Hello, and welcome to the Wheels Up Third Quarter 2021 Earnings Call. My name is Alex, and I will be your operator for today. I will now hand over to Keith Ferguson from Wheels Up. Keith, over to you.

Thank you, and welcome again to Wheels Up's Third Quarter 2021 Earnings Conference Call. Earlier today, we issued a press release announcing our financial results for the period. The release with its supporting tables as well as a copy of today's presentation can be found on our Investor Relations website at wheelsup.com/investors. Please refer to the slides that are disclaimed. Today's presentation contains forward-looking statements based on our current forecasts and expectations of future events. These statements should be considered estimates only, and actual results may differ materially. During today's call, we will refer to non-GAAP financial measures as outlined by SEC guidelines. Unless otherwise noted, all income statement-related financial measures will be non-GAAP other than revenue. Reconciliations of GAAP to non-GAAP financial measures and definitions of non-GAAP financial measures are found within the financial tables of our earnings release and appendix of today's presentation. And with that, I'd like to turn the call over to our Chairman and Chief Executive Officer, Kenny Dichter.

Thank you, Keith, and thanks to all of you for joining us today ahead of Veterans Day, a National Day of remembrance. I wanted to say a special thank you to all of our veterans who have so honorably served our country. We are incredibly fortunate to have many veterans in our ranks, including pilots, mechanics, corporate staff, executive leadership, our Board and, of course, our members. As has been the driving force since we founded Wheels Up, we continued to disrupt private aviation. We are building a technology-driven marketplace platform, connecting robust demand with fragmented supply. This is similar to how Uber disrupted the traditional taxi and limousine market and how Airbnb created value in vacation homes. The unprecedented demand that the private aviation industry is experiencing today and the related stresses it's putting on the available supply further validate our strategy and the tremendous opportunity that exists in the market. We have plenty of positives to recognize this quarter, including our record growth. With our trusted and iconic brand, we are a leading demand generator in our space. Our membership programs and other flight options like shared flights make private aviation more accessible than ever and are resonating with consumers. Our Wheels Up events and exclusive partner benefits continue to add important value to member experience and support retention. In addition, our public listing has given us a very strong balance sheet with over $500 million of cash and essentially zero debt. We are very well positioned to invest in our business and build on our significant first-mover advantage. With that backdrop, let me share some highlights from this morning's earnings release. We reported over $300 million in revenue in the third quarter, setting another quarterly revenue record, up 50% year-over-year. Revenue for the first nine months was nearly $850 million, which is up 75% year-over-year. We are now over 11,000 active members growing 45% year-over-year. In the past twelve months, we have added over 3,500 Active Members. And our Live Flight Legs were up over 50% year-over-year to 19,700 in the quarter. Now with unprecedented demand come supply challenges that are also unprecedented; particularly in the light of COVID-19, supply constraints are an issue for almost all industries, including ours, and have been widely reported on. As consumers, we experience this every day from commodities to durables and luxury goods. These supply challenges were significantly exacerbated during the third quarter, which impacted contribution margin and our profitability. We pride ourselves on providing exceptional service for all of our customers, including members and nonmembers, and they deserve no less given this is the cornerstone of our business. That said, while we believe we have performed better than most this quarter, we haven't met the high expectations that we have set for ourselves and our brand. As much as external factors have driven most of the challenges, we will not rest on that as an excuse. The good news is we believe the challenges are largely in our control, fixable and being addressed today. And with seemingly no end in sight to the continued demand for private aviation from both consumers and businesses, we are more encouraged than ever, but it will take some time and patience to address these supply constraints and increase costs. So let me take a few minutes to explain what we are doing today, starting with our pilots. The biggest gating factor for us today is our ability to hire enough pilots to serve the rapid increase in demand and offset turnover. Unlike some other sectors facing labor shortages that can quickly train and deploy more workers, Wheels Up pilots receive extensive training and must meet stringent qualification requirements. The end result was that we could not fully crew our first-party fleet during the third quarter. This reduced the utility of our fleet versus our prior quarter. Pilot shortages were also experienced by many of the partners we work with. This resulted in less third-party aircraft available to us and increased cost in obtaining that supplemental lift. With regards to addressing the issue for our fleet, we are increasing compensation and benefits for all of our pilots. This includes providing our pilots with the first-ever broad-based equity grant in our industry, one of the incredible benefits we have as being a publicly traded company. Equity provides a unique competitive advantage for us going forward, allowing our pilots to share in the success of the company. Beyond compensation, we are investing in the quality of our travel management program for pilots when they are on duty as we reserve hotels, ground transportation and food. These may sound like simple things, but during and after a long day of flying, they are incredibly important for quality of life. Our pilots represent some of the best-trained, most dynamic individuals in the industry and our frontline with our customers. We want Wheels Up