Surf Air Mobility reports revenue growth in third quarter 2023

Surf Air Mobility - the air mobility platform transforming regional flying through electrification, has reported its third-quarter results and announced that it remains on track to meet its full-year 2023 guidance. 

BUSINESS HIGHLIGHTS

• Completed public listing on the NYSE, allowing Surf Air to close our merger with Southern Airways and solidify our contractual agreements with strategic partners Textron Aviation, Jetstream Aviation Capital, and GEM Global Yield.
• Confirmed our order with Textron Aviation and paid the deposit for the purchase of 100 Cessna Grand Caravan EX aircraft, with 11 to be delivered into service during 2024.
• Purchased a number of spare engines to mitigate the industry-wide supply chain issues and return the fleet to normal operations over the next one to two quarters.
• Saw a sizable increase in our On-Demand business with 63% growth in flights year-over-year for the third quarter on a pro forma basis, and 55% growth in flights year-over-year for the nine months year-to-date on a pro forma basis.
• Made significant progress on the buildout of our Electrification business by finalizing a data license agreement with Textron Aviation, thus de-risking the electrification timeline.
• Advanced the engineering and design specifications of our electrification program in collaboration with our lead partner, AeroTEC. Additionally, we are actively engaging with supply chain vendors to source the key components for our electrified powertrain.
• Finalized our exclusive sales and marketing agreement with Textron Aviation that Surf Air anticipates will activate a viable channel to significant market share with our electrified powertrains.
• Forged a partnership with REGENT – a company pioneering all-electric Seaglider airships – to be their launch customer in Hawaii, and to establish a base of operations for passenger service in South Florida, the Bahamas, and the Caribbean.
• Restructured our funding facility with GEM with new terms providing more flexibility in how, and when, Surf Air makes cash draws, providing on-going access to up to $400 million of capital.

“We are making solid progress toward our long-term goal of expanding the airline network and advancing our electrified aircraft program with proprietary powertrain technology. Over time, this will enable us to bring other innovative electric aircraft to market, lowering operating costs and driving growth for the entire regional air mobility market,” said Stan Little, Surf Air’s chief executive officer.

THIRD QUARTER FINANCIAL HIGHLIGHTS

Our acquisition of Southern Airways closed on July 27, 2023, and Surf Air Mobility has reflected the results of Southern Airways operations in our financial statements included in our quarterly report Form 10-Q as of the acquisition date according to GAAP. Additionally, Surf Air Mobility is providing unaudited pro forma results for the period ended September 30, 2023, on a quarterly and year-to-date basis, which assumes the Southern acquisition closed as of the beginning of the fiscal year.

• Revenue
  • GAAP revenue of $21.9 million and Pro forma1 revenue of $28.9 million for 3Q23, up 6.2% year-over-year on a pro forma basis, and GAAP revenue of $33.7 million and Pro forma1 revenue of $85.4 million for the nine months year-to-date, up 17.3% year-over-year on a pro forma basis.
• Net Loss
  • GAAP Net loss of $(74.6) million for 3Q23, compared to $(21.1) million for the same period of the prior year. GAAP Net loss of $(139.7) million for nine months year-to-date, compared to $(50.5) million for the same period of the prior year.
  • Pro forma Net loss of $(50.8) million for 3Q23, compared to $(13.3) million for the same period of the prior year. Pro forma Net loss of $(77.5) million for nine months year-to-date, compared to $(72.1) million for the same period of the prior year.
• Pro forma Adjusted EBITDA2
  • Pro forma Adjusted EBITDA of $(14.7) million for 3Q23, compared to $(10.2) million for the same period of the prior year.
  • Pro forma Adjusted EBITDA of $(32.5) million for nine months year-to-date, compared to $(25.8) million for the same period of the prior year.
  • See the Pro forma Adjusted EBITDA table for the reconciliation from Pro forma Net Loss to Pro forma Adjusted EBITDA.

Unaudited Condensed Consolidated Balance Sheets as of September 30, 2023 and December 31, 2022:

