Good morning, everyone, and welcome to the Blade Air Mobility Fiscal Second Quarter 2025 Earnings Release Conference Call. This call is being recorded. I will now hand over the call to Matt Schneider, Vice President of Investor Relations and Strategic Finance. Matt, please go ahead.

Thank you for standing by, and welcome to the Blade Air Mobility Conference Call and Webcast for the quarter ended June 30, 2025. We appreciate everyone joining us today. Before we get started, I would like to remind you of the company's forward-looking statement and safe harbor language. Statements made in this conference call that are not historical facts, including statements about future time periods, may be deemed to constitute forward-looking statements within the meaning of the Private Securities Litigation Reform of 1995. These forward-looking statements are subject to risks and uncertainties and actual future results may differ materially from those expressed or implied by the forward-looking statements. We refer you to our SEC filings, including our annual report on Form 10-K filed with the SEC for a more detailed discussion of risk factors that could cause these differences. Any forward-looking statements provided during this conference call are made only as of the date of this call. As stated in our SEC filings, Blade disclaims any intent or obligation to update or revise these forward-looking statements, except as required by law. During today's call, we'll also discuss certain non-GAAP financial measures, which we believe may be useful in evaluating our financial performance. A reconciliation of the most directly historical comparable consolidated GAAP financial measures to those historical non-GAAP financial measures is provided in our earnings press release and investor presentation. Our press release, investor presentation and our Form 10-Q and 10-K filings are available on the Investor Relations section of our website at ir.blade.com. These non-GAAP measures should not be considered in isolation or as a substitute for financial results prepared in accordance with GAAP. Hosting today's call are Rob Wiesenthal, Founder and Chief Executive Officer of Blade; and Will Heyburn, Chief Financial Officer; and Melissa Tomkiel, President. I'll now turn the call over to Rob.

Thank you, Matt, and good morning, everyone. Yesterday, we announced the sale of the Blade Passenger business to Joby Aviation for up to $125 million. This transaction is transformational for both the Blade Passenger business and Blade's Medical division, which will remain a stand-alone publicly traded company and be renamed Strata Critical Medical. It will be a pure-play contractual medical business, operating in rapidly growing markets, uniquely situated to enjoy organic growth as well as an aggressive acquisition strategy. We strongly believe that this is the best path forward to create long-term value for all stakeholders, including employees, customers, partners, and shareholders. Blade's Medical business has grown from 12% of revenue in 2020 to approximately 60% of revenue in 2024, while accounting for approximately 85% of our segment's adjusted EBITDA. Fundamentally, the Passenger and Medical businesses have different growth, investment, and investor profiles. The strength and awareness of Blade as a consumer brand simply overshadows the high-growth and highly profitable nature of our Medical business, and this transaction will unlock the full potential of each business over the coming years. The Blade Passenger sale includes all our passenger operations in the U.S., Europe, including lounges, terminals, as well as the Blade brands. Blade's mission since inception has been to accelerate the transition from traditional rotorcraft to electric aircraft. There is no stronger company than Joby Aviation to help make this mission a reality for the benefit of all stakeholders. Our Medical division has long been our fastest-growing and most profitable business line with no direct reimbursement risk, limited economic sensitivity, and an attractive multiyear growth profile. We believe a stand-alone Blade Medical will appeal to a broader set of investors versus the historical combined company structure. I am confident that the pure-play nature of Strata, combined with the cash war chest that should more than double in size, will enable our stock to enjoy a valuation that represents the strength we have today coupled with the numerous opportunities we have ahead. We have a clear value creation strategy for Strata over the coming years, driven by strong underlying organic growth and a highly focused and disciplined capital allocation strategy, supported by approximately $200 million of cash on the balance sheet pro forma for the upfront portion of the Blade Passenger sale, in addition to up to $35 million to be received within 12 to 18 months based on certain employee retention and financial metrics. Trinity Medical Solutions, the company's operating business in the Medical segment and one of the largest air transfers of human organs for transplant in the United States will remain Strata's wholly owned subsidiary. I will join Joby Aviation as CEO of Blade Air Mobility when the transaction closes, and as the largest individual shareholder of our parent company, I will also serve as Chairman of Strata at closing. Melissa Tomkiel and Will Heyburn have overseen our Medical division for many years and will serve as Co-CEOs of Strata while retaining their General Counsel and CFO roles, respectively, providing a seamless transition for our customers, suppliers and employees. We are very lucky to have them as our Co-CEOs. Importantly, the financial impact of the divestiture is expected to be adjusted EBITDA and free cash flow neutral on a go-forward annualized basis, supported by approximately $7 million in estimated corporate cost efficiencies. I'm also confident that even more economic streamlining opportunities lay ahead. Will and Melissa will talk more about Strata's value creation strategy in a few moments. Lastly, we are announcing this transformation from a position of strength that is reflected in our strong Q2 2025 financial results as Medical revenue accelerated its growth to 18% in Q2 2025 versus the prior year period. With that, I'll turn the call over to Will.

