Business context and reporting period
flyExclusive, Inc. filed its annual report for the fiscal year ended December 31, 2023. It operates private jet charter, membership, fractional ownership and maintenance, repair and overhaul (MRO) services, with more than 100 owned and leased aircraft at year-end. The December 27, 2023 business combination brought the former LGM operating business under the public company; LGM is the accounting predecessor. The company reports one operating segment: charter aviation services.
Financial performance and liquidity
| Metric | 2023 | 2022 |
|---|---|---|
| Revenue | $315.4 million | $320.0 million |
| Gross profit / margin | $51.2 million / 16.2% | $64.6 million / 20.2% |
| Operating loss / margin | $(51.2) million / (16.2)% | $(12.3) million / (3.8)% |
| Consolidated net loss / margin | $(54.7) million / (17.4)% | $(4.2) million / (1.3)% |
| Adjusted EBITDA (non-GAAP) | $0.3 million | $27.7 million |
| Cash from operations | $8.7 million | $45.6 million |
Revenue comprised $237.8 million of jet club and charter, $66.9 million of guaranteed revenue program (GRP), $6.0 million of fractional ownership and $4.6 million of MRO. Cost of revenue was $264.2 million; selling, general and administrative expense was $75.4 million. Interest expense rose to $22.2 million from $8.3 million. Other notable items included a $13.9 million gain on aircraft sales, a $14.6 million noncash derivative fair-value loss and a $14.8 million gain on extinguishment of debt.
At December 31, cash and cash equivalents were $11.6 million and short-term investments were $71.2 million. The company reported a $104.7 million working-capital deficit. Long-term notes payable totaled $193.3 million, including current maturities; separate short-term notes payable were $33.3 million. Operating lease liabilities were $86.0 million. The company received covenant waivers for debt balances totaling $42.7 million after failing certain financial covenants. Its audited financial statements received an unqualified opinion; the auditor did not audit internal control effectiveness.
Material changes versus the prior comparable period
- Revenue declined 1%, but the mix shifted: jet club and charter revenue increased 22%, while GRP revenue fell 46% after termination of the Wheels Up Partners (WUP) agreement on June 30, 2023. WUP represented 22% of 2023 revenue, compared with 39% in 2022.
- Cost of revenue rose 3% and SG&A rose 40%, contributing to a substantially larger operating loss. Higher wages, lease, maintenance and public-company costs were among the drivers; lower fuel expense partly offset cost increases.
- Operating cash flow fell to $8.7 million from $45.6 million. Total flight hours declined to 55,518 from 58,207, although hours excluding GRP increased to 47,663 from 37,971. Revenue-contributing members increased to 948 from 684.
- Year-end cash decreased to $11.6 million from $23.2 million. Long-term notes payable declined year over year, while lease liabilities and current obligations increased.
Outlook, management commentary and risks
The filing gives no numerical revenue or earnings guidance. Management expects revenue to grow over time with fleet additions and membership growth, plans to modernize the fleet over the next two years, and expects operating losses in the near term while pursuing modernization and cost savings. It targets moving most maintenance in-house and planned to expand in-house pilot training in 2024.
Management said existing cash, operating cash flows and financing should cover obligations for at least 12 months from the financial-statement issuance date, while warning that refinancing or additional capital may be needed and may not be available on acceptable terms. Subsequent to year-end, the company entered a secured facility of up to approximately $25.8 million and had drawn $25.0 million by April 30, 2024; a March 2024 preferred-stock issuance raised approximately $25.0 million. The preferred stock carries a dividend rate that steps up from 10% to 16% annually and includes redemption provisions and a warrant.
Key risks include replacing WUP revenue, the unresolved WUP lawsuit (damages are unspecified and the company said an estimate cannot be made), debt service and refinancing, aircraft and pilot availability, fuel and maintenance costs, and dependence on financing for growth. The company had received $9.0 million of Employee Retention Credits and recorded the amount as a liability because eligibility remains uncertain. It also identified material weaknesses in financial reporting controls, concluded disclosure controls were ineffective, and disclosed that it had not timely filed its third-quarter 2023 Form 10-Q or this Form 10-K.
Most important facts an investor should verify
- Whether WUP-related revenue has been replaced, the status and potential exposure from the WUP litigation, and the treatment of the disclosed $59.0 million of billed but unrecorded drawdown-period amounts.
- Current liquidity, borrowing availability, debt maturities and covenant compliance, including the status and cost of refinancing obligations.
- Whether the $9.0 million Employee Retention Credit will need to be repaid and whether CARES Act program compliance is challenged.
- Progress in remediating internal-control weaknesses and restoring timely SEC reporting.
- The cash cost and dilution implications of the preferred stock, related-party financing, warrants and potential resale of registered shares.