to be their employer of choice. Now let me move to customer service. We always focus on providing the best service possible to our customers. Given heightened demand, we are spending more to secure and lock up third-party aircraft supply. And recently, that has increasingly included providing a significant number of cabin class upgrades to ensure that we can deliver for our customers. While we are looking to add more pilots, we are also investing in our maintenance technicians and facilities in order to return our aircraft back to service faster. We are doing all of this because we know that absorbing some short-term margin pressure makes sense for the long-term value of the company and our brand. Our customers have a very high lifetime value, and we are confident that the technology and operational improvements that we are working on will allow us to continue to unlock that value in the future. Our Core and Business members spend on average over $80,000 per year with us. When you look at our customer cohort spending, you can see how loyal customers spend more money with us year after year. Even better, our newest customers are spending more with us than prior cohorts. These are very consistent trends. We believe the right strategy is to build loyalty for the long term. That's why we made the conscious decision not to raise our cap pricing over the summer. Our customers appreciate our integrity and recognize that one of the key benefits of our membership program is our cap rates. I am pleased to report that our customers are making increasingly long-term commitments to Wheels Up. This is reflected in the strength of our block sales, which were $172 million, up 120% year-over-year, a record for the third quarter. And the fourth quarter is positioned to be even stronger as existing members lock in current rates before our recently announced cap rate pricing increase takes effect on December 1. These block sales provide us great visibility to continued robust demand, and they give us confidence to lock up future supply. Now I want to touch on program changes we recently implemented that you may have seen reported in the press. The bigger changes we were requiring more advanced notice ahead of travel. This will give us more time to schedule and secure capacity. In addition, we are also raising pricing and requiring larger block commitments from our members for the peak day guarantees. These program changes will allow us to prioritize our current resources and support our existing customers while continuing to sell programs that we can confidently deliver to our new customers. The most valuable brands in the world are built by doing the right thing for their customers over the long term and not taking shortcuts in the near term. Let me now turn to highlight several of our recent management additions. The supply-demand imbalance that we are currently experiencing reflects the industry's inability to scale with analog and inefficient processes. What is happening today makes it even more clear that we need to change the way things get done. That's how we are going to unlock supply and enhance margins in the future. In order to be truly disruptive, you need to start with a disruptive management team. To that end, we are augmenting our experienced private aviation industry leadership with world-class expertise in tech and digital marketplaces. Vinayak Hegde joined our company as Chief Marketplace Officer 6 months ago. During this time, I have been extremely impressed by his rigor and business insights that he has brought to the organization. This is the type of leadership we need as the pace of business continues to accelerate. That's why we recently announced he was promoted to President. He has important operational and technology expertise from his years disrupting and innovating industries at Amazon and Airbnb. He is going to bring us to the forefront of technology-driven innovation and automation that is going to significantly improve our access to supply. He will share some details of our technology roadmap in a few minutes. Our new Chief Product Officer, Gene McKenna, has also worked closely with Vinayak in the past. Gene is building products and tools to streamline our backend processes, enhance our user experience and automate our operations. Our new SVP of Pricing and Revenue Management, Julia Zhang, joined us from T-Mobile, one of the biggest disruptors in the wireless space, where she was in charge of Pricing and Supply Chain. There's a lot of opportunity to innovate on pricing and incentivize off-peak flying to smooth demand compression and expand the market. Srikanth Satya, who joined us only a month ago as our Chief Technology Officer, headed a storage division at EMC Dell and also spent meaningful time as an executive at Microsoft and Amazon Web Services. He will lead our technology transformation. On the operations side, we have elevated Gregg Fahrenbruch, who is the CEO of Mountain Aviation to head our first-party operations; Phil Dodyk who was President of TMC, when we acquired them, is now head of our second-party operations which includes aircraft management operations. Their extensive experience having led some of the largest third-party operators in the country will help us immensely moving forward. I'd like to close with a quick update on a couple of other recent initiatives. Our partnership with American Express, offering their members exclusive flight benefits commenced on July 1 and is off to a strong start. We are seeing new flight activity, membership purchases, lot purchases as well as an uptick in our mobile app downloads. The partnership is exceeding our expectations. Our UP For Business initiative is also gaining traction with a strong pipeline. We are seeing success cross-selling to Delta's large base of corporate customers. Our partnership with Delta gives businesses the flexibility to fly both commercial and private. We offer businesses access to a diverse range of aircraft to fit their varying needs. Before I turn the call over to Vinayak Hegde, I want to reiterate how thankful I am for our loyal customers for their patience, understanding and continuing to put their trust in us. I would also like to take a moment to recognize our hard-working team, particularly our pilots for their great work and support of our customers. Vinayak?

