NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1.ORGANIZATION AND OPERATIONS
Wheels Up Experience Inc. (together with its consolidated subsidiaries, “Wheels Up”, the “Company”, “our”, “we”, and “us”) is a leading provider of on-demand private aviation in the U.S. and one of the largest companies in the industry.
2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation and Basis of Presentation
The consolidated financial statements and accompanying notes have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The consolidated financial statements include the accounts of Wheels Up Experience Inc. and its subsidiaries, after elimination of intercompany transactions and accounts. We consolidate Wheels Up MIP LLC (“MIP LLC”) and record the profits interests held in MIP LLC that Wheels Up does not own as non-controlling interests (see Note 13). Use of Estimates
Preparing the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates due to risks and uncertainties. The most significant estimates include, but are not limited to, the useful lives and residual values of purchased aircraft, the fair value of financial assets and liabilities, acquired intangible assets, goodwill, contingent consideration and other assets and liabilities, sales and use tax, the estimated life of member relationships, the determination of the allowance for credit losses, reserve for excess and obsolete inventory, impairment assessments, the determination of the valuation allowance for deferred tax assets and the incremental borrowing rate for leases.
Cash Equivalents
Cash equivalents consist of highly liquid investments that are readily convertible into cash. We consider securities with initial maturities of three months or less, when purchased, to be cash equivalents (see Note 7). Restricted Cash
Restricted cash is pledged as security for letters of credit and also includes cash and cash equivalents that are unavailable for immediate use due to contractual restrictions. We classify Restricted cash as current or non-current based on the remaining term of the restriction (see Note 7). Accounts Receivable and Allowance for Credit Losses
Accounts receivable, net, primarily consists of contractual amounts we expect to collect from customers related to flight-related charges, including amounts currently due from credit card companies. We record Accounts receivable at the original invoiced amount.
We monitor exposure for losses and maintain an allowance for credit losses for any receivables that may be uncollectible. We estimate uncollectible receivables based on the receivable’s age, customer credit-worthiness, past transaction history with the customer, changes in payment terms and the condition of the general economy and the industry as a whole. When it is determined that the amounts are not recoverable, the receivable is written off against
the allowance. Changes in allowance for credit losses from December 31, 2022 to December 31, 2024 were as follows (in thousands):
| | | | | | | | |
| | Amount |
Balance as of December 31, 2022 | | $ | 9,982 | |
| Current period provision | | 1,705 | |
| Write-offs, net and other | | (3,823) | |
Balance as of December 31, 2023 | | 7,864 | |
| Current period provision | | 2,728 | |
| Write-offs, net and other | | (2,931) | |
Balance as of December 31, 2024 | | $ | 7,661 | |
Concentration of Credit Risk
Financial instruments that may potentially expose us to concentrations of credit risk primarily consist of cash, cash equivalents, restricted cash and receivables. We place ash and cash equivalents with financial institutions that we believe have high credit quality. To the extent that our international cash holdings increase or decrease in the future, our exposure to fluctuations in foreign currency exchange rates may correspondingly increase or decrease and could have a material adverse effect on our business, financial condition or results of operations. Certain of the Company’s U.S. bank accounts are guaranteed by the Federal Deposit Insurance Corporation up to certain limits. Although our cash deposits are held with multiple financial institutions, such deposits at times may exceed the federally insured limits. We have not experienced any losses in such accounts.
Revenue and Accounts receivable are spread over many members and customers. There were no customers that accounted for 10% or more of revenue for the years ended December 31, 2024, 2023 and 2022. We monitor credit quality on an ongoing basis and maintain reserves for estimated credit losses. There were no customers that accounted for 10% or more of accounts receivable as of December 31, 2024 and 2023.
Parts and Supplies Inventories
Inventories are used in operations and are generally not for sale. Inventories are comprised of spare aircraft parts, materials and supplies, which are valued at the lower of cost or net realizable value. Cost of inventories are determined using the specific identification method. Storage costs and indirect administrative overhead costs related to inventories are expensed as incurred.
We determine, based on the evidence that exists, whether or not it is appropriate to maintain a reserve for excess and obsolete inventory. The reserve is based on historical experience related to the disposal of inventory due to damage, physical deterioration, obsolescence or other causes, as well as our projected usage of inventory on-hand as of each balance sheet date. As of December 31, 2024 and 2023, the reserve for excess and obsolete inventory was $16.4 million and $4.4 million, respectively.
Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets include contractual prepayments to third-parties for future services, security deposits, the current portion of capitalized costs related to sales commissions and referral fees and insurance claims receivable.
