Strata Critical Medical, Inc. annual report, FY2022

Business Context and Reporting Period

The supplied filing is a Form 10-K for Blade Air Mobility, Inc., not Strata Critical Medical, Inc. It covers the fiscal year ended December 31, 2022. Blade changed its fiscal year-end from September 30 to December 31; the comparable prior-year figures presented in the filing are for the year ended September 30, 2021, with a separate three-month transition period ended December 31, 2021.

Blade operates an asset-light air-mobility platform and does not own or operate aircraft. Its two reporting segments are Passenger, comprising Short Distance and Jet and Other, and Medical, comprising MediMobility Organ Transport. Blade uses third-party aircraft operators and provides helicopter, jet, turboprop, seaplane, and ground transportation services.

Financial Performance and Key Metrics

Metric	2022	Comparable 2021	Change
Revenue	$146.1 million	$67.2 million	Up 118%
Cost of revenue	$123.8 million	$54.3 million	Up 128%
Loss from operations	$53.5 million	$32.3 million	Loss increased
Net loss	$27.3 million	$36.9 million	Loss narrowed
Net loss per share	$0.38	$0.68	Improved
Operating cash flow	$(37.1) million	$(21.6) million	Cash use increased
Total flight profit	$22.9 million	$12.9 million	Up 78%
Total flight margin	15.7%	19.1%	Down 3.4 points
Seats flown	106,368	35,799	Up 197%

Passenger revenue was $74.3 million, up 42%, while Medical revenue was $71.8 million, up 380%. By product line, Short Distance revenue was $45.0 million, Jet and Other revenue was $29.4 million, and MediMobility Organ Transport revenue was $71.8 million.

Cost of revenue increased to 85% of revenue from 81%, reflecting the larger mix of Medical revenue, below-breakeven operations in Blade Canada and the ramp-up of Blade Airport. Passenger flight margin declined to 15.2% from 19.7%; Medical flight margin declined to 16.1% from 17.1%.

Segment Adjusted EBITDA was negative $1.3 million versus positive $2.4 million in the prior comparable period. Passenger Adjusted EBITDA was negative $6.4 million, while Medical Adjusted EBITDA was positive $5.1 million.

Reported net loss benefited from a $24.2 million non-cash gain from the change in fair value of warrant liabilities and included a $2.2 million realized loss on sales of short-term investments and $3.4 million of net interest income. The warrant liability declined to $7.1 million from $31.3 million.

Liquidity, Capital Resources, and Debt

Cash and cash equivalents were $43.3 million at December 31, 2022, compared with $2.6 million at December 31, 2021.
Short-term investments were $150.7 million, compared with $279.4 million.
Total liquidity, defined by management as cash and short-term investments, was $194.0 million, compared with $282.0 million.
Net working capital was $191.5 million.
The Company reported zero debt and stated that existing liquidity should support current operational needs for at least 12 months from the filing date.
Investing activities generated $79.3 million, primarily from sales and maturities of investments, partly offset by $48.1 million paid for the Blade Europe acquisition.
Blade had aircraft-operator minimum purchase commitments of approximately $12.3 million for 2023 and $18.0 million for 2024, subject to specified termination rights. Annual real-estate lease payments were expected to be $1.8 million in 2023 and $1.3 million in 2024.

Material Changes Versus the Prior Comparable Period

Revenue more than doubled, driven primarily by the full-year contribution from Trinity, growth in existing Medical customers, increased Passenger volumes, price increases, the Canadian operations, and the September 2022 acquisition of Blade Europe.
Blade Europe was acquired for $48.1 million in cash and contributed revenue from September 1 through December 31, 2022. The acquisition added $24.6 million of goodwill and $25.9 million of identifiable intangible assets on a preliminary basis.
Medical revenue expanded substantially following the Trinity acquisition and additional hospital clients, but Medical net income declined to a $2.9 million loss because of a $6.3 million Trinity contingent-consideration compensation expense.
General and administrative expense rose 60% to $62.5 million, including higher staffing, acquisition-related amortization, a $6.3 million Trinity earn-out expense, and $4.1 million of legal, regulatory, and merger-related costs.
The company’s cash position increased, but total liquidity declined because cash was used for the Blade Europe acquisition, operating losses, and investment activity.
Internal controls over financial reporting and disclosure controls were deemed ineffective at year-end due to two material weaknesses involving control deficiencies across business processes and IT general controls, and insufficient documentation and testing of control effectiveness.

Outlook, Commentary, Risks, and Unusual Items

Management expects near-term net losses while it executes growth initiatives. It expects Blade Airport utilization to improve as passenger volumes grow, but the service remained below breakeven during its ramp-up. Management also expects selling and marketing and general and administrative expenses to increase as the company expands routes, cities, infrastructure, and staffing.

Blade’s longer-term strategy includes transitioning to electric vertical aircraft, or EVA/eVTOL aircraft. No EVA aircraft were certified by the FAA for commercial operations in the United States as of the filing, and the timing, cost savings, infrastructure requirements, regulatory approvals, and market acceptance remain uncertain.

Blade remains dependent on third-party aircraft operators, aircraft availability, pilot and maintenance labor, fuel, insurance, and reliable service execution.
Passenger demand is discretionary, seasonal, and concentrated in metropolitan areas and airports, particularly New York, Vancouver, and the South of France.
Blade Airport and certain other routes may continue to operate below breakeven if seat utilization does not improve.
Regulatory, airport-access, noise, environmental, privacy, cybersecurity, safety, and climate-related risks could restrict operations or increase costs.
Trinity received a federal grand jury subpoena for records relating to transplant transportation services and is cooperating. The filing does not state the ultimate outcome or quantify a potential financial exposure.
The East Hampton airport litigation resulted in a favorable October 2022 trial-court ruling, but respondents filed a notice of appeal. Blade also disclosed litigation involving Westchester County Airport.
The company expects to remediate its material control weaknesses during 2023, but the filing provides no assurance that remediation will be timely or effective.
Blade does not expect to pay dividends in the foreseeable future. Its public and private warrants have an $11.50 exercise price and may expire worthless.

Important Facts for Investors to Verify

Confirm the issuer identity: the supplied text is Blade Air Mobility, Inc. with Nasdaq ticker BLDE, not Strata Critical Medical, Inc.
Review the audited financial statements and acquisition notes for the preliminary Blade Europe purchase-price allocation, goodwill, intangible assets, and lease obligations.
Assess whether Passenger utilization, particularly Blade Airport, improves enough to restore segment profitability.
Monitor Medical revenue concentration, customer retention, aircraft availability, and the effect of the Trinity earn-out and other acquisition-related costs.
Verify cash burn, investment maturities, aircraft capacity commitments, lease obligations, and the company’s stated 12-month liquidity coverage.
Track remediation of the two material weaknesses in internal control over financial reporting.
Follow the federal grand jury subpoena, airport-access proceedings, regulatory developments, and any related financial or operational consequences.
Evaluate the effect of warrant remeasurement gains and losses, which can materially affect reported earnings without affecting operating cash flow.