Thank you, Rob. I'm excited for the opportunity to lead Strata alongside Melissa Tomkiel and this exciting next phase of growth for the company. We are laser-focused on executing a multiyear value creation strategy built on, first, continued share gains and product line extensions in the rapidly growing non-correlated markets we serve; and second, a disciplined capital allocation strategy supported by approximately $200 million of cash on the balance sheet pro forma for the upfront proceeds from the Blade Passenger sale. The company may also receive up to an additional $35 million to be received within 12 to 18 months from closing based on certain employee retention and financial metrics. In our core organ transplant market, we expect strong organic growth over the coming years, driven by increasing transplant volumes supported by technology adoption and regulatory changes, continued new customer acquisition and growth in ancillary businesses, including ground and organ placement. As we've talked about before, we see several additional growth opportunities, both within our core organ transplant market and in adjacent markets. There is also a considerable opportunity to deploy capital towards strategic acquisitions to strengthen our core business, growth potential, and earnings power. We're looking forward to providing more detail around our value creation strategy and our actionable M&A pipeline at an Investor Day this fall. Before I walk you through the financial results, I'll turn it over to Melissa for a few remarks.

Thanks, Will. I'm thrilled to help guide Strata as we enter this new phase of growth. Our end-to-end time-critical air logistics platform is second to none and is trusted by more organ transplant hospitals than any other provider. We will remain relentless in supporting our customers, all of whom are engaged in lifesaving work every day. Our 100% contracted customer retention rate over the last 12 months is a testament to this unwavering commitment to the healthcare providers we serve. We're also setting ourselves up for future success as technology continues to revolutionize the art of the possible in organ transplantation. As part of this transaction, Strata is entering into a long-term partnership with Joby through which we will gain access to Joby eVTOL aircraft for medical use, anywhere they have operations. We expect that the quiet capabilities of Joby's aircraft, coupled with its potential to operate at a lower cost than traditional helicopters and other shorter-range aircraft will provide value to Strata customers and a competitive advantage for the company. In the meantime, we will provide the industry-leading service we are known for using conventional aircraft, managing costs down and improving callout times for the hospitals we serve by moving aircraft closer to their facility. We'll also continue to broaden our support for all the incredible new organ preservation technologies that are available and becoming available soon. Our partnership with OrganOx is a great example of the lengths we will go to, to ensure we can always say yes to our customers' requests to accommodate new technology. We're excited about the multiple avenues for organic growth in the Medical business, including broadening our service offering within our core organ transplant market. We launched TOPS, our organ placement service in late 2023, and we introduced a hand-carry logistics service offering targeted at kidney, a segment of the market that we have had limited participation in historically, and this business has grown significantly year-to-date. I look forward to meeting with many of you over the coming weeks and months to discuss our plans for value creation and the unique opportunities ahead. With that, I'll turn it over to Will to discuss the financial results.