Property and Equipment
Property and equipment are stated at cost, net of accumulated depreciation and amortization. Depreciation and amortization for all property and equipment are calculated using the straight-line method over the estimated useful lives of the related assets. Residual values estimated for aircraft are approximately 50% of the original purchase price. Expenditures that increase the value or productive capacity of assets are capitalized, and repairs and maintenance are expensed as incurred. The estimated useful lives of property and equipment are principally as
follows: aircraft — seven years, furniture and fixtures — three years, vehicles — five years, building and improvements — 27 years, computer equipment — three years and tooling — ten years. Leasehold improvements are amortized over the shorter of either the estimated useful life of the asset or the remaining term of the lease (see Note 4). Software Development Costs
We incur costs related to developing the Wheels Up website, mobile application and other internal use software. The amounts capitalized include employees’ payroll and payroll-related costs, directly associated with the development activities, as well as external direct costs of services used in developing the software. We amortize capitalized costs using the straight-line method over the estimated useful life, which is currently three years, beginning when the software is ready for its intended use. Costs incurred during the preliminary project and post-implementation stages are expensed as incurred (see Note 4). Leases
We determine if an arrangement is a lease at inception on an individual contract basis. Operating leases are included in Operating lease right-of-use assets, Operating lease liabilities, current, and Operating lease liabilities, non-current, on the consolidated balance sheets. Operating lease right-of-use assets represent the right to use an underlying asset for the lease term and operating lease liabilities represent the obligation to make lease payments arising from the lease. Operating lease right-of-use assets and operating lease liabilities are recognized at lease commencement date based on the present value of the future minimum lease payments over the lease term. The interest rate implicit in our leases is not readily determinable to discount lease payments. As a result, for all leases, we use an incremental borrowing rate that is based on the estimated rate of interest for a collateralized borrowing of a similar asset, using a similar term as the lease payments at the commencement date.
The operating lease right-of-use assets and operating lease liabilities include any lease payments made, including any variable amounts that are based on an index or rate, and exclude lease incentives. Variability that is not due to an index or rate, such as payments made based on hourly rates, are excluded from the lease liability. Lease terms may include options to extend or terminate the lease. Renewal option periods are included within the lease term and the associated payments are recognized in the measurement of the operating right-of-use asset and operating lease liability when they are at our discretion and considered reasonably certain of being exercised. Lease expense for lease payments is recognized on a straight-line basis over the lease term.
We have elected the practical expedient not to recognize leases with an initial term of 12 months or less on our consolidated balance sheets and associated lease expense is recognized on a straight-line basis over the term of the lease. For real estate leases, we have elected the practical expedient to account for both the lease and non-lease components as a single lease component and not allocate the consideration in the contract. Certain real estate leases contain fixed lease payments that include real estate taxes, common area maintenance and insurance. These fixed payments are considered part of the lease payment and are included in the operating lease right-of-use assets and operating lease liabilities. For non-real estate leases, including aircraft, we have separated the lease and non-lease components. The non-lease components of aircraft leases are typically for maintenance services and insurance that are expensed as incurred (see Note 10). Impairment of Long-Lived Assets
Long-lived assets consist of aircraft, including aircraft held for sale, property and equipment, finite-lived intangible assets and operating lease right-of-use assets. We review the carrying value of long-lived assets for impairment when events and circumstances indicate that the carrying value may not be recoverable based on the estimated undiscounted future cash flows expected to result from its use and eventual disposition. In cases where undiscounted expected future cash flows are less than the carrying value of the asset or asset group, an impairment loss is recognized equal to an amount by which the carrying value exceeds the fair value of the asset or asset group.
Acquisitions
We account for business combinations and asset acquisitions using the acquisition method of accounting, which requires allocation of the purchase price to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values on the acquisition date. For acquisitions meeting the definition of a business combination, the excess of the purchase price over the amounts recognized for assets acquired and liabilities assumed is recorded as goodwill. During the measurement period, which may be up to one year from the acquisition date, we may record adjustments to the assets acquired and liabilities assumed in a business combination with the corresponding offset to goodwill. Upon the conclusion of the measurement period or final determination of the values of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded in the consolidated statements of operations. Acquisition costs, such as legal and consulting fees, are expensed as incurred for business combinations.
For acquisitions meeting the definition of an asset acquisition, the fair value of the consideration transferred, including transaction costs, is allocated to the assets acquired and liabilities assumed based on their relative fair values. No goodwill is recognized in an asset acquisition (see Note 5). Goodwill
Goodwill represents the excess of the consideration transferred over the fair value of the identifiable assets acquired and liabilities assumed in business combinations. The carrying value of goodwill is tested for impairment on an annual basis or on an interim basis if events or changes in circumstances indicate that an impairment loss may have occurred (i.e., a triggering event).
During the third quarter of 2024, the Company elected to voluntarily change the timing of its annual goodwill impairment test from October 1st to September 1st. The selection of September 1st as the annual testing date for the impairment of goodwill is intended to move the testing to a period outside of the Company’s interim financial reporting process to allow sufficient time to complete the analysis prior to releasing its third quarter financial results. The Company believes this change is preferable under the circumstances and does not accelerate, delay or avoid an impairment charge. The change did not result in more than 12 months between annual testing dates. The Company will apply this change prospectively as management determined that retrospective application would be impracticable, and the change does not have an impact on the financial statements as the Company currently evaluates for triggering events in interim periods.
The test for goodwill is performed at the reporting unit level. Subsequent to acquisition, we determined that Air Partner Limited (“Air Partner”) represents a new reporting unit for the purposes of assessing potential impairment of goodwill, and therefore the private aviation services operating segment, our only reportable segment, was divided into two reporting units, the Air Partner reporting unit and the legacy Wheels Up reporting unit (“WUP Legacy”).
