Strata Critical Medical, Inc. Q4 FY2024 earnings call

Management Statement and Operational Highlights

• Profitability: Achieved first full year of adjusted EBITDA profitability with a $17.8 million year-over-year improvement in 2024. Q4 revenue (excluding Canada) increased 22.1% versus the prior year period, Q4 flight profit increased 40% year-over-year, and Q4 adjusted EBITDA rose $4.9 million year-over-year.
• Strategic Initiatives: Announced a strategic partnership with Skyports Infrastructure for a pilot program at the Downtown Manhattan Heliport to gather data on consumer demand. Introduced a new mobile app with enhanced user experience. Medical's organ placement service offering, TOPS, ended 2024 with six contracted customers and a strong sales pipeline. Partnered with OrganOx for the metra machine perfusion device, pre-positioning devices at key Blade aviation hubs.
• Fleet Strategy: Owned fleet provides financial and strategic benefits. Expect to add a low single-digit number of similarly priced aircraft to the fleet over the next year or two.

Segment Performance

• Passenger: Excluding Canada (exited in August 2024), Short Distance revenue increased 18% year-over-year, driven primarily by growth in New York Airport, Leisure, and other US Short Distance. Jet and Other revenue increased 85% year-over-year. Passenger segment adjusted EBITDA margin expanded by over 16 percentage points year-over-year to approach break even, driven by a 630 basis point improvement in Flight Margin and an 18% reduction in Passenger segment adjusted SG&A. The exit from Canada and SG&A cost efficiencies contributed to this profitability improvement.
• Medical: Medical revenue rose 13.7% year-over-year to $36.4 million. Air revenue was primarily driven by trip volume, partially offset by a reduction in block hours per trip. Ground and TOPS also contributed to revenue growth. Medical segment adjusted EBITDA margin improved by over 700 basis points year-over-year to 15.1% in Q4 2024. Sequential revenue increase in Q4 was somewhat less than anticipated due to softer industry transplant volumes.

Guidance

• 2025 Revenue: Expect revenue in the range of $245 million to $265 million and double-digit adjusted EBITDA.
• Passenger: Expect revenue of $90 million to $100 million in 2025, an increase from previous expectations. Low single-digit revenue growth in Short Distance (excluding Canada) and approximately 5%-10% decline in Jet and Other. Expect a low to mid-single digit million dollar increase in passenger segment adjusted EBITDA for 2025 versus 2024.
• Medical: Expect double-digit revenue growth in 2025, but cautious due to industry transplant volume variability. Flat to up year-over-year in the first half of 2025, then returning to double-digit growth in the second half. Medical segment adjusted EBITDA margin expected to be approximately 15% for the year, but could slip below target depending on maintenance timing. Adjusted unallocated corporate expenses and software development expected to decline slightly. Expect positive free cash flow before aircraft acquisitions, but burdened by maintenance spending.

Risks

• Maintenance Downtime: Heavy scheduled maintenance on owned fleet in the first half of 2025 will result in additional maintenance downtime and lower aircraft utilization, potentially impacting margin.
• Macro Impacts: Jet charter volumes are exposed to macro impacts on demand and pricing, affecting guidance visibility.
• eVTOL Deployment Delays: OEMs have pushed back eVTOL deployment schedules, affecting the timing of full commercialization in the US.

Question and Answer

• Q: How are you thinking about catalysts for growth in passenger and medical, and timing of eVTOL passengers? A: Passenger growth via optimizing schedule and pricing; Medical growth via new customers in Q2/Q3 2025. eVTOL likely in the Middle East in Q1 2026, with US full commercialization expected late 2027 to 2028.
• Q: Europe traction, magnitude of improvement? A: Pulled out several million dollars of hard cost in Europe. Winter ski season going well, summer season to watch. Significant driver of passenger segment adjusted EBITDA improvement.
• Q: Passenger margins, seat optimization? A: Continued margin increases via schedule optimization and pricing. Incremental seats on profitable flights contribute near 100% margin. Conscious effort to accelerate profitability by optimizing schedule and pricing.
• Q: Medical maintenance, impact on margins? A: Heavy scheduled maintenance in the first half of 2025 will cause elevated downtime and impact margins. Timing based on aircraft life cycle, and will keep investors appraised of lumpiness.
• Q: Passenger pilot program at Downtown Heliport, data collection? A: Gathering data on passenger flow and viability of the facility to de-risk eVTOL launch. Already have three Manhattan heliports, unique position in NYC.
• Q: Capital allocation between passenger and medical? A: Best deployment on Medical side for large scale M&A. Passenger is profitable, will be opportunistic but not diverting capital needed for medical.