Thank you, and I'm delighted to speak with all of you today. Also thank you, Kenny and the Wheels Up Board for having the confidence and faith in me as the President of Wheels Up. It's truly an honor. I joined Wheels Up to execute on the next and arguably the most critical phase of our disruptive strategy, which is to build the industry's first technology-driven marketplace like Amazon, Airbnb and Uber have done. For us, it entails a simple user interface that is easy for customers to search, discover and book. It also means creating an easy way for operators to list their aircraft availability and increase utilization of their fleet. What's incredible is the industry, despite all its complexity, still largely depends on analog and manual processes to operate today. It should be a little surprised that today's strong demand environment has masked the industry's inability to scale expensive assets that are very underutilized through empty repositioning legs, ad hoc maintenance scheduling, efficient communications, resulting in a suboptimal experience both for customers and operators. It is important to understand the logistics of our industry are very complicated. More than half of our customers book within a week of their travel. We fly to thousands of airports. Unlike commercial airlines where schedules are set more than six months in advance, our schedules have to be developed and optimized very close to the departure time of the flights. We have to manage a platter of different aircraft types and sizes. Now you heard Kenny touch on program changes we announced to preserve the integrity of the service we deliver to every customer, whether legacy or new to Wheels Up. And I would like to take a moment to provide some color on what that really means. Supply is the industry's biggest challenge today. So what we are doing is focusing our capacity on our existing customers so that we can provide the best service possible. Most new members from November 1 on will have access to Shared and Hot flights. However, we will have specific full aircraft travel restrictions for 90 days after joining. I want to be clear, these changes were very thoughtful and deliberate based on data and analytics. They were designed to focus on consistently delivering the highest level for our members in a very difficult near-term environment. We'll continue to monitor market conditions and our own supply capabilities and adjust our offerings accordingly, including the potential to allocate specific membership offerings. The reality is our growth has exceeded even our most optimistic expectations and the broader industry is still largely functioning on our analog systems. Let me now turn to our technology initiatives that will unlock more supply in the near future. Specifically, how we will optimize this marketplace by building a trusted platform where supply and demand meet efficiently, providing liquidity to operators with great selection, price and convenience to our customers. We'll do this using data and machine learning to optimize aircraft routing, maintenance and crew schedules, minimizing empty repositioning legs and improving utilization across a fragmented industry of these expensive underutilized assets. Automating and bringing scale to this marketplace will allow us to drive down costs, improve efficiencies and provide world-class customer experiences. We want to do this similarly to what Amazon did during its early stages of growth. We are rolling out several new initiatives this quarter. I'm going to talk about two such initiatives today. First, we're deploying a new operational management system, giving us end-to-end tracking for customer experiences from search to booking to the flight itself. This will enable us to monitor defects, communication delays, data inconsistencies, missing customer data, etc. By providing visibility and priority to our member services organization, we can better ensure each step is successfully executed as we continuously improve our processes. We're already starting to leverage this tool to improve our customer experience. For example, we can now identify flights that are only passenger listed and alert the member to supply the full passenger manifest ahead of time to avoid day-of delays. Second, we're deploying the first version of our customer data platform. This will provide a full view of our service we have provided to each customer, flight history, case and communications history, upgrades and benefits provided. It will give us meaningful insights into customer behavior, enabling us to unearth new opportunities and act on them quickly. For example, we score a customer's propensity to churn and their potential lifetime value. This allows our account management and operational teams to take the right action at the customer level. Going forward, our technology initiatives will run on up cloud services. You may have heard me talk about the importance of a service-oriented architecture. This is a technology platform where all the functions have effectively apps or modules that all plug into one another. This will improve the digital workflows, allow us to scale better and give us the ability to adopt and make changes very quickly. Being agile is an important hallmark of a successful marketplace. Now when I refer to up cloud services, you should understand that Avianis is a component of that which represents our fleet management system, which we now call Up FMS. The FMS is responsible for cruise scheduling, maintenance record keeping, fuel, invoicing, etc. It's essentially the ERP of an aircraft fleet. Last quarter, I mentioned that we successfully migrated our Mountain Aviation fleet to Up FMS. We're continuing to have enhancements and other features before we roll it out to our other certificates. In addition, third-party operators who use Avianis are also testing these new enhancements. Next, I want to update you on our primary goal, which is to build what we call the global aircraft search engine. This will offer a high fidelity view of aircraft locations, crew availability, maintenance scheduling and where that plane needs to be and when. Avianis which again is now Up FMS, is one of the building blocks to creating that system. By the middle of next year, we'll deploy the first generation of that system by having all that information and intelligence, it will significantly improve our ability to schedule and unlock more capacity. We will do that by deploying advanced algorithms to optimize the schedule in seconds rather than human rule sets that we use today. It should provide a faster and more efficient recovery option in the event of an unscheduled maintenance event. It would be an enormous differentiator and critical for our success, including improving profitability. Let me now switch on to our Wheels Up app, the core user interface for our customers. What you see today is the first generation of the Wheels Up app. I'm very happy with the great reviews the app has received so far. And over 50% of our bookings are done through the app today. But clearly, there is a lot we must do to deliver a world-class experience for our members and customers, including continuing to improve the user interface. Foremost, we want to make it easier to use and more relevant with better personalization. Specifically, customers will see improved search and booking capabilities, end-to-end self-service for managing reservations and travel, automated notifications of updates or changes to status on the flight, catering and ground transportation, promotional calendar, partner deals, notices of upcoming events, access to member benefits, community and flight sharing. I want to double-click on the amount of personalization and merchandising we are going to do within the app. The content displayed on the app will be personalized for each customer based on their specific preferences and needs. It will give us more flexibility in our scheduling to gain efficiencies. To give you an example, we may have a customer who has booked to arrive at Truckee Airport in Tahoe at 2:00 p.m. on Friday and another customer doing the search right now to leave Truckee at 1:00 p.m. on the same day. Our feature system will be able to, in real time, recognize the opportunity, offer a benefit to nudge the searching customer towards a slightly later departure from Truckee so we can utilize a single aircraft for both flights, which will allow us to drive utility and efficiency in what is a win-win for everyone. The new app will be built on the service-oriented architecture that I mentioned before. It will enable future enhancements to be delivered much faster than we have in the past. Lastly, we are working closely with our partner at Delta Airlines. Private aviation has different complexities than commercial aviation. But we can benefit from their operational resources and capabilities. For example, we are leveraging their expertise in customer care, maintenance and operations, crew scheduling and adapting it to our marketplace. It is also worth noting that we are on a quest to create a much larger marketplace with optionality to provide more services for our high-value customers, leveraging opportunities to expand into logical adjacencies and forge new partnerships. We have built trusted relationships with our members, and this gives us a unique ability to diversify our offerings well beyond private aviation, leveraging the strength, scale and flexibility of our marketplace platform. That's why it's important to lay the groundwork to build a truly scalable platform. Let me conclude by saying we have an incredible foundation as a leading demand generator in private aviation today. I see a lot of similarities that other marketplaces have been involved with at the earlier stages of their life cycle. All of them had less automation to start with. But through continuous focus on technology, we were able to turn the corner and show the strength in their business model. I'm excited by the opportunities in front of us to improve efficiency and utility and generate significant margins in the future. We just need to execute. And I can tell you the exceptional management team in place today is up for the challenge and you'll see significant improvements in the near future. I wouldn't have come if I didn't see a very real opportunity to generate significant shareholder value. With that, let me turn it over to Eric. Eric?