Goodwill impairment is the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying value of goodwill. We use both qualitative and quantitative approaches when testing goodwill for impairment. Our qualitative approach evaluates various events including, but not limited to, macroeconomic conditions, changes in the business environment in which we operate and other specific facts and circumstances. If, after assessing qualitative factors, we determine that it is more-likely-than-not that the fair value of a reporting unit is greater than its carrying value, then performing a quantitative impairment assessment is unnecessary and the reporting unit is not considered to be impaired. However, if based on the qualitative assessment we cannot conclude that it is more-likely-than-not that the fair value of the reporting unit exceeds its carrying value, or if we elect to bypass the optional qualitative assessment approach, we proceed with performing the quantitative impairment assessment using a discounted cash flow model, or income approach, and relevant data from guideline public companies, or market approach, to quantify the amount of impairment, if any (see Note 6). Intangible Assets
Intangible assets other than goodwill primarily consist of acquired finite-lived trade names, customer relationships and developed technology. At initial recognition, intangible assets acquired in a business combination are recognized at their fair value as of the date of acquisition. Following initial recognition, intangible assets are
carried at cost less accumulated amortization and impairment losses, if any, and are amortized on a straight-line basis over the estimated useful life of the asset, which was determined based on management’s estimate of the period over which the asset will contribute to our future cash flows (see Note 6). Warrant Liability
We determine if warrants are equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 480, Distinguishing Liabilities from Equity (“ASC 480”) and ASC 815, Derivatives and Hedging (“ASC 815”). The assessment considers whether warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether warrants meet all of the requirements for equity classification under ASC 815, including whether warrants are indexed to our Common Stock, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while warrants are outstanding.
For issued or modified warrants that meet all of the criteria for equity classification, warrants are required to be recorded as a component of additional paid-in capital at the time of issuance. For issued or modified warrants that do not meet all of the criteria for equity classification, warrants are required to be recorded as a liability at their fair value on the date of issuance and each balance sheet date thereafter. Changes in the estimated fair value of warrants are recognized as an unrealized gain or loss.
We recorded the Private Warrants and Public Warrants (as each term is defined below) assumed in connection with the closing of the business combination consummated on July 13, 2021 (the “Business Combination Closing Date”) between Wheels Up Partners Holdings LLC (“WUP”) and Aspirational Consumer Lifestyle Corp. (“Aspirational”), a blank check company (the “Business Combination’) (see Note 9 and Note 12) as liabilities . Revenue
We determine revenue recognition through the following steps:
•identification of the contract, or contracts, with a customer;
•identification of the performance obligations in the contract;
•determination of the transaction price;
•allocation of the transaction price to the performance obligations in the contract; and
•recognition of revenue when, or as, a performance obligation is satisfied.
For the periods presented in the consolidated statements of operations contained herein, Revenue is derived from a variety of sources, including (i) memberships, (ii) flights, (iii) aircraft management and (iv) other.
Revenue is recorded net of discounts on standard pricing and incentive offerings, including special pricing agreements and certain promotions.
Deferred revenue is an obligation to transfer services to a customer for which we have already received consideration. Upon receipt of a prepayment from a customer for all or a portion of the transaction price, we initially recognize a contract liability. The contract liability is settled, and revenue is recognized, when we satisfy our performance obligation to the customer at a future date.
(i) Memberships
Wheels Up membership agreements are signed by each member and, together with the terms and conditions in the flight services agreement, govern the use of the Wheels Up membership. We account for a contract when both parties have approved and are committed to perform their obligations, the rights of the parties are identified, payment terms are identified, the contract has commercial substance and collectability of consideration is probable.
We charge members annual fees to maintain their memberships, which are generally non-refundable under the terms of our membership agreements. Revenue related to annual membership fees is deferred and recognized on a straight-line basis over the related contractual period, which is generally but not always 12 months. If a customer qualifies to earn SkyMiles (as defined below) as part of their membership, then a portion of the transaction price is allocated to this performance obligation at contract inception. The amount allocated to each performance obligation is based on standalone selling price. If at any time the membership is terminated, any previously unrecognized amounts are recognized in the period of termination.
Until July 2024, we charged members a one-time initiation fee at the commencement of their membership, which was generally nonrefundable under the terms of our prior membership agreements. Any initiation fee, less any flight credits awarded, was deferred and recognized on a straight-line basis over the estimated duration of the customer relationship period, which was estimated to be approximately three years.
(ii) Flights
Flights and flight-related services, along with the related costs of the flights, are earned and recognized as revenue at the point in time in which the service is provided. For round trip flights, revenue is recognized upon arrival at the destination for each flight segment. In addition to retail flights, we also have flight service agreements to sell wholesale flights to customers that are non-members and do not pay annual membership or initiation fees.
Members pay a fixed quoted amount for flights. The amount per flight leg can be based on a contractual capped or fixed rate or dynamically priced based on market demand at time of booking. Wholesale customers primarily pay a fixed rate for flights. In addition, flight costs can be paid by members through the purchase of dollar-denominated credits that can be applied to future costs incurred by members, including flight services, annual membership fees, and other incidental costs such as catering and ground transportation (“Prepaid Blocks”). Prepaid Blocks are deferred and recognized as revenue when the member completes a flight segment. Prepaid Blocks also can generally be used to purchase commercial flights on Delta. Wheels Up, acting in the capacity of an agent, charges the member a ticketing fee to use their commingled funds on a flight provided by Delta, which is recorded on a net basis at the time of booking.
