Global Crossing Airlines Group Inc

XTSX:JET

Earnings Call Transcript

[Operator]

Good morning, ladies and gentlemen, and thank you for standing by. Welcome to today's conference call to discuss Global Crossing Airlines Financial results for the first quarter of 2024. [Operator Instructions]. Joining us on the call today are Chris Jamroz, Executive Chairman of Global Crossing Airlines; and the company's President and CFO, Ryan Goepel, please be advised that this conference call will contain statements that are considered forward-looking statements under the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to certain known and unknown risks and uncertainties as well as assumptions that could cause actual results to differ materially from those reflected in these forward-looking statements. These forward-looking statements are also subject to other risks and uncertainties that are described from time to time in the company's filings with the SEC. Please do not place undue reliance on any forward-looking statements, which are being made only as of the date of this call. Except as required by law, the company undertakes no obligation to publicly update or revise any forward-looking statements. The company's presentation also includes certain non-GAAP financial measures, including EBITDA as supplement measures of performance of the business. All non-GAAP measures have been reconciled to most directly comparable GAAP measures in accordance with SEC rules. You will find reconciliation tables and other important information in the earnings press release and Form 8-K furnished to the SEC earlier today, which are currently available on the company's EDGAR page on the SEC website, which will be available on the company's Investor Relations section of its website within approximately 24 hours after this call has ended. And now I would like to turn the call over to the company's Executive Chairman, Chris Jamroz. Chris, please go ahead.

[Christopher Jamroz, executive]

Thank you, operator, and good morning, everyone. Thank you very much for dialing in. Like we spoke last quarter, we expected the first quarter of 2024 to be effectively the beginning of the new chapter in the history in our short corporate history of Global Crossing Airlines. And as you know, since our inception in 2019, we operated with a rather acute focus on driving scale and top line growth. And over the course of the last few years and particularly since 2021, when we became a fully certified airline, we've developed a core competence in rather rapidly deploying new aircraft into revenue charter operations. and the speed to market has become our calling card, and that also enabled us to become effective as the nation's fastest-growing charter airline. And we're very proud of that heritage and obviously, we continue our focus on that. At the same time, like we talked last quarter, it appeared to us that we want to and we owe to focus a lot more on driving profitable growth and sustained profitability, which has really defined our actions we've taken across the business of the last month. Effectively the next quarter would be a more substantive ability we will have a more static ability to talk to you about this in great detail. But at this point, we have really refocused on our core confidence, which is the narrow-body charter ACMI flying which is effectively critical to sustain profitability for us. We have terminated peripheral initiatives, and we have taken significant write-offs this quarter to make sure we have a clean slate with anything that we would deem noncore to our focus on driving sustained profitability. At the same time, as you recall, when I stepped out and appointed Ryan to President, which is a decision that is beginning to pay off very well here. Our mandate is effectively clear and the complete focus on operational excellence, driving sustained profitability initiatives. Again, closing and shutting down anything that would be contrary to that objective of ours. And effectively, we delivered the first quarter, which was a good quarter, particularly when you look at and Ryan will dive into detail from a customer perspective, yield perspective, our ability to command premium based on our reliability of service, but it was very transitional in nature in terms of being a transitional quarter. And we begin to see the fruits of our labor in the end of March, and we don't tell you that April has really been as well fairly descriptive of everything we wanted to focus on. And as I said, Ryan will provide more color momentarily, but I really wanted to reiterate our commitment to delivering on the sustained profitability, which I continue to repeat to the point of nausea, and I recognize that. But we really have set up the basically 2 strategic programs for the business. On-time performance as a reliable carrier and sustained profitability. And these are the sort of the words that are being altered every day across all functions and verticals across the business. And we are very happy with the momentum we're gaining and the results we are going to be delivering on a go-forward basis. So with that, I do want to hand it over to Ryan, our President and CFO, to elaborate further on our strategy and review the Q1 financial highlights. Ryan?