Thanks, Melissa. I'll now walk through the financial highlights from the quarter, starting with Medical. Medical revenues rose 17.6% year-over-year to a record setting $45.1 million in Q2 2025. After a slow start to the year, we saw a strong rebound in the second quarter, driven primarily by new transplant center customers, along with strengthened demand from third-party service providers. The launch of TOPS, our organ placement service, also contributed to revenue growth ahead of the average for the rest of the business this year. Medical segment adjusted EBITDA margin rose to 13.4% in Q2 2025 versus 11.4% in Q1 2025, but declined 100 basis points compared to 14.4% in Q2 2024. This was expected as maintenance downtime and costs remained elevated in the second quarter, driven by the timing of scheduled maintenance events on our own fleet. To provide context, on average, our fleet of 10 aircraft have approximately 3 major inspections, which are called G inspections and 2 engine overhauls per year. In 2025, we have 4 G inspections and 5 engine overhauls scheduled, with these maintenance events weighted towards the first half of the year. Given that our own fleet provides the best unit economics on the P&L and cash basis, elevated maintenance downtime has two negative impacts on our financial results. First, though we continue to perform all trips for our customers as contracted, we must substitute higher cost aircraft from our asset-light network. Second, lower hours on our own fleet results in fixed cost under absorption and a higher fully loaded average cost per flight hour. It's important to recognize that scheduled maintenance downtime will vary from year to year with elevated maintenance downtime in some years and below normal downtime in other years, resulting in the opposite effect, higher fleet uptime and improved fixed cost absorption. We continue to expect an improvement in fleet uptime and Medical segment adjusted EBITDA margins in the second half of the year, and we'll provide more details on the outlook shortly. Turning to our Passenger business, excluding Canada, which we exited in August 2024, short distance revenue decreased 5.5% year-over-year, driven primarily by lower revenue in the U.S. Short Distance segment, partially offset by strength in Europe. U.S. Short Distance revenue was impacted by the New York Tourist helicopter incident in April 2025, along with inclement weather in June, which was an outlier versus previous years, both of which we view as transitory. Encouragingly, we've seen meaningful improvement in U.S. Short Distance performance in July relative to Q2 2025. Following the restructuring of our European operations last fall, we've seen two consecutive quarters of strong revenue growth. We attribute the improving fundamentals in Europe to the realignment of interest with our local partners, along with important operational and commercial changes that have reinvigorated growth and improved the customer experience. In Jet & Other revenue decreased 2% year-over-year, driven by a modest reduction in flight volume and revenue per flight compared with the year-ago period. Despite lower revenue, we continue to see a significant improvement in Passenger segment profitability in Q2 '25 driven by improving flight margins and lower segment adjusted SG&A. Passenger segment flight margin rose 580 basis points year-over-year to 30.5% in Q2 2025, driven by margin expansion in short distance including the restructuring in Europe and our exit from Canada, along with margin improvement in Jet & Other. Passenger segment adjusted SG&A fell 17% year-over-year driven by lower marketing spend in the U.S., the restructuring in Europe and the discontinuation of Canada. Passenger segment adjusted EBITDA tripled year-over-year from $0.8 million to $2.4 million. Moving to adjusted unallocated corporate expense and software development, we continue to focus on cost efficiencies across the business. And during the quarter, expenses declined 2.1% year-over-year. Turning to cash flow, given our strong sequential revenue growth in Q2 2025 of 30% versus Q1 2025, we saw a proportionate increase in working capital during the period. The difference between our Q2 2025 adjusted EBITDA of $3.2 million and cash from operations of negative $3.1 million in the quarter was primarily driven by a $7 million increase in working capital, partially offset by an increase in deferred revenue. It's important to note that our collections remain healthy with days sales outstanding down to 32 days in Q2 2025 compared with 34 days in the year-ago period. Capital expenditures, inclusive of capitalized software development costs, were $2.7 million in the quarter, driven primarily by capitalized aircraft maintenance for approximately $1.8 million and capitalized software development of $0.4 million. Our owned aircraft fleet is unchanged at 10 aircraft, and we remain focused on optimizing the financial and operational performance of the fleet. Given the significant strategic and financial benefits of our owned aircraft, it's possible that we'll add a low single-digit number of aircraft to the fleet over the next year or two, but we are not currently in the process of buying any new aircraft. We ended the quarter with no debt and $113.4 million of cash and short-term investments. Moving on to the outlook, we expect the sale of our Passenger business to be neutral to adjusted EBITDA and free cash flow on a go-forward basis. We expect the loss of Passenger segment adjusted EBITDA to be offset by a reduction in unallocated costs associated with the Passenger business. The seasonality of the Passenger business, where Q3 is typically the strongest quarter of the year, followed by a seasonally weak Q4 could create a modest timing impact in 2025 depending on the exact timing of the transaction close. We will update our revenue and adjusted EBITDA guidance for 2025 after the close of the transaction. For our Medical segment specifically, revenue growth accelerated in Q2 2025, driven by new customer additions, and we've seen this strength continue into July. We expect mid-teens revenue growth in the second half of the year. As discussed previously, Medical segment adjusted EBITDA margins were impacted by elevated scheduled maintenance downtime and costs in the first half of 2025. We continue to expect improved owned fleet uptime and Medical segment adjusted EBITDA margins in the second half of the year with margins of approximately 15%. Given uncertainty on the exact closing time for the passenger divestiture, we are reaffirming our 2025 guidance on a full company basis, excluding the impact of the divestiture. We expect revenue between $245 million and $265 million with double-digit adjusted EBITDA. We will provide guidance for the stand-alone Medical business following the close of the transaction. With that, we'll turn it back over to the operator for Q&A.