In addition, Wheels Up provides Medallion® status (“Status”) in Delta’s SkyMiles® Program (“SkyMiles”) for purchases of Prepaid Blocks. A member is granted Status free of charge for use during the term of the contract and may assign the Status to any designated individual. Any members that meet the designated spend thresholds for Prepaid Blocks or the designated dollar-denominated flight spend thresholds during the year receive the same Status. We do not owe Delta any consideration for the grant of each Status provided. Status is not a material right at contract inception and does not give rise to a separate performance obligation. The provided Status is not recognized as revenue, but instead is considered a marketing incentive related to future purchases on Delta.
We utilize registered independent third-party air carriers in the performance of a portion of our flights. We evaluate whether there is a promise to transfer services to the customer, as the principal, or to arrange for services to be provided by another party, as the agent, using a control model. If Wheels Up has primary responsibility to fulfill the obligation, then the revenue and the associated costs are reported on a gross basis in the consolidated statements of operations.
Revenue and the associated costs are recognized on a net basis when acting as an agent to arrange for services to be provided by another party, including acting as an intermediary ticketing agent for travel as part of the Amended and Restated Commercial Cooperation Agreement, dated as of June 15, 2024 (the “Amended CCA”), by and among WUP, Wheels Up Partners LLC (“WUP LLC”) and Delta, and when managed aircraft owners charter their own aircraft. Members can use Prepaid Blocks (defined below) to purchase commercial flights on Delta. Wheels Up charges the member a ticketing fee to use their funds with Delta, which is recorded on a net basis in Revenue at the time of booking. Wheels Up passes along the fulfillment of the performance obligation to Delta who actually provides the flight to the member. Owner charter revenue is recognized for flights where the owner of a managed aircraft sets the price for the trip. Wheels Up records owner charter revenue at the time of flight on a net basis for the margin we receive to operate the aircraft.
(iii) Aircraft Management
We generate fee revenue under management agreements with third-party aircraft owners, which includes the recovery of owner incurred expenses including maintenance coordination, cabin crew and pilots, as well as recharging of certain incurred aircraft operating costs and expenses such as maintenance, fuel, landing fees, parking and other related operating costs. We pass the recovery and recharge costs back to owners at either cost or a predetermined margin. Aircraft management related revenue contains two types of performance obligations. One performance obligation is to provide management services over the contract period. Revenue earned from management services is recognized over the contractual term, on a monthly basis. The second performance obligation is the cost to operate and maintain the aircraft, which is recognized as revenue at the point in time such services were completed.
On September 30, 2023, we completed the sale of our non-core aircraft management business to an unrelated third party. We do not expect to recognize any significant revenue or expenses associated with aircraft management activities in future periods.
(iv) Other
Ground Services
Fixed-base operator (“FBO”) ground services are provided for aircraft customers that use our facility at Cincinnati/Northern Kentucky International Airport. FBO ground services are comprised of a single performance obligation for aircraft facility services such as fueling, parking, ground power and cleaning. FBO related revenue is recognized at the point in time each service is provided.
We also separately provide maintenance, repair and operations (“MRO”) ground services for aircraft owners and operators at certain of our facilities. MRO ground services are comprised of a single performance obligation for aircraft maintenance services such as modifications, repairs and inspections. MRO related revenue is recognized over time based on the cost of inventory consumed and labor hours worked for each service provided.
Flight-Related Services
As part of each flight, there is the option to request flight-related services such as catering or ground transportation for an additional charge. Flight-related services, which are passed through at either cost or a predetermined margin, were $2.3 million, $2.8 million and $4.6 million for the years ended December 31, 2024, 2023 and 2022, respectively.
Software Subscription
We discontinued our software subscription services in the third quarter of 2023. Subscription revenue consisted of fees earned, typically monthly, from third-party operators and other businesses in the private aviation industry for web-based access to Avianis, which is a collaborative suite of flight software tools that we offered through our subsidiary, Avianis Systems LLC. Our subscription services provided users software licenses and related support and updates during the term of the arrangement to enable management of flight operations.
Revenue was generally recognized from such subscription contracts on a straight-line basis over the contract period. Contracts for related professional services, such as customized training or implementation programs, were either on a time and materials or fixed fee basis. Professional services revenue was generally recognized at the point in time the services were performed.
Other
Other revenue includes sales of whole aircraft (as described below), group charter revenue, cargo revenue, revenue sponsorships and partnership fees, safety and security revenue and special missions including government, defense, emergency and medical transport.
Aircraft Sales
We acquire aircraft from vendors and various other third-party sellers in the private aviation industry. On the acquisition date, we determine whether our intent is to sell the aircraft. Additionally, we may identify certain aircraft within our property and equipment which we intend to sell. If an aircraft is available to be used to service member or customer flights and all of the six specified accounting criteria in ASC 360-10-45-9 are met, we classify the aircraft as an asset held for sale on the consolidated balance sheets. Assets held for sale are reported at the lower of cost or fair value less costs to sell. The gain or loss upon sale of such aircraft is recorded on a net basis as part of Income (loss) from operations in the consolidated statements of operations.