[Ryan Goepel, executive]

Great. Thank you, Chris. As I mentioned this on our last call, but I am honored to be entrusted by the Board to Shepherd Global X to a new stage of profitability and growth. Now turning to our recent operational highlights. We achieved another quarter of significant revenue growth while increasing EBITDAR by approximately 16x compared to the prior year quarter. Our ACMI business delivered the largest contribution to these results, increasing 4x compared to the prior year quarter. As a reminder, in our ACMI business, we provide outsourced cargo and pasture aircraft, crew, maintenance and insurance, while customers assume fuel demand and price risk, we are typically responsible for landing airports and other operational fees. The increase in ACMI was attributable to strong customer demand and ongoing supply shortages. As well, we see an increase in our aircraft fleet and a growth in a key government agency relationship, and we'll discuss more of this later. Memar charter business grew 27% from the year ago period to $34 million. As a reminder, in our Charter business, we provide passenger and cargo aircraft, while the customer pays a fixed fee that covers fuel insurance lending and other operational expenses such as travel. The increase in charter revenue was primarily attributable to the aforementioned growth in our aircraft fleet. Additionally, we booked 5,200 hours during the quarter, a 66% increase compared to the prior year quarter, and our average utilization per aircraft grew 4% on the same period to 416 block hours, representing a modest organic utilization growth on a per aircraft basis. Increased efficiency is more evident when looking at our average revenue per block hour. For ACMI, we generated an average of $6,480 per block hour, which is an increase of 46% from the prior year quarter and average revenue per block hour in the charter increased 19% to 15,468 from approximately 13,000 in Q1 of 2023. Subsequent to quarter end, we announced we had received DOT authorization increased the size of our fleet to 20 aircraft, target we intend to achieve this summer. I'd also like to take a moment to touch upon our strategy, while which Chris alluded to a few minutes ago. Earlier in my career, I was a strategic strategy executive for a nationally recognized Quick service brand, and I often refer back to restaurants when explaining what drives successful execution for a charter airline, as this generally boils down to the same 2 key principles: same-store or in our K, same aircraft growth; and two, cultivating the right relationships to drive predictable and recurring business. Similar to restaurant brands that selected specialization, where they have the capacity to outperform. We deliver our best results when operating as a narrow-body charter airline. With our current operational profile, we believe we can achieve breakeven operations if we had 12 passenger aircraft flying full time with each additional incremental aircraft delivering accretive benefit to our bottom line. In accordance, we have shuttered projects and business ventures that we've deemed noncore to our primary narrowbody passenger and charter cargo charter operations. We expect these actions will not only result in a more streamlined and focused profile for GlobalX will have a direct impact on near-term profitability as a cost associated with these noncore projects are avoided. Additionally, we recognize the importance of establishing repeat business with strategic customers. To further these efforts, we have deepened our relationship with the key government agency that is now utilizing 8 dedicated aircraft with our fleet and chartering over 1,000 ACMI block hours per month. We expect this relationship to provide us with a solid foundation of predictable and reliable revenue as we continue to scale our business. We are still in the early innings of implementing our new strategy. However, we believe we are well positioned to execute on our objectives of growth and profitability. Now turning to our financial results. Please note that all financial results today discussed today are as of March 31, 2024, while Variant's commentary is on a year-over-year basis unless stated otherwise. Revenue increased 67% from to $53.8 million from the $32.2 million in the prior year, driven primarily by higher block hour loan and aircraft fleet expansion as well as continued strong demand for passenger ACMI and charter flights. Looking further into our sales, Charter revenue increased 27% to $34 million compared to $26.7 million. ACMI revenue increased 4x to $18.6 million compared to $4.7 million. All other revenue increased to $1.2 million compared to $700,000 Total operating expenses were $58.4 million compared to $32.3 million, driven primarily by higher aircraft rent maintenance and personnel costs associated with the expansion of our fleet as well as higher travel costs related to government contract. This also includes approximately $1 million of nonoperational expenses and charges related to the unwinding of noncore businesses and other onetime items during the quarter. Net loss was $6.3 million compared to $6.1 million in the year ago quarter. Net loss per share remained unchanged from a year ago at $0.11 per basic and diluted share. EBITDA increased approximately 16x from $9.3 million compared to $600,000 driven primarily by the increase in revenue and prove operating margins, higher average charter rates and higher utilization of aircraft. Turning to liquidity. We ended the quarter with cash and restricted cash of $12.1 million compared to $17.7 million at December 31, 2023. We remain very comfortable with the liquidity position as we have ample runway to execute on our growth objectives and turn cash flow positive. Before concluding and opening the call for Q&A, and I'd like to reiterate a few key themes we've covered today. We have eliminated noncore businesses and now operating with a renewed focus on our core competency as a narrow-body charter airline. This refined focus will enable us to continue to expand our fleet and provide customers with industry-leading service ordering sustainable growth and profitability. We are still in the early stages of this new direction for GlobalX. However, we are well positioned to execute on our plans. We look forward to providing you with an update in the quarters ahead. This concludes our prepared remarks. We'll be glad to answer any questions now. Operator, back to you.