Your first question comes from the line of Laura Lee of Deutsche Bank.

So my first question is about with that up to $125 million proceeds from Joby, what are your current priorities for capital allocation to help your growth, either organic or inorganic? And also how confident are we to meet the required milestones or metrics for the $35 million earnout?

It's Rob Wiesenthal. In terms of capital deployment, we see numerous opportunities in mergers and acquisitions that I believe are actionable and can support the growth we aim for in the future. Regarding organic growth, you’re aware of our initiatives with TOPS, and we are also pursuing other verticals like critical cargo. This capital base is essential for elevating the company to where it needs to be for exponential growth, which is a significant opportunity since few companies can match our agility with the strength of our balance sheet. This positions us well to swiftly pursue the M&A deals we identify. I'm optimistic about this. Regarding the performance metrics for some of the holdbacks we assessed with the Board for the transaction, we deemed those achievable, viewing this as a $125 million transaction. While there is some risk involved, we believe we are capable of meeting the required milestones that everyone agrees upon.

And Laura, just some detail on that. About half of the $35 million holdback is related to retention, mostly related to Rob specifically. And then the other half is related to financial performance that is really pegged around just continuing the status quo performance we've had. So we do believe that these are achievable. Obviously, nothing is without risk.

Okay, got you. Just another follow-up on that. Do you see any operational impact from the divestiture to the Medical segment, like in terms of infrastructure, relationships or the operating team, etc.?

No. We think we're set up for success as a stand-alone company. And on the vertical takeoff and landing side, we're entering into a long-term agreement with Joby, both to continue providing access to helicopters in the markets where we use them today, but also on a much more exciting note, providing access to the Joby Aircraft for medical use in any markets that they roll out to. So we think that's actually going to be a huge value add for our customers, given the expected quiet operation of these aircraft, expected to lower cost and also could provide us with a competitive advantage. So we're really excited about the long-term partnership.

These were always two distinct businesses. In fact, if you take a look at what we're saying about EBITDA remaining consistent here, I think there's a lot of opportunity to streamline the operations. Obviously, the operators are staying in Arizona, and we're happy about that. In terms of the kind of business overhead that we need to run the business, I think we really have the opportunity to be extremely lean and efficient. So we feel pretty good about that, and definitely, I see upside.

Your next question comes from the line of Bill Peterson with JPMorgan.

Congrats on the transaction. I have a few questions. I guess, first, starting off, if we think about the Passenger business sale, why now versus maybe a later point when it could have been more profitable? I understand, obviously, you wanted to bolster the Medical, but how long were discussions ongoing to sell this piece of the business? Were there concerns on your previously announced sort eVTOL partnerships, maybe that they'd be too late, or just any sort of additional context on the sale, please?

Sure. I think that, frankly, when I take a look at the stock and listen to investors, it was clear that they were discounting the value of the Passenger business. We were not getting value for it. At the same time, we were unable to invest the kind of capital that I think it needs to grow without hampering the overall earnings of the company. It was just too confusing of a story on the investor side. The opportunity to really be a pure-play medical kind of M&A machine here and to roll up what I view as a pretty fragmented business with high-growth and high-margin prospects was the right move to create shareholder value. And then with regard to why Joby? I think early on, we identified them as the company that we felt had the best path to certification and the capital to execute the right technology, and that would be first to market. I'm unequivocal about that. Up to this point, we were agnostic. We've watched all the other companies out there in terms of what they've been able to get to and what milestones they've hit. I believe they have much more of a head start with respect to getting to the point of flying. We'll be flying in Dubai next year, and hopefully, in the U.S. thereafter. Does that answer your question, Bill? Or do you have any follow-ups?

That answers that part of the question. I want to pivot to the Medical business a bit. I realize you're planning an Investor Day; we'll get a lot more information. But I want to try to get a sense as you look at it today on how you think the growth outlook would look from an organic point of view and then inorganic. How should we think about revenue growth, CAGR, steady-state margins? Just trying to get a sense of your latest snapshot view there.