If we do not intend to use the aircraft to service member or customer flights prior to the sale, we classify the purchase as aircraft inventory on the consolidated balance sheets. Aircraft inventory is valued at the lower of cost or net realizable value. Sales are recorded on a gross basis within Other revenue and Cost of revenue in the consolidated statements of operations. We recorded $1.2 million, $18.2 million and $86.8 million of Other revenue for aircraft sales during the years ended December 31, 2024, 2023 and 2022, respectively.
Aircraft Maintenance and Repair
Regular maintenance for owned and leased aircraft is expensed as incurred unless covered by a third-party, long-term flight hour service agreement. We have separate service agreements in place covering scheduled and unscheduled repairs of certain aircraft components, as well as the engines for certain owned and leased aircraft in our fleet. Certain of these agreements, whose original terms generally range from 10 to 15 years, require monthly payments at rates based either on the number of cycles each aircraft was operated during each month or the number of flight hours each engine was operated during each month, subject to annual escalations. These power-by-the-hour agreements transfer certain risks, including cost risks, to the third-party service providers. The agreements generally fix the amount we pay per flight hour or number of cycles in exchange for maintenance and repairs under a predefined maintenance program, which are representative of the time and materials that would be consumed. These costs are expensed as the related flight hours or cycles are incurred.
Advertising Costs
We expense the cost of advertising and promoting our services as incurred. Such amounts are included in sales and marketing expense in the consolidated statements of operations and totaled $10.6 million, $8.0 million and $10.5 million, for the years ended December 31, 2024, 2023 and 2022, respectively.
Equity-Based Compensation
Equity-based compensation awards are measured on the date of grant based on the estimated fair value of the respective award and the resulting compensation expense is recognized over the requisite service period of the respective award. We account for forfeitures of awards as they occur. Expense associated with awards granted but not yet approved by the Company’s stockholders is classified as mezzanine equity in the consolidated balance sheet. Upon subsequent approval of awards by the Company’s stockholders, the carrying value of the award is reclassified to permanent equity on the consolidated balance sheet.
RSUs (as defined in Note 11) typically vest upon a service-based requirement, and we recognize compensation expense on a straight-line basis over the requisite service period. Certain of our RSUs granted under the Amended and Restated 2021 LTIP (as defined in Note 11) vest upon achievement of pre-determined performance objectives (“PSUs”), or certain market-based vesting conditions, and may be subject to a participant’s continued service. Compensation expense associated with PSUs is recognized based on the quantity of awards we have determined are probable of vesting and is recognized over the longer of the estimated performance goal attainment period or time vesting period. The grant date fair value of RSUs with market-based vesting conditions is recognized over the derived service period for the award unless the market condition is satisfied in advance of the derived service period, in which case a cumulative catch-up is recognized as of the date of achievement
The Executive Performance Awards (as defined in Note 11) are subject to the satisfaction of the applicable performance- and service-based vesting conditions under such award, if at all. Compensation expense associated with the Executive Performance Awards is recognized over the derived service period. For the CCO Performance Award, which as of the date of this Annual Report has not been approved by the Company’s stockholders, the amortized expense, or carrying value, is classified as mezzanine equity in the consolidated balance sheets. Income Taxes
We account for income taxes using the asset and liability method. Deferred tax assets and liabilities reflect the expected future consequences of temporary differences between the financial reporting and tax bases of assets and liabilities as well as operating losses, capital losses and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates that are expected to be in effect when these differences are anticipated to reverse. Management makes estimates, assumptions and judgments to determine our provision for income taxes, deferred tax assets and liabilities, and any valuation allowance recorded against deferred tax assets. We assess the likelihood that our deferred tax assets will be recovered from future taxable income and, to the extent we believe, based upon the weight of available evidence, that it is more likely than not that all or a portion of the deferred tax assets will not be realized, we establish a valuation allowance.
We recognize the tax benefit from an uncertain tax position only if it is more likely than not the tax position will be sustained upon examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized from such positions are then measured based on the largest benefit that has a greater than 50% likelihood of being realized upon settlement. Interest and penalties related to unrecognized tax benefits are recognized within income tax expense.
Net Income (Loss) per Share
Basic net income (loss) per share is computed by dividing Net income (loss) attributable to Wheels Up by the weighted average number of shares of Common Stock outstanding during the period. Diluted net income (loss) per share is computed based on the weighted average number of shares of Common Stock outstanding plus the effect of dilutive potential shares of Common Stock outstanding during the period. During the periods when there is a net loss, potentially dilutive shares of Common Stock are excluded from the calculation of diluted net loss per share as their effect is anti-dilutive.
Segment Reporting
We identify operating segments as components of Wheels Up for which discrete financial information is available and is regularly reviewed by the chief operating decision maker (“CODM”), or decision-making group, in making decisions regarding resource allocation and performance assessment.
