Global Crossing Airlines Group Inc. (PNK:JETMF) Q1 2024 Earnings Call Transcript

Global Crossing Airlines Group Inc. (PNK:JETMF) Q1 2024 Earnings Call Transcript May 11, 2024

Global Crossing Airlines Group Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

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. At this time, all participants are in a listen-only mode. As a reminder, this conference is being recorded. 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 assumption that could cause actual results to differ materially from those reflected in these forward 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 obligations 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 websites, 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.

Chris Jamroz: 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 a new chapter in the history – in our short corporate history of Global Crossing Airlines. As you know, since our inceptions 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 effectively 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 over the last month. And the next – effectively the next quarter would be a more substantive ability – we would have a more substantive ability to talk to you about this in great detail. But at this point, we have really refocused the airline on our core competence, which is the narrow body charter ACMI flying, which is a bit – effectively critical to sustained 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 non-core to our focus on driving sustained profitability.

At the same time, as you recall when I stepped up and appointed Ryan to President, which is a decision that is beginning to pay off very well here, our mandate is effectively clear, 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 nature in terms of being a transitional quarter. And we begin to see the fruits of our labor the end of March, and we can 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 the point of nausea and I recognize that, but we really have set up basically two strategic progress for the business, on-time performance as a reliable carrier, and sustained profitability. And these are the sort of the words that are being uttered every day across all functions and verticals across the business. And we are very happy with the momentum we’ve 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 high highlights.

Ryan?

Ryan Goepel: Great. Thank you, Chris. As I mentioned this on our last call, but I am honored to be entrusted by the board to shepherd GlobalX 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 EBITDA 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 passenger 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 is 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 on this later. Meanwhile, our 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, landing, 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 on 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 to increase the size of our fleet to 20 aircraft, a target we intend to achieve this summer. I’d also like to take a moment to touch upon our strategy, 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 two key principles, same-store, or in our case, same aircraft growth, and two, cultivating the right relationships to drive predictable and reoccurring business.

Similar to restaurant brands that select a 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 have 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 non-core to our primary narrow body passenger and 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 the cost associated with these non-core projects are avoided.

A modern commercial jet airliner decorated with the company logo in flight against a clear blue sky.

Additionally, we recognize the importance of establishing repeat business with strategic customers. To further these efforts, we have deepened our relationship with a key government agency that is now utilizing eight 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’re well positioned to execute on our objectives of growth and profitability. Now, turning to our financial results. Please note that all financial results discussed today are as of March 31, 2024, while variance commentary is on a year-over-year basis, unless stated otherwise.

Revenue increased 67% to $53.8 million, from the $32.2 million in the prior year, driven primarily by higher block hours flown 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 four times 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 cost associated with the expansion of our fleet, as well as higher travel costs related to a government contract. This also includes approximately $1 million of non-operational expenses and charges related to the unwinding of non-core businesses and other one-time 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 $9.43 million compared to $600,000, driven primarily by the increase in revenue and fleet 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 31st, 2023. We remain very comfortable with the liquidity position as we have ample runway to execute on our growth objectives and turn cashflow-positive. Before concluding and opening the call for Q&A, I’d like to reiterate a few key themes we’ve covered today.

We’ve eliminated non-core businesses and are 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, ultimately make sustainable growth and profitability. We’re 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 quarter ahead. This concludes our prepared remarks. We’ll be glad to answer any questions now. Operator, back to you.

Grant Howard:

Ryan Goepel: 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 email 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? 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’ll be several months before the impact is fully felt across the market. However, we are already beginning to see some of the early effects as these customers turn to alternative solutions for charter flights.

With respect to GlobalX, 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 appear during the wind-down period in Q1.

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

Ryan Goepel: 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, which is – and this is something we’re beginning to see, but is 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.

A – Chris Jamroz: Yes, and I would add to Ryan remark here as well, that our product is a very modern product to service the cargo market that currently is being serviced by very aged or aging aircraft as of latter 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 to the market. So, as Ryan said, as we continue to see the aging aircraft being phased out of service in North America, we do expect our aircraft to become a very compelling alternative for our shippers.

Grant Howard: 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: 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 as I mentioned earlier, well positioned to execute this expansion this summer. Specifically, as we think about tail numbers, the serial numbers for the aircraft that we’re bringing on board, the next four passenger ones will be 3349, 3869, 3670, and 1153. So, the 3349 is on the ground here with the FAA. 3869 is in paint and will 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 those – 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. 1153, 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 one aircraft as its lease has expired and the lessor is asking to take it back. That’s 3605 will 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.

Grant Howard: 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: Yes. Well, we perform best when focused on our core competency as a narrow body charter airline. And if we’re able to operate with 12 passenger aircraft flying full-time, we believe we’ll be able – would 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 these reasons, we’re no longer pursuing those other ventures at this time.

Grant Howard: Okay. And last one here for the emailed questions. Ryan, you mentioned breakeven operations earlier. Is this something we should expect in 2024?

Ryan Goepel: Yes, thank you for the questions. 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.

Grant Howard: Excellent. Operator, do you mind opening it up for live Q&A?

Operator: [Operator instructions]. Our first question comes from the line of Brian Foote with Broadway Capital Management. Please proceed with your question.

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Q&A Session

Brian Foote: Thank you and good morning. 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: 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 – well, for the quarter when you look at what our available aircraft were, we effectively only had 10 active passenger and two freighter aircraft, even though we had 15 on the on the books operating. The reason for the difference is one of the passenger aircraft was in heavy maintenance kind of back to back to back. There was three different aircraft that went through it, what we tend to do in the first quarter, because that’s – we want to have them available for the busy summer.

When you look at the freighters, we had two aircraft that were busy, were on the certificate. One was in a long-term repair, which we had. 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: 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 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 planes out there, are you currently cash-generative?

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

Brian Foote: And just a side question to that. How much of that is attributable to iAero or any other factors in the market and how much of that that nice 30% growth is organic as you classify it?

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

Brian Foote: Super. Hey, thanks guys.

Operator: 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.