Thank you, Vinayak. As Kenny noted, we are very pleased with our strong revenue growth this year with third quarter revenue up 55% year-over-year to $302 million. This reflects the unprecedented demand we are experiencing as well as the success of our membership programs and our broad-based delivery capability. Let me start by providing more details about our revenue, which is broken down across four main categories: membership, flight, aircraft management and others. Membership revenue grew 35% year-over-year in the quarter. We believe membership revenue is highly visible and largely recurrent. Given our 80% retention rate for Core and Business members generally and approximately 90% of those Core and Business members that purchase blocks. In the third quarter, we added 860 net new members with active members growing 45% year-over-year. We were very pleased to have crossed 11,000 member thresholds, finishing the quarter with 11,375 Active Members. Our Core and Business offerings with their guaranteed availability and cap rates across all asset classes continue to resonate with the market, particularly as market pricing increased. That was a key driver of growth in the quarter, along with the initial success of our AmEx partnership that Kenny commented on earlier. Kenny and Vinayak touched on the recent changes to our programs. We will essentially be managing near-term membership growth based on our expected ability to deliver. We believe this will be temporary, however, as we execute on our plan to increase our delivery capabilities. Turning to flight revenue. Flight revenue was up 3% sequentially this quarter and up 56% year-over-year. We think the best way to model flight revenue is to multiply Live Flight Legs by Revenue per Live Legs. Live Flight Legs were up 8% sequentially from the second quarter and up 52% year-over-year. We continue to see strong leisure demand and the beginning of a pickup in business in international travel. We also believe there was significant demand from connect nonmembers which we simply could not address during the quarter given the supply constraints. Flight revenue per Live Flight Legs was almost $11,100 for the quarter, up 2% year-over-year and down 5% sequentially, reflecting a higher mix of shorter haul trips on smaller aircraft. This is normal seasonality for the third quarter. Prepaid blocks, which provides visibility into our future flight revenue were $172 million in the quarter, up 120% year-over-year. We expect fourth quarter block sales to be very strong as well and outpace third quarter block sales. That said, please note that the fourth quarter of 2020 was a particularly strong quarter for block sales due to the resumption of the federal excise tax on flight at the beginning of 2021. This pulled forward lost demand into the fourth quarter of 2020. As I mentioned earlier, Core and Business members who buy prepaid blocks typically renew at around 90%. Now approximately 60% of our Core and Business members have a block, up from roughly 50% a year ago. Members who are buying block today are generally able to lock in current cap rates for the duration of their prepaid blocks. Effective December 1, we are implementing a cap rate increase of 8% to 13% on the cabin classes that are most constrained. New and existing members are able to purchase at the old rates and program term through the end of November. Historically, we've raised rates and changed program terms as of January 1 of each year. So this year has changed the month earlier than normal. Switching to aircraft management. Our aircraft management revenue grew 51% year-over-year in the quarter due to a higher mix of pass-through revenue, reflecting higher owner usage of aircraft. We were managing approximately 160 aircraft as of the end of the third quarter, which is down slightly from the prior quarter. As we mentioned during our second quarter call, we are continuing to call legacy management contracts that are not commercially advantageous to us. There are about 20 of those contracts remaining to be worked through. On a positive note, managed charter hours, hours that our members fly on our managed tails were up approximately 40% year-to-date, even on that slightly smaller fleet. We believe that aircraft owners are recognizing how our strong demand generation helps them to monetize their underutilized aircraft. We are encouraged by our healthy sales pipeline for new managed aircraft. We are also actively working on a new product initiative to further highlight our value proposition for aircraft owners. Once we work through the reduction of sales I mentioned, we expect that total aircraft under management will resume growth in 2022. Charter friendly managed aircraft are an increasingly important source of supply for us as it allows us to flex up our capacity at pre-negotiated rate. Our other revenue is a small percentage of our total revenue and represents revenue earned from software, fixed-based operations or FBO, maintenance, aircraft sales and special missions, including defense. Now let me address cost of revenue and margins. Our strategy is to optimize utility and efficiency across all fleets. In essence, to use the right plane in the right place at the right time to minimize repositioning legs and improve profitability. To manage the third-party asset light tail closest to our customer, we will try to utilize the better positioned aircraft. We are going to enable this through the process improvements, technology and automation initiatives that Vinayak described as well as through improved operational and maintenance capabilities. That's how we expect to drive significant margins in the future. In the second quarter of this year, we are much better able to balance our service commitments with our costs, and our contribution margin improved steadily each month during the quarter. However, that trend reversed in the third quarter as higher demand in industry labor, supply and cost pressures compounded. That led to significant margin declines in August and September, which were well beyond expectations. As a result, adjusted contribution margin fell to 6.3% in the third quarter, down from 10.7% in the second quarter. We are now showing contribution and contribution margin on an adjusted basis to exclude equity-based compensation and exclude certain other items that are not indicative of our ongoing operating performance. Prior to us issuing a unique broad-based equity grant for our pilots, the amount of equity-based compensation included in cost of revenue was not significant. We believe that the adjusted contribution calculation conforms more closely to our adjusted EBITDA calculation. We and the aviation industry at large are not immune to the cost pressures and supply constraints impacting most companies across the global economy. Labor and part availability and costs, commodity prices, shipping, fuel and travel costs have all gone up and/or tightened across the board. The largest impact in the quarter was pilot availability, driven by increased competition