The Company’s CODM is our Chief Executive Officer, who reviews financial information presented on a consolidated basis. We determined that Wheels Up operates in a single operating and reportable segment, private aviation services, as the CODM reviews financial information presented on a consolidated basis, accompanied by disaggregated information about revenue, for purposes of making operating decisions, allocating resources and assessing performance (see Note 19). Foreign Currency Translation Adjustments
Assets and liabilities of foreign subsidiaries, where the functional currency is not the U.S. dollar, have been translated at period-end exchange rates and profit and loss accounts have been translated using weighted-average exchange rates. Adjustments resulting from currency translation have been recorded in the equity section of the consolidated balance sheets and the consolidated statements of other comprehensive loss as a cumulative translation adjustment.
Accounting Pronouncements Not Yet Effective
In December 2023, the FASB issued Accounting Standards Update (“ASU”) No. 2023-09 “Income Taxes (Topic 740): Improvements to Income Tax Disclosures” (“ASU 2023-09”). The amendments in ASU 2023-09 aim
to enhance the transparency and decision usefulness of income tax disclosures. ASU 2023-09 will be effective for the Company’s Annual Report on Form 10-K for the year ending December 31, 2025, with early adoption permitted. The Company is currently evaluating the impact of this update on its consolidated financial statements.
In November 2024, the FASB issued ASU No. 2024-03 “Disaggregation of Income Statement Expenses (“ASU 2024-03”). The amendments in ASU 2024-03 aim to improve the decision usefulness of expense information on public business entities’ income statements through the disaggregation of relevant expense captions in the notes to the financial statements. ASU 2024-03 will be effective for the Company’s Annual Report on Form 10-K for the year ending December 31, 2027, with early adoption permitted. The Company is currently evaluating the impact of this update on its consolidated financial statements.
Recently Adopted Accounting Pronouncements
In November 2023, the FASB issued ASU No. 2023-07 “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures” (“ASU 2023-07”). The amendments in ASU 2023-07 aim to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. Public entities with a single reportable segment are required to apply the disclosure requirements in ASU 2023-07, as well as all existing segment disclosures and reconciliation requirements in ASC 280, on an interim and annual basis. The Company adopted ASU 2023-07 during the year ended December 31, 2024.
3. REVENUE
Disaggregation of Revenue
The following table disaggregates Revenue by service type and the timing of when these services are provided to the member or customer (in thousands):
| | | | | | | | | | | | | | | | | |
| Year Ended December 31, |
| 2024 | | 2023 | | 2022 |
| Services transferred at a point in time: | | | | | |
| Flights, net of discounts and incentives | $ | 633,865 | | | $ | 884,065 | | | $ | 1,073,094 | |
| Aircraft management | 9,537 | | | 159,150 | | | 232,248 | |
| Other | 89,867 | | | 102,352 | | | 166,732 | |
| | | | | |
| Services transferred over time: | | | | | |
| Memberships | 57,614 | | | 82,857 | | | 90,132 | |
| Aircraft management | 170 | | | 16,679 | | | 9,784 | |
| Other | 1,051 | | | 8,214 | | | 7,770 | |
| Total | $ | 792,104 | | | $ | 1,253,317 | | | $ | 1,579,760 | |
Performance Obligations
A performance obligation is a promise in a contract to transfer a distinct service to the customer and is the basis of revenue recognition. To determine the proper revenue recognition method for contracts, we used judgment to evaluate whether two or more contracts should be combined and accounted for as a portfolio and whether the combined or single contract should be accounted for as more than one performance obligation.
Transaction Price
The transaction prices for each of our primary revenue streams are as follows:
•Flights — The fixed quoted amount including any flight credits.
•Memberships — The one-time initiation fee, which was discontinued starting in July 2024, less any flight credits, when signing up (if applicable) and annual membership fees for all years thereafter.
•Aircraft management — The fixed monthly fee to manage the aircraft over the contractual term plus the recovery of owner-incurred expenses and recharge costs that are based on the expenses we incur to operate and maintain the aircraft.
•Other — Generally based on contractual amounts or time and materials incurred for the work performed or services rendered.
If there is a group of performance obligations bundled in a contract, the transaction price is allocated based upon the relative standalone selling prices of the promised services underlying each performance obligation.
Payment Terms
Under standard payment terms, the member or customer agrees to pay the full stated price in the contract, in advance of the service, and financing of the transaction is not provided. Revenue in the consolidated statements of operations is presented net of discounts and incentives of $10.6 million, $9.6 million and $12.2 million for the years ended December 31, 2024, 2023 and 2022, respectively. We generally do not issue refunds for flights unless there is a failure to meet a service obligation with respect to such flight. Refunded amounts for annual membership and initiation fees are granted to some customers that no longer wish to remain members following their first flight and were $2.1 million, $3.5 million and $3.0 million for the years ended December 31, 2024, 2023 and 2022, respectively.
Contract Balances
Receivables from members and customer contracts represent amounts owed by a member or customer for services we have performed and are included within accounts receivable, net, on the consolidated balance sheets. Accounts receivable, net consists of the following (in thousands):
| | | | | | | | | | | |
| December 31, 2024 | | December 31, 2023 |
| Gross receivables from members and customers | $ | 39,187 | | | $ | 43,970 | |
| Undeposited funds | 790 | | | 2,131 | |
| Less: Allowance for credit losses | (7,661) | | | (7,864) | |
| Accounts receivable, net | $ | 32,316 | | | $ | 38,237 | |
The opening balance of Accounts receivable, net as of December 31, 2022 was $112.4 million.