[Unknown Executive]

Thanks, Chris and Ryan, and thanks, everyone, for participating on the conference call. As we gather the queue for live questions, we'd first like to address questions that have come in via e-mail over the past couple of weeks as well as recent as this morning. So kicking off here, Chris, Ryan, can you guys share any color on the changes in demand or customer behavior following the recent iAero bankruptcy early last month?

[Ryan Goepel, executive]

No, I'll take that one. They were a major operator within the charter airline industry. And today, there's an opportunity for the remaining operators to gain share. We believe it will be several months before the impact is fully felt across the market. However, we're already beginning to see some of the early effects of these customers turn to alternative solutions for charter flights. With respect to mobile X, as mentioned in our prepared remarks, we've been able to fulfill additional flights for a key government agency customer that is now flying over 1,000 block hours per month with us. Additionally, we're already seeing price normalization as operators are no longer competing with discounted fares that appeared during the wind down period in Q1.

[Unknown Executive]

Great. And can you give us an update on the state of the cargo business and maybe the cargo market more broadly?

[Ryan Goepel, executive]

Yes, I'll get this one as well. We continue to see long-term opportunity in cargo. But for now, it's a difficult operating environment. The key driver here is going to be capacity coming out of the system as the older aircraft age out of service with some of the larger operators. This is something we're beginning to see, but it's not a uniform process. That said, we have a renewed sales team that's dedicating efforts to win new cargo business, and recent progress has been really encouraging. Overall, we remain positive on the long-term prospects of cargo.

[Christopher Jamroz, executive]

Yes. And I would add to, Ryan, to remark here as well, that our product is a very modern product to service the cargo market that currently is being serviced by or aging aircraft as of a later stage of light aircraft, which predominantly are not particularly fuel efficient. Our new product is extraordinarily fuel efficient and provides a very compelling competitive alternative into the market. So as Ryan said, as we continue to see the aging aircraft being phased out of the service in North America.

[Unknown Executive]

Thanks, Chris. This next one. Last month, you announced the Department of Transportation authorized the approval to expand your fleet to 20 aircraft. Do you plan to continue to rent these aircraft? Or will any of these be purchased?

[Ryan Goepel, executive]

I think I'll take this one as well. So these aircraft will be rented. We are open to the idea of purchasing aircraft down the line, and we believe there could be advantageous aspects of purchasing versus renting. However, do we not see a need to deviate from our current model at this time. We are pleased to receive the DOT authorization to expand our fleet and is, as I mentioned earlier, well positioned to execute the suspension this summer. Specifically, as we think about tail numbers, the serial numbers for the aircraft that we're bringing on board, the next 4 passenger ones will be 3349,3869-3670 and 11:53. So 334 on the ground here with the FAA 3869 is in paint, and we'll move into the FAA approval process as soon as it comes out. And then 3670 will go into the FAA process as soon as 3869 is approved. 1153 we expect to have, and we should hopefully get all those aircraft done by June/July. Again, the FAA process is one that we can't control, but that is the last step in this process. 1,153, which we're hoping to get to August, that's still in the maintenance process, the maintenance cycle, which is a little more unpredictable, but we're hoping to get that in by August. The next aircraft after that is 1938. It's a freighter. We expect to see that sometime in the summer. We'll also be returning on aircraft as it leases expired and the lessors asking to take it back. That's 3605, we'll go back at some point in the summer. So all of that aircraft when you add it together will get us to our 20 aircraft this summer.