for experienced pilots. Additionally, maintenance parts and labor constraints resulted in longer return to service time. Combined, these factors led to a significant sequential reduction in our on-fleet utility as we couldn't fly all the aircraft we had available on certain days. As a result, we are forced to rely more on our second-party and third-party fleets. At the same time, some third-party operators with capacity in the spot market took advantage of the limited supply and raised their wholesale pricing upwards of 20% or more. Related to that, we experienced a significant increase in expensive cabin class upgrades as light jets were particularly supply constrained. Again, we absorbed those costs and upgrades as we focused on delivering for our customers. Now let me quantify the impact of these pressures on our margins, and then I will speak to how Wheels Up is addressing each going forward. First, the lower first-party on-fleet utility in the third quarter despite higher demand versus the second quarter impacted our adjusted contribution margin by over 200 basis points. Second, the increase in on-fleet cost per hour, driven by higher input maintenance and labor costs, created an additional roughly 150 basis points headwind. And third, higher cost for third-party supply and complementary cabin class upgrades drove the balance of the margin decline. So let me now walk you through what we're doing to improve adjusted contribution margins going forward. First, we will improve our first-party utility. We are ramping up our pilot recruiting and retention efforts. We believe that our investment in compensation, including recent equity grants, health and wellness and quality-of-life initiatives will create a compelling offering as we look to add and train over 150 pilots over the coming quarters. In addition, we are expanding our in-house maintenance capabilities as we plan to add over 100 aircraft technicians. We also expect to increase our mobile service unit capacity by 50% and institute other process changes to get our aircraft back into service sooner. The fact that we are raising pricing, the capped pricing and program changes effective December 1 will allow us to better price in this market environment and more efficiently match demand with supply. The more immediate impact will be on existing pay-as-you-go members and new members and blocks added after December 1. Third, we are working to secure more third-party capacity by significantly increasing our usage of long-term guaranteed rate programs. We have a unique advantage from the predictability of our customer cohort spending trends and prepaid block sales to lock up supply earlier at better rates than the spot market. GRPs accounted for 40% of our third-party flying in the quarter, and we expect that will continue to increase. Fourth, we expect an increased contribution from our second-party fleet. We are launching several new initiatives, including GRPs for our managed fleet to further incentivize and grow the number of owners that charter their aircraft in our marketplace. And fifth, we are focusing on developing our technology where we'll be looking to hire over 50 software engineers. We believe these investments will generate increased efficiencies across the organization, particularly in our flight operations, customer service and sales and marketing areas. The launch of the global aircraft search engine as Vinayak detailed should be a big step to optimize scheduling and improve profitability. While we will provide our 2022 guidance when we report fourth quarter earnings, we do expect supply constraints to persist in the near term. So as we execute on the strategies I just outlined and others, our adjusted contribution margins will likely be in the low to mid-single digits for the next several quarters. With that said, we still continue to believe we can significantly increase margins in the long term as we execute on our plan. Switching to OpEx. We continue to gain some leverage on our sales and marketing expense as a percentage of revenue. At the same time, we are planning to increase our spending on technology, including capitalized software to execute on our technology initiatives. General and administrative expenses were higher this quarter due to public company costs which should continue to come down over time as a percentage of revenue. Our challenges with our adjusted contribution margin resulted in our adjusted EBITDA decreasing $15.9 million in the quarter compared to last year. Turning to capital expenditures. CapEx was $16.3 million year-to-date, but more than half of that being capitalized software. Free cash flow, defined as cash flow from operations less total capital expenditures, including capitalized software, was a negative $39 million for the quarter. At quarter end, Wheels Up had a strong balance sheet with cash and cash equivalents of $535 million and essentially no debt. With regards to 2021 guidance, given the strength in our revenue in the first nine months of the year, we now expect 2021 revenue to be in a range of $1.115 billion to $1.14 billion. We now expect adjusted EBITDA to be in a range of negative $80 million to negative $90 million for the year. That is largely due to the lower-than-expected adjusted contribution margin we discussed and the cost of the investments that Vinayak outlined. We expect to report a GAAP net loss of between $200 million to $210 million for 2021. Reflected in this range are several non-cash amounts, a $20 million charge related to the earn-out shares and a $35 million expense related to stock-based compensation, which includes accelerated success. The range also reflects a $12 million year-to-date non-cash gain on the fair value of our warrants. Most of these non-cash amounts relate to our transaction and the public listing of our shares. We expect CapEx spending will be at the higher end of our $25 million to $35 million range. In order to support the stronger demand, we will likely acquire some aircraft this quarter. It's worth noting that we also serve as an aircraft broker. Our goal would be to sell at least some of the aircraft we acquired to new owners will allow us to manage or lease back those aircraft. Also, our increased technology-related investments will lead to an increase in capitalized software. From an income tax perspective, we anticipate that we will generate net operating losses for income tax purposes in the near term that may be carried forward indefinitely. In closing, I want to reiterate our Core and Business member retention and lifetime value are very important to the long-term value of the company. That is why we are incurring incremental costs to ensure our customers get the best possible experience in this environment. We are focused on execution to deliver on the promise of our technology-enabled marketplace platform and believe we can significantly increase margins in the long term as a result. With that, thank you all for joining. Let me turn the call back to the operator so we can take your questions.