Contract liabilities represent obligations to transfer services to a member or customer for which we have already received consideration. Purchases of flights, Prepaid Blocks, initiation fees, including flight credits, and annual membership fee payments are received up front in advance of performance under the contract and initially deferred as a liability.
The balance classified as Deferred revenue, current includes prepaid flights and flight credits, and annual membership and initiation fees. Prepaid flights and flight credits are redeemable for flights at any time. The balance classified as Deferred revenue, non-current includes amounts to be recognized beyond 12 months following the balance sheet date.
Deferred revenue consists of the following (in thousands):
| | | | | | | | | | | |
| | December 31, 2024 | | December 31, 2023 |
| Flights - prepaid | $ | 729,581 | | | $ | 686,413 | |
| Memberships - annual dues | 17,638 | | | 33,890 | |
| Memberships - initiation fees | 494 | | | 2,377 | |
| Flights - credits | 673 | | | 1,366 | |
| Other | 1,226 | | | 183 | |
| Deferred revenue - total | $ | 749,612 | | | $ | 724,229 | |
| | | |
| | | |
| | | |
The opening balance for Deferred revenue as of December 31, 2022 was $1.1 billion. Changes in deferred revenue for the year ended December 31, 2024 were as follows (in thousands):
| | | | | |
| Deferred revenue as of December 31, 2023 | $ | 724,229 | |
| Amounts deferred during the period | 804,749 | |
| Revenue recognized from amounts included in the deferred revenue beginning balance | (422,676) | |
| Revenue from current period sales | (356,690) | |
| Deferred revenue as of December 31, 2024 | $ | 749,612 | |
Revenue expected to be recognized in future periods for performance obligations that are unsatisfied, or partially unsatisfied, as of December 31, 2024 was as follows (in thousands):
| | | | | |
| 2025 | $ | 494,552 | |
| 2026 | 127,512 | |
| 2027 | 127,548 | |
| Total | $ | 749,612 | |
Costs to Obtain Contract
Commissions are granted to certain employees and consultants separately for the initial sales of memberships, additional subsequent contract renewals, when members purchase Prepaid Blocks on their accounts or for charter flights. In addition, members are eligible to receive a credit if they refer a new customer who signs up for a membership in the Wheels Up program. Commissions were also granted for the execution of aircraft management agreements, additional subsequent contract renewals and performance over the contractual term. The cost of commissions and referral fees are capitalized as an asset on the consolidated balance sheets as these are incremental amounts directly related to attaining a contract with a member. Capitalized costs related to sales commissions and referral fees were $8.8 million, $8.1 million and $16.3 million for the years ended December 31, 2024, 2023 and 2022, respectively.
As of December 31, 2024 and 2023, capitalized sales commissions and referral fees of $4.6 million and $4.8 million, respectively, were included in Other current assets, and $0.3 million and $0.4 million, respectively, were included in Other non-current assets on the consolidated balance sheets.
Amounts capitalized for certain costs incurred to obtain a contract are periodically reviewed for impairment and amortized on a straight-line basis concurrently over the same period of benefit in which the associated contract revenue is recognized. Amortization expense related to capitalized sales commissions and referral fees included in Sales and marketing expense in the consolidated statements of operations was $8.8 million, $9.5 million and $16.3 million for the years ended December 31, 2024, 2023 and 2022, respectively.
4. PROPERTY AND EQUIPMENT
Property and equipment, net consisted of the following (in thousands):
| | | | | | | | | | | |
| December 31, 2024 | | December 31, 2023 |
| Aircraft | $ | 443,193 | | | $ | 475,058 | |
| Software development costs | 85,112 | | | 81,075 | |
| Leasehold improvements | 22,882 | | | 22,899 | |
| Computer equipment | 3,042 | | | 3,515 | |
| Building and improvements | 1,424 | | | 1,424 | |
| Furniture and fixtures | 3,322 | | | 4,618 | |
| Tooling | 3,246 | | | 3,898 | |
| Vehicles | 2,166 | | | 2,166 | |
| Total Property and equipment | 564,387 | | | 594,653 | |
| Less: Accumulated depreciation and amortization | (216,048) | | | (256,939) | |
| Total Property and equipment, net | $ | 348,339 | | | $ | 337,714 | |
Depreciation and amortization expense, excluding amortization expense related to software development costs, was $18.8 million, $22.0 million and $28.9 million for the years ended December 31, 2024, 2023 and 2022, respectively.
Amortization expense related to software development costs, included as part of Depreciation and amortization expense of property and equipment, was $18.5 million, $15.1 million and $14.6 million for the years ended December 31, 2024, 2023 and 2022 respectively.