Yes, it's Bill, Will here. I'm still incredibly enthusiastic about the growth prospects in this industry broadly and for us specifically. We're seeing organic growth supported by all the new technology that we've been talking about on our prior calls. We're seeing more and more providers of organ preservation technology come into the fold, starting to work with hospitals to use that technology, and we're seeing some new therapies as we talked about like NRP, normothermic regional perfusion. It's giving more access to those donors, which previously has been pretty expensive and somewhat risky regarding being able to successfully complete the transplant. All of those things, we believe, are still in the early innings of playing out and becoming more broadly available at an affordable cost for hospitals. We expect to continue to see strong growth in the number of people that are getting successful transplants in America. Then when we think about the specific opportunity for us, this quarter is a good testament to our ability to provide a better value proposition than the competition and win new customers and continue to gain share in this fragmented market. So I think there's still lots of opportunity there. Lastly, just our ability to provide other services to those same customers helps us accelerate our growth. We've seen faster growth in our TOPS program compared to the overall business on average. We'll continue to see those things help us accelerate our growth, which will contribute to our long-term high teens adjusted EBITDA margin target that we still think is readily achievable. Now that we've built the business with more operating leverage from the owned aircraft, the more we fly, the less it will cost us. Our long-term thesis is very much intact, and I'm excited about our opportunities ahead.

If I can just finish up on a near-term and housekeeping question. On the Medical business, how should we think about any seasonality in the business in the third quarter? I'm just trying to get a sense that there is seasonality as you see it today. How is the business trending quarter-to-date? On the housekeeping side, can you speak to any tax implications of the transaction?

Sure, Bill. On the seasonality, look, I wouldn't call it a seasonal business. You do occasionally see a little bit of a slowdown in the summer months driven just by staffing, considering folks being on vacation. We've not seen that quarter-to-date. We had a great July and continue to see similar trends that we saw in Q2. But we have seen in years past a moderate slowdown in the late summer, but have not seen that show up in our numbers yet. On the tax side, we have enough NOLs to offset the capital gain associated with the Passenger divestiture. Assuming we receive that full $125 million of proceeds, we use about one-third of the NOLs that we have. That would leave us with just under $50 million remaining. We can't offset 100% with NOLs, as you know, under the rules, but we would expect the cash tax impact to be a couple of million dollars, something immaterial. So we think we're in great shape on that front.

Okay. I'll pass it on. But again, congratulations on the transaction. Best wishes going forward to the full team.

Thank you, Bill.

The next question comes from Ben Klieve with Lake Street Capital Markets.

Yes, I echo the sentiment. Congratulations on the successful divestiture here. First question is around kind of the process with the divestiture. Rob, you noted how specifically advantaged you believe Joby is in this world. I'm wondering the extent to which the process was kind of a sweeping one where you considered all possible strategics and financial buyers or if you really had kind of a laser-focused view that Joby would be the best able to be a successful partner in this divestiture.

Yes. I think thanks for your question. Since we started this company, the name of the company has never been Blade Helicopters, it was always Blade Air Mobility. We knew we had to make this transition at some point. We were a bit agnostic. We met and worked with pretty much every single OEM out there, both from the major companies like Boeing and others as well as the eVTOL manufacturers. I would say it was definitely a sweeping process that I was personally involved in. It went from everywhere from OEMs to luxury good companies to private equity; you name it. It was clear that the right move for us was to do something with Joby because I truly believe that their time to market, capital, and technology is going to get them and especially with this transaction, to market much sooner than others. As important for the Medical side, I wanted to make sure that we had a partner where there was an actionable strategy in terms of eVTOL because I think it can change the financial architecture of how we fly surgeons and organs in short to mid-range flights. So it really was a two-part decision there.

Got it. That's helpful and good to hear. Second question, and then I'll get back in queue, is around the $7 million of corporate efficiencies you've noted that are going to be going away. Can you kind of characterize what these expenses were? Is this personnel that are going to be going to Joby? Is this internal development cost that you're just backing away from? Just any context there would be great.

Ben, this is Matt. These are just costs that are associated with the Passenger segment that are unallocated expenses. So everything from staff cost to IT cost to portions of the lease costs. Several different categories of costs that are closely related to the operation of the Passenger business.

Thank you. This concludes the question-and-answer session. Thank you for your participation in today's conference. This does conclude the program, and you may now disconnect.