Our first question for today comes from Sheila Kahyaoglu from Jefferies.

Nice quarter on the revenue side. Maybe few details adjusted EBITDA guidance being lower very nicely in terms of the different components lowering it. So maybe can you talk about the timing of the improvement, given fleet labor, I think you mentioned was 150 basis points that might take a while as you focus on pilots and competition there and some of the supply chain shortages. So kind of how do you expect the improvement post Q4? Because I think Q4 is about a 15% EBITDA loss.

Thank you for the question. Regarding our adjusted EBITDA outlook, we will provide guidance for 2022 next quarter. However, as I mentioned earlier, we expect our contribution margin to decrease to the low to mid-single digits over the next few quarters. Therefore, we anticipate this trend will continue into at least the first half of next year until various factors start to improve. Additionally, we're investing between $20 million to $25 million in pilot programs and $15 million in technology, which will also affect our performance in the fourth quarter and into the start of next year.

Yes. And Sheila, this is Kenny. Thanks for the question. We're taking a long view of the customer here. Ultimately, I believe that this market has plenty of pricing power and elasticity in it. But our membership program, membership has its privileges, and we want to take care of that customer through this transitory period where we're seeing spike in pricing. So again, playing the long game on the member. And I think Eric laid it out nicely.

Yes. No, I hear you on that, Kenny. And I think that's a fair point, you're announcing a price increase of 4% taking effect on December 1. So kind of is that enough? Or do you see more? And how do you think your competitors are changing their price?

Yes. Well, we've already seen our competitors move pricing more drastically than we are. We're moving pricing 8% to 13% where we need to move it, which is in our entry level, the King Air, and the Light Jets. We're leaving our cap rates on the mid and super mid because we have some room there. But the net-net is we want to always provide value. Listen, can somebody argue that Amazon Prime can double their rate on what they charge their customer for that great value and great service? The answer is yes, they probably lose a couple of percentage points, but nothing material. We could move our pricing even higher, but we've made a conscious decision to keep that value on our member really focused on the member. Eric?

Yes. So Sheila, in my remarks, I talked about how the Core members and people that buy blocks after December 1 will see the higher pricing pretty much immediately. But over half of our members have a block today. And I also said during my remarks that we expect very strong fourth quarter block sales as existing members take advantage of this one-month period, where they can buy blocks and build rates. So it's going to take a longer period of time that to kick in.

I'm going to have Vinayak drop a bullet point here. I'm talking about Amazon. Vinayak lived with Amazon and Airbnb through sort of peak surge demand. Vinayak?

Thanks, Kenny. Sheila, I think when it comes to pricing, your question was also on competitors. So we do monitor competitive pricing very closely. We do believe that the opportunity for us with respect to pricing is in the smaller cabin sizes, as we mentioned. Pricing is a big opportunity for us. That is why we are building a team around it. We hired Julia Zhang from T-Mobile who has expertise in both subscription and pricing. So that allows us to figure out like how to price it, not just at the cap level, but an individual trip level that enables us to maximize profitability in the long run, while making sure we are increasing customer lifetime value. But the trick for us is to move on from more static price to automated pricing even though there is a cap, so that we can actually manage the pricing at a per-trip level.

Our next question for today comes from Hunter Keay from Wolfe Research.

Eric, what type of planes are you going to buy in the fourth quarter? How many are you buying? And how are you going to finance the acquisition?

We plan to purchase a few planes this quarter, primarily smaller models. We are not looking at larger aircraft like Globals or Gulfstreams. The amount we are spending will not be substantial. Our guidance for EBITDA and CapEx remains unchanged. We are focusing on investing in long-term GRPs for both our third-party and second-party fleets, which enables us to secure longer-term aircraft from third parties in a very asset-light manner.

Okay. And then how temporary is this initiative to manage the membership? Sorry for the noise in the background. And is there a point where you contemplate maybe closing off to new members until the supply and all catch up like just did?

Yes, this is Kenny. Thanks for the question. What we've done to protect our current membership is we put a moratorium; we're taking new members in, but there's a 90-day delay in when you can book unless you put $200,000 down for non-peak access or $400,000 down for full access. So it's critical that we manage through this transitory period, again, 90 days is where we kind of confer the front end and the back end of the business on operations and took a look at what forecasted demand looks like, and that's the answer for now. But incredibly bullish and look, we're filling demand as we speak, the tens of millions of dollars of demand that we could take in and this is just one way that we're tempering it for our current members, but more importantly, keeping the business open for new business when we believe we can service it the way we service our current.

Our next question for today comes from Gary Prestopino from Barrington Research.

This may be a little bit of a long question, but could you maybe just segment out what these price changes are for the various levels of membership your Connect, Core and Business just so we have that clear as to where we're going here with what you're doing to raise prices?

I want to clarify that we have maintained the current membership pricing. The rates for your program have not changed. I will now turn it over to Eric or Vinayak to provide more details about the pricing changes for the King Air and Light Jet, as well as to recap where we stand with mid-size, super mid-size, and large aircraft.

I'll take it, Vinayak. So in terms of the turboprop, the King Air, essentially we're raising the cap rates 8% effective December 1. For the Light Jet, that's going to be raised 13%. Once again, we're talking about the cap rates. We price each individual trip that could be up to the cap rate or at the cap rate. And then for the midsized jets, we're only raising at $100, which is about 1%. And then we're leaving the super mid and large cabin cap rates as is.

One of the significant advantages is our one-way pricing. This is why we are seeing new customers join and why our retention rates are strong. We are providing exceptional value for our customers. As I mentioned earlier in the call, we could implement further price increases. The market and our members are allowing us the opportunity to do this, and we are committed to it. Eric, if you want to discuss some program changes, or Vinayak, if you'd like to add anything, feel free. Personally, I've been in this business for 21 years, and from a total addressable market and demand perspective, all the public numbers available indicate that we are at historic levels.

Regarding the program changes, we are extending the duration of our calls. This adjustment provides us with more time to align supply and demand. These changes are minor, but as Vinayak mentioned, we have utilized extensive data and analytics to assess this, which will ultimately enhance our profitability.

One challenge we face is that hiring in technology is difficult, and we're focused on assembling a top-tier team. Vinayak, could you elaborate on the role of technology in this context? The way we are structured—with first party, second party, and third party—aims to create a marketplace based on the demand we anticipate for 2022 and 2023, as well as the insights from the industry. Technology will be crucial in unlocking potential in supply, demand, and efficiency. So, Vinayak?