5. ACQUISITIONS AND DIVESTITURES
Air Partner plc Acquisition
On April 1, 2022, we acquired all of the outstanding equity of Air Partner plc (n/k/a Air Partner Limited) for a total purchase price of $108.2 million in cash. Air Partner is a United Kingdom-based international aviation services group that upon acquisition provided us with operations in 18 locations across four continents. Acquisition-related costs for Air Partner of $2.9 million were included in General and administrative expense in the consolidated
statements of operations for the year ended December 31, 2022. The acquisition of Air Partner was determined to be a business combination.
As of the date of acquisition, the total purchase price allocated to the Air Partner assets acquired and liabilities assumed according to their estimated fair values were as follows (in thousands):
| | | | | |
| Current assets | $ | 49,617 | |
| Property and equipment, net | 2,012 | |
| Operating lease right-of-use assets | 2,780 | |
| Goodwill | 83,910 | |
| Intangible assets | 20,921 | |
| Restricted cash | 27,507 | |
| Other assets | 1,686 | |
| Total assets acquired | 188,433 | |
| Total liabilities assumed | (80,239) | |
| Net assets acquired | $ | 108,194 | |
Current assets of Air Partner included $18.0 million of cash and $16.6 million of accounts receivable.
The allocated value of goodwill primarily relates to anticipated synergies and economies of scale by combining the use of Air Partner’s existing business processes with our platform to expand on an international basis. The acquired goodwill is not deductible for tax purposes.
The amounts allocated to acquired intangible assets and their associated weighted-average amortization periods, which were determined based on the period the assets are expected to contribute directly or indirectly to our cash flows, consist of the following:
| | | | | | | | | | | |
| Amount
(In thousands) | | Weighted-Average Amortization Period
(Years) |
| Customer relationships | $ | 16,521 | | | 5.7 |
| Backlog | 1,458 | | | 1.5 |
| Trade name | 1,931 | | | 1.9 |
| Developed technology | 1,011 | | | 5.8 |
| Total acquired intangible assets | $ | 20,921 | | | 5.1 |
The intangible asset fair value measurements are primarily based on significant inputs that are not observable in the market which represent a Level 3 measurement. The valuation method used for the Air Partner intangible assets was the income approach.
The results of Air Partner were included in the consolidated statement of operations from the date of acquisition. Revenue for Air Partner was $87.6 million, net of intercompany eliminations, and income from operations was $8.3 million from the date of acquisition through December 31, 2022.
Alante Air Charter, LLC Acquisition
On February 3, 2022, we acquired all of the outstanding equity of Alante Air Charter, LLC (“Alante Air”) for a total purchase price of $15.5 million in cash. Alante Air added 12 Light jets to our controlled fleet and expanded our presence in the Western U.S. Acquisition-related costs for Alante Air of $0.5 million were included in General and
administrative expense in the consolidated statements of operations for the year ended December 31, 2022. The acquisition of Alante Air was determined to be a business combination.
We have allocated the purchase price for Alante Air to its individual assets and liabilities assumed. As of the date of acquisition, the total purchase price allocated to the Alante Air assets acquired and liabilities assumed according to their estimated fair values were as follows (in thousands):
| | | | | |
| Current assets | $ | 4,452 | |
| Goodwill | 13,069 | |
| Other assets | 22,048 | |
| Total assets acquired | 39,569 | |
| Total liabilities assumed | (24,101) | |
| Net assets acquired | $ | 15,468 | |
Current assets of Alante Air included $3.0 million of cash and $1.4 million of accounts receivable, including $15.0 thousand owed from Wheels Up that was eliminated in consolidation upon acquisition.
Goodwill represents the excess of the purchase price over the fair values of the acquired net tangible assets. The allocated value of goodwill primarily relates to anticipated synergies and economies of scale by combining the use of Alante Air’s aircraft and existing business processes with our other acquisitions. The acquired goodwill is deductible for tax purposes.
The results of Alante Air were included in the consolidated statement of operations from the date of acquisition. Revenue for Alante Air was $2.8 million, net of intercompany eliminations, and loss from operations was $3.1 million from the date of acquisition through December 31, 2022.
Unaudited Pro Forma Summary of Operations
The accompanying unaudited pro forma summary represents the consolidated results of operations as if the 2022 acquisitions of Alante Air and Air Partner had been completed as of January 1, 2022. The unaudited pro forma financial results for 2022 reflect the results for the year ended December 31, 2022. The unaudited pro forma financial information includes the accounting effects of the acquisitions, including adjustments to the amortization of intangible assets and professional fees associated with the transactions. The pro forma results were based on estimates and assumptions, which we believe are reasonable but remain subject to adjustment. The unaudited pro forma summary does not necessarily reflect the actual results that would have been achieved had the companies been combined during the periods presented, nor is it necessarily indicative of future consolidated results (in thousands, except per share data).
| | | | | | | | |
| | Year Ended December 31, |
| | 2022 |
| Net revenue | | $ | 1,617,578 | |
| Net loss | | $ | (505,538) | |
| Net loss attributable to Wheels Up Experience Inc. | | $ | (505,151) | |
| Net loss per share | | $ | (20.56) | |
Divestiture of Aircraft Management Business
On September 30, 2023, (the “Divestiture Closing Date”), WUP, pursuant to an equity purchase agreement (the “Equity Purchase Agreement”) with Executive AirShare LLC, completed the