[Unknown Executive]

Great. And are you moving forward with the electric commuter flights or the warehouse? You mentioned these were on pause on the last call, but are these some of the discontinued operations that you referenced earlier today.

[Ryan Goepel, executive]

Yes. Well, we performed best when focused on our core competency as a narrowbody charter airline. And if we're able to operate with 12 past aircraft flying full time, we believe we'll be able with achieve breakeven operations. As Chris said earlier, growth even as robust as ours without profitability is unsustainable. But right now, the path to profitable growth is by focusing on what we do best and not getting distracted with business ventures that deviate from our core competency. For those, these reasons, we are no longer pursuing those other ventures at this time.

[Unknown Executive]

Okay. And the last one here for the e-mailed questions. Ryan, you mentioned breakeven operations earlier. Is this something we should expect in 2024?

[Ryan Goepel, executive]

Yes. Thank you for the question. We're not providing formal guidance at this time. Chris and I believe we need to deliver results before making promises to our investors and it's still relatively early in the implementation of our new strategy for GlobalX. That being said, this color we plan to add and provide in future calls.

[Unknown Executive]

Excellent. Operator, do you mind opening it up for live Q&A.

[Operator]

Of course. [Operator Instructions]. Thank you. Our first question comes from the line of Brian Foote with Broadway Capital Management.

[Brian Foote, analyst]

My first question is regarding the upfront expenses that you guys typically break out during the quarter for new pilots, new training, effectively, as you grow the fleet, you have personnel that aren't productive. Is there a number that you could call out related to that for this past quarter?

[Ryan Goepel, executive]

Yes. So I think in the prior quarter, it was around $7 million. We slowed down our hiring in Q1. So when you think about what's training, and I would almost call excess pilots, which is kind of the cost of carrying pilots in excess of the available net aircraft keeping in mind for the quarter, when you look at what our available aircraft were, we effectively only had 10 active passenger and 2 freighter aircraft, even though we had 15 on the books operating. The reason for the difference is one of the pass-through aircraft was in heavy maintenance kind of back to back to back. There's 3 different aircraft that went through it, which we tend to do in the first quarter because we want to have them available for the busy summer. When you look at the freighters, we had 2 aircraft that were busy. We're on the certificate one was in a long-term repair, which we have. So the number you're looking for is around $5 million, which we've alluded to before, would be related to those costs.

[Brian Foote, analyst]

Okay. Great. And if I might have one more. You look at the quarter on a monthly basis sequentially, was there a cash flow breakeven or a cash-generative month or we look at the shape as we exit the quarter and we're in May already, given the number of the plans out there, are you currently cash generative?

[Ryan Goepel, executive]

So when you look at the months, January, February is a little bit of a shorter month, but March was clearly the best month of the 3 and was positive. We're hoping to continue that momentum through April. As we've seen, if you've tracked our block hours, we had about a 30% increase in our block hours of flying in April versus March.

[Brian Foote, analyst]

And just a side question to that. How much of that is attributable to Aero or any other factors in the market? And how much of that nice 30% growth is organic as we classify it?

[Ryan Goepel, executive]

I would say, I think we saw a bit of a pickup in cargo at the end of April, which was great, which is kind of obviously a key focus of us. One of the aspects of Aero kind of going not being available as we're starting to see some of our contracts, they're utilizing existing aircraft more. And so I think a couple of hundred of those hours could be attributable to that, but I think that's also kind of how we see it going forward.

[Operator]

Thank you. There are no further questions at this time. This concludes today's conference call. You may disconnect your phone lines at this time, and have a wonderful day. Thank you for your participation.