Thank you, Kenny. Regarding pricing technology, we’re developing systems similar to those used by Amazon and Airbnb for competitive price monitoring. This will allow us to track competitor pricing in real-time. There are three main components to our program changes: the call-out period, the pricing Eric mentioned, and minimums for each cabin class, which will also help improve our margins. On the buyer side, as we create the new app, we'll include features that allow us to see real-time trip information for the day. This will enable us to encourage customers to adjust their flight times, enhancing aircraft utilization significantly. With our FMS system, we're building a global aircraft search engine to locate the right planes at the right locations. Our FMS is also utilized by various third-party operators. For example, if someone needs a flight from Las Vegas to Seattle, and there's already a plane headed from Las Vegas to Vancouver, we can match passengers with that flight, which helps to optimize our margins by utilizing empty legs. This global aircraft search capability will maximize returns for operators and increase our supply, and we're very enthusiastic about it.

Our next question comes from Aaron Kessler from Raymond James.

I have a couple of questions regarding M&A opportunities. I assume many competitors are facing similar supply constraints in the industry. Do you see this as a chance to acquire some smaller players in the market and consolidate the space further? Also, could you provide some insight on the weighted average increase in pricing based on your current mix? What does that amount to?

I'll take the first piece. I'll let Eric take the second piece. I might even take a swing at a little piece of the second. But on the first one, listen, our timing on the public offering, we rang the bell on July 14. What did that do? We put $656 million worth of fresh cash on the balance sheet, and we have a public currency. So when you think about the opportunity to do M&A, we have all of the ammunition. I think Eric pointed out, that we have essentially zero debt. We paid off our founding debt on the King Air. So we have tremendous deal capacity. This is a fragmented industry. Again, we're 3% of the $30 billion TAM that exists today. So plenty of fragmented folks here that are small, medium and even large out there for us to look at and partner. And again, when you're talking to an entrepreneur and I get to talk to them all the time in our space. Having currency New York Stock Exchange stock plus capital on the balance sheet, if we have all of the ingredients to do just what you asked, which is look at every M&A opportunity out there; we're focused on asset life which is our folks that have access to airplanes, control the scheduling and we can take that in and look at how that can enhance our fleet overnight. When considering overall pricing for the mid and super mid segments, we occasionally reach the cap, but there is still considerable opportunity to adjust pricing in the mid, super mid, and large categories without affecting our cap rates. While I can't provide an exact figure, it's important to note that about 40% of our core members will experience an increased effect of approximately 12.1% on around 75% of their flights, reflecting a 4% blended increase which aligns with our cap rate. The actual rent increases will not be realized until their blocks expire, meaning the remaining 60% will see these effects more in the latter half of the year and into next year.

Our next question for today comes from Marvin Fong from BTIG.

Most have been asked and answered actually. But perhaps you could give us your view on when you think your pilot shortage might come in the balance and you'd be able to get all the pilots that you want to? Are we thinking by the end of the year? Or will this persist into '23? And then just a question on membership. I mean, do you expect the program changes that you've implemented to the press membership as maybe these people move on to mainline line? Or do you do you expect your membership trend to kind of hold and people to accept the changes you've made?

I'm going to address the first part and then pass it to Vinayak. Regarding the pilots, we provided our first opportunity to all of our control fleet pilots and celebrated that occasion with our pilots and those holding equity and RSUs. As a public company, we have the unique advantage of issuing equity, allowing our pilots to share in the company's success. Given the current demand, we know we need to be more competitive when it comes to our pilots, and we are ready for that. A lot of this is about lifestyle, and we're actively working on developing excellent lifestyle programs and new benefits for our pilots, focusing on everything from their meals to accommodations and various needs while they work hard. Like with the previous M&A question, we are in a great position to strengthen our pilot workforce. We have several hundred requisitions to tackle in the next 30, 60, and 90 days, and we expect to be not only balanced but also well-prepared to have our first-party aircraft staffed as we desire in 2022. Additionally, we plan to enhance our relationships with the 170 owners in our program, particularly the 50 or 60 aircraft that are very charter-friendly, which will give us more control over scheduling.

Yes. Thank you, Kenny. On the back half of the question regarding membership. When we did this price changes, we did it very thoughtfully. We looked at competitive prices. We looked at our membership cohorts. The broader industry, it's well recognized that what is happening in the industry as people said, other competitors are also figuring out their memberships. We announced our program changes thoughtfully while making sure we are delivering outstanding service. We really have two big types of membership, Core membership and Connect membership. What is really happening is more and more customers are seeing a better product market fit with our Core memberships. So while there may be changes to membership patterns with respect to Core and Connect, you're going to see more and more people use our Core memberships and our retention rates, especially when the are blocks are very, very high. So the way we think about it is kind of the total value of our entire membership base, not just the number of members. And we are trying to optimize the total value of our entire membership base. And we believe more and more people are liking our Core membership program. So we may see some movement with respect to Connect versus Core. But overall, we are happy with the growth in membership and retention. Our retention numbers for our Core and Business customers are incredibly high. And we believe that we'll continue to see that as we think through the market in the short and medium term.

I'm going to have Eric give you a bullet or two. One more bullet on that from Eric.

Yes, thank you. There were two main questions. One was about pilots and the timeline. As we've mentioned, we are aiming to hire over 100 pilots in the next few quarters, but we need to consider the training process, which has its own scheduling challenges, and the involvement of a third party that will extend the duration. This is why our contribution margin will be affected in the upcoming quarters. The other question was regarding the membership and its potential decline. For the next two months, we are actively selling memberships, and while there may be some temporary fluctuations, we will evaluate our position at the start of the year to assess supply conditions and whether we can expedite our efforts.

The good news is we're one of the only majors that is open for business and people are looking for programmatic lift into 2022. Yes, the doors are open, and we're welcoming them in. And like I said, with the caveat that over the next two to three months, we're going to govern when they can fly in the short term.

