strategic partnerships with Palantir, AeroTEC, Azul, and REGENT, which will drive future growth.
• The company is making significant progress in its electrification initiatives, including the development of a proprietary powertrain technology.
• The company is expanding its route network and securing new service agreements, which will increase revenue.
• The company has strengthened its management team with the appointment of a new CFO.
• The company has secured MOUs with multiple African operators for its electrification technology, indicating strong market interest.

Negatives

• The company reported a significant GAAP net loss of $(250.7) million for the full year 2023, indicating substantial expenses.
• The pro forma net loss for the full year 2023 was $(185.0) million, which is still a substantial loss.
• The company's pro forma adjusted EBITDA was a loss of $(50.9) million for the full year 2023, indicating ongoing operational losses.
• The GAAP net loss for the fourth quarter of 2023 was $(110.5) million, a significant increase compared to $(23.8) million in the same period of the prior year.
• The pro forma net loss for the fourth quarter of 2023 was $(107.4) million, a significant increase compared to $(19.4) million in the same period of the prior year.
• The pro forma adjusted EBITDA for the fourth quarter of 2023 was $(18.4) million, compared to $(12.6) million for the same period of the prior year, indicating increased losses.

Risks

• The company's future ability to pay contractual obligations and maintain liquidity depends on operating performance, cash flow, and securing adequate financing.
• Surf Air Mobility has a limited operating history and has not yet manufactured any hybrid-electric or fully-electric aircraft.
• The powertrain technology the company plans to develop does not yet exist, posing a significant technological risk.
• The company is dependent on third-party partners and suppliers for components and collaboration, which could lead to interruptions or delays.
• The company may face challenges in executing its business objectives and growth strategies.
• The company's customers may not be able to pay for its services, impacting revenue.
• The company may not be able to obtain additional financing or access capital markets on acceptable terms.
• The company is subject to legal proceedings and changes in applicable laws and regulations.
• The company faces risks related to forecasting demand, managing inventory, and potential accidents or incidents involving hybrid-electric or fully-electric aircraft.

Future Outlook

Surf Air Mobility is focused on balancing growth with profitability, expense reduction, and disciplined capital allocation in 2024, with full-year 2024 guidance to be provided at its Investor Day on June 7, 2024.

Management Comments

• We are pleased to have beat our revenue guidance and achieved our Adjusted EBITDA guidance for the year.
• We've achieved two significant milestones: our direct listing on the NYSE and the completion of our merger with Southern Airways.
• We have also advanced our growth pillars of expanding our leading regional airline network and developing a proprietary powertrain technology to electrify smaller aircraft, said Stan Little, Surf Air Mobilitys Chief Executive Officer.
• Looking ahead in 2024 we are focused on balancing growth with profitability, expense reduction, and disciplined capital allocation centered around high ROI opportunities, including potential route expansions, stated Surf Air Mobility Chief Financial Officer, Oliver Reeves.

Industry Context

This announcement highlights Surf Air Mobility's efforts to establish itself as a leader in the emerging electric regional air mobility market, with a focus on both airline operations and technology development. The partnerships with companies like Palantir and the MOUs with various operators indicate a push towards industry collaboration and adoption of their technology.

Comparison to Industry Standards

• Surf Air Mobility's revenue growth of 12% year-over-year is a positive sign, but the significant net losses are concerning when compared to established airlines.
• The company's focus on electrification is a differentiator, but the technology is still in development, unlike companies like Joby Aviation and Archer Aviation which are further along in their electric aircraft development.
• The pro forma adjusted EBITDA loss of $(50.9) million is substantial compared to more mature airlines, but is expected for a company in the early stages of technology development and expansion.
• The partnerships with Palantir and other technology companies are similar to other tech-focused aviation companies, but the success of these partnerships will be key to future growth.
• The MOUs with African operators are a positive sign of global interest in their technology, but the actual conversion of these fleets will be a key metric to watch.

Management Changes

Stakeholder Impact

• Shareholders will be impacted by the company's financial performance, particularly the significant net losses.
• Employees will be impacted by the company's growth and technology development initiatives.
• Customers will benefit from the expansion of the route network and the potential for more affordable and sustainable air travel.
• Suppliers and partners will be impacted by the company's technology development and operational needs.
• Creditors will be impacted by the company's ability to meet its financial obligations.

Next Steps

• Surf Air Mobility will provide full-year 2024 guidance at its Investor Day on June 7, 2024.
• The company will continue to advance its electrification initiatives, including vendor selection for key components.
• The company will continue to develop its software platform in partnership with Palantir.
• The company will work to convert the MOUs with African operators into firm contracts.
• The company will continue to expand its route network and secure new service agreements.

Key Dates

Keywords

electric aviation, regional air mobility, Cessna Caravan, electrification, pro forma revenue, adjusted EBITDA, Palantir, Southern Airways, eSTOL aircraft, financial results