Wheels Up’s full year sales rose 32% in 2022 to $1.579bn with the company losing $507m including a $132m non-cash goodwill impairment. Without this accounting adjustment it lost $375m in 2022.
The company had $586m in cash at the end of 2022 – compared with $785m in cash at the end of 2021 and $286m at the end of September 2022. The rise was boosted by strong fourth quarter block sales and the $270m aircraft-backed bond it issued in October. The fourth quarter is typically its strongest one for block sales.
Wheels Up had already announced a $30m cost cutting programme last week involving job losses. “The cost action was difficult but it is the right step in our plan to get the company profitable in 2024,” Kenny Dichter, chair and CEO, Wheels Up told Corporate Jet Investor just after the results were announced. “People our rallying on the path to profitability.”
This goodwill impairment charge related to acquisitions. It was purely an accounting adjustment partly because of the fall in Wheel Up’s share price and higher interest rates since it bought companies.
Wheels Up had 13,846 members and customers at the end of 2022 up 10% from 12,543 at the end of 2021. This was boosted by buying charter broker Air Partner. Mark Briffa, the former CEO of Air Partner, has been made chief commercial officer for Wheels Up.
It flew 19,308 live flight legs, down from 20,296 in the last three months of 2021.
“We have seen some moderation in demand but sales are still strong and we are forecasting a flatter year in 2023 for demand but one where we can improve margins,” Todd Smith, CFO, Wheels Up told Corporate Jet Investor.
“We spent nine plus years building the brand, memberships, customer service and partnerships,” said Dichter, “and we are now on the flight path to profitability. Where growth meets profitability. We are very satisfied with where we are now and the future is in our hands. We are on the glidepath to profitability.”
CJI Take: The Wheels Up sales and marketing machine is clearly still working with revenues up 18% in the fourth quarter and active members up 5% for the year. But the company’s focus is very much on becoming profitable next year.
Unless you are an accountant, the $132m goodwill impairment is irrelevant. Much more important is the $586m in cash that Wheels Up had at the end of the year. This should give it the runway it needs to reach profitability. It also means any more large acquisitions are unlikely this year.