I just wanted to mention that new members, particularly the Core members, will still have access to Shared flights and Hot flights. However, for individual flights, there is a 90-day restriction in place.

Our next question comes from Michael Bellisario from Baird.

Just on that same new member topic. Can you tell how many new private flyers are signing up with you versus someone or some business switching from a competitor?

Yes. We are seeing the total addressable market that we presented publicly starting to materialize. Our partnership with American Express is yielding strong early results, with a significant number of downloads of our app and growing familiarity with Wheels Up. Additionally, I want to highlight our collaboration with Delta. We are actively cross-selling with their business sellers and our UP For Business unit, and there is tremendous interest in our offerings. The evidence of this growth is reflected in the successful early results with American Express and the increased interest and conversion from individuals who were not previously programmatic private flyers over the past year with Delta. I believe this is the beginning of significant expansion.

Got it. That's helpful. And then just on the revenue side, do you have an estimate of how much revenue you had to forego in the quarter and then how that maybe progressed throughout the quarter and so far in October and November? Just really trying to understand how much demand is being that in terms of dollars?

When we analyze the situation, it's not precisely measurable, but we understand who is actively searching and who has restrictions on their memberships, as well as the booking numbers. I estimate that there are tens of millions of dollars that have been lost, and this could be a conservative figure. Considering the industry overall, I believe there are hundreds of millions of dollars across the sector that is still available to be addressed. For instance, when Travis Kalanick and Garrett Camp identified at Uber that the average American car is parked for 23 hours and 30 minutes a day, it's noteworthy that business jets in North America are parked for 23 hours and 40 minutes daily. This indicates a significant amount of unused capacity. These aircraft are not operating like Boeing or Airbus models. With advancements in technology and an increase in new pilots entering the industry, there is substantial airframe capacity available without needing to draw from original equipment manufacturers at this moment.

Our final question for today comes from Brian Nowak from Morgan Stanley.

I just want to sort of follow-up around user growth and member growth. You have a lot of great data on elasticity over time on your users. Just talk to us about how you're thinking about new user growth the next 9 months or so, just sort of navigating through this challenging time? And then when you made the comment about low single-digit contribution margins, what is the underlying user growth assumption to get to that low single-digit number?

I appreciate the question. I want to emphasize that we currently hold 3% of the $30 billion market, and there is significant potential for growth. When I consider expanding that total addressable market, I think about sharing and the option to buy by the seat. For example, on the New York to Vancouver route, ticket prices can reach $600 or $700 for a round trip. If that cost is divided among 8 seats on a King Air, the individual price per flight might only be $100 to $200 more. This offers an attractive alternative compared to commercial flights, often providing a 2 to 3 times advantage in terms of time and space. This approach could potentially increase our market to 15 to 20 million people who can afford less than $1,000 per leg. We believe there is a vast opportunity in this segment. I will now turn it over to Vinayak, and then Eric will conclude with insights on our margins. I want to thank everyone who asked a question today. We have a remarkable opportunity with just 3% market penetration and unmet demand. By focusing on serving our members, similar to how Amazon prioritizes customer experience, we believe that the growth will follow. Vinayak, could you provide some additional insights, and then Eric will wrap up?

Thank you, Kenny. Regarding membership growth, we’re not revealing the numbers at this time, but we have a clear target and a solid plan to achieve it. Two key points about membership growth: first, we are observing a consistent increase in growth rates. Second, new members are spending more than previous cohorts. We are also noticing that members are booking flights sooner after joining. Importantly, we are doing this while maintaining a relatively stable sales and marketing budget. We believe we can ramp up demand when necessary. Additionally, we engage in lead generation marketing, though we haven’t focused heavily on it due to existing demand. We are confident in our membership growth potential, and partnerships with companies like American Express significantly contribute to this growth. Eric can provide more details when we discuss 2022.

Thanks, Vinayak. You're correct, we're not going to provide specific guidance for user growth, but I want to emphasize some points from my earlier remarks. Our Core and Business memberships are performing better than Connect due to the guaranteed rates and the program rules. We're seeing an increase in transitions from Connect to Core at double the rate we've typically observed. User growth will decline since we are not allowing users to fly for the next 90 days. Our primary focus is on the membership strategy. I'll leave it at that.

Yes. And I'll just double-click in on that. I think if you were in an environment that didn't have the demand surge that we are seeing today, you have a lot more a la carte available. But right now, what we set up 8 years ago, this membership program, the value of that membership today with certain guarantees on lift just puts us in a position, again, Vinayak and team, I'm counting on you to open up that supply-demand latency that's out there. But in the meanwhile, as Eric said, the trade that has the most value today and has the most liquidity, if you will, is the membership. And that's really what we're seeing here, and we're excited about it. With that said, I think we're at the end of the call. Is that the last question?

That is the last question. Yes, I will hand back over to Kenny Dichter for any closing remarks.

All right. I'm going to go quick and I know people have a lot to do today. Thanks for joining us today and taking the time to better understand our vision, our business and our long-term strategy. I've been now in this business for 21 years, and I'm as bullish about our space as I've been since the day I started. We are building an innovative technology-enabled marketplace to optimize fragmented and underutilized supply and connect it with a large and growing addressable market. All of this is supported by a trusted and iconic brand. We firmly believe that the leaders we have hired and the investments we're making in operations, technology, product development, customer service, and most importantly, our pilots, will position Wheels Up as the undisputed leader in our industry. We also believe we'll create significant shareholder value in the years ahead, and I look forward to continuing the up journey with all of you. Thank you. Alex, thank you for running a great call.

Thank you very much. That's no problem. Thank you all for joining today's call. You may now disconnect.