		September 30, 2023				December 31, 2022
Assets:
Current assets:
Cash		$	5,916			$	6
Accounts receivable, net			3,916				161
Prepaid expenses and other current assets			18,202				7,755
Total current assets			28,034				7,922
Restricted cash			909				906
Property and equipment, net			49,223				624
Intangible assets, net and other assets			34,568				3,102
Operating lease right-of-use assets			13,161				1,143
Finance lease right-of-use assets			1,415				—
Goodwill			58,164				—
Total assets		$	185,474			$	13,697
Liabilities, Redeemable Convertible Preferred Shares and Shareholders’ Deficit:
Current liabilities:
Accounts payable		$	19,998			$	12,891
Accrued expenses and other current liabilities			46,379				14,740
Deferred revenue			16,365				7,820
Current maturities of long-term debt			2,942				—
Operating lease liabilities, current			4,306				903
Finance lease liabilities, current			228				—
SAFE notes at fair value, current			27				149
Convertible notes at fair value, current			—				15,948
Due to related parties, current			14,237				4,947
Total current liabilities		$	104,482			$	57,398
Long-term debt, net of current maturities		$	23,566			$	—
Convertible notes at fair value, long term			7,544				13,148
Operating lease liabilities, long term			6,286				246
Finance lease liabilities, long term			1,207				—
SAFE notes at fair value, long term			—				24,565
Due to related parties, long term			1,708				—
Other long-term liabilities			12,383				9,762
Total liabilities		$	157,176			$	105,119
Commitments and contingencies (Note 14):
Redeemable convertible preferred shares $0.001 par value; 0 and 263,459,277 shares authorized as of September 30, 2023 and December 31, 2022, respectively; 0 shares issued and outstanding as of September 30, 2023 and 229,144,283 shares issued and outstanding as of December 31, 2022, respectively; and aggregate liquidation preference of $0 as of September 30, 2023 and $178,608 as of December 31, 2022, respectively		$	—			$	130,667
Shareholders’ equity (deficit):
Class B-6s convertible preferred shares, $0.001 par value; 0 authorized shares as of September 30, 2023 and 98,799,158 authorized shares as of December 31, 2022; 0 shares issued and outstanding as of September 30, 2023 and 71,478,742 shares issued and outstanding as of December 31, 2022, respectively		$	—			$	3,414
Preferred Stock, $0.0001 par value; 10,000,000 shares authorized; 0 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively			—				—
Common shares, $0.0001 par value; 800,000,000 and 35,803,199 shares authorized as of September 30, 2023 and December 31, 2022, respectively; 73,486,976 shares issued and outstanding as of September 30, 2023 and 12,487,438 shares issued and outstanding as of December 31, 2022, respectively			7				1
Additional paid-in capital			519,832				126,335
Accumulated deficit			(491,541	)			(351,839	)
Total shareholders’ equity/(deficit)		$	28,298			$	(222,089	)
Total liabilities, redeemable convertible preferred shares and shareholders’ equity/(deficit)		$	185,474			$	13,697

Unaudited Condensed Consolidated Statements of Operations for the Three Months And Nine Months Ended September 30, 2023: (in thousands, except share and per share data):

		Three Months Ended September 30,								Nine Months Ended September 30,
		2023				2022				2023				2022
Revenue		$	21,967			$	5,082			$	33,669			$	14,378
Operating expenses:
Cost of revenue, exclusive of depreciation and amortization			20,610				6,216				34,309				17,484
Technology and development			2,877				730				4,506				2,188
Sales and marketing			4,529				1,382				7,850				3,645
General and administrative			55,618				7,605				73,354				25,682
Depreciation and amortization			1,356				256				1,875				771
Total operating expenses			84,990				16,189				121,894				49,770
Operating loss		$	(63,023	)		$	(11,107	)		$	(88,225	)		$	(35,392	)
Other income (expense):
Changes in fair value of financial instruments carried at fair value, net		$	(10,926	)		$	(9,748	)		$	(49,426	)		$	(20,052	)
Interest expense			(935	)			(4	)			(1,632	)			(528	)
Gain (loss) on extinguishment of debt			63				—				(326	)			5,951
Other expense			(3,359	)			(281	)			(3,664	)			(519	)
Total other income (expense), net		$	(15,157	)		$	(10,033	)		$	(55,048	)		$	(15,148	)
Loss before income taxes			(78,180	)			(21,140	)			(143,273	)			(50,540	)
Income tax benefit			(3,571	)			—				(3,571	)			—
Net loss		$	(74,609	)		$	(21,140	)		$	(139,702	)		$	(50,540	)
Net loss per share applicable to ordinary shareholders, basic and diluted		$	(1.36	)		$	(1.51	)		$	(5.03	)		$	(3.85	)
Weighted-average number of common shares used in net loss per share applicable to ordinary shareholders, basic and diluted			54,695,009				13,998,411				27,775,172				13,133,743

Unaudited Pro Forma Financial Measures; Revenue, Net Loss, and the Reconciliation of Pro forma Net Loss to Pro forma Adjusted EBITDA for the Three Months and Nine Months Ended September 30, 2023 (in thousands):

		Three Months Ended September 30,								Nine Months Ended September 30,
		2023				2022				2023				2022
Revenue		$	28,882			$	27,197			$	85,446			$	72,849
Net loss		$	(50,751	)		$	(13,314	)		$	(77,542	)		$	(72,133	)

		Three Months Ended September 30,								Nine Months Ended September 30,
(in thousands)		2023				2022				2023				2022
Net loss		$	(50,751	)		$	(13,314	)		$	(77,542	)		$	(72,133	)
Addback:
Depreciation and amortization			2,315				1,916				6,201				5,161
Interest expense			1,127				784				3,730				2,227
Income tax expense (benefit)			(1	)			(22	)			(268	)			(7,244	)
Stock-based compensation expense			32,586				446				35,385				10,447
Share settlement for contract termination			—				—				—				3,175
Changes in fair value of financial instruments carried at fair value			—				—				—				11,111
Transaction costs			—				—				—				21,490
Adjusted EBITDA - Pro forma			(14,724	)			(10,190	)			(32,494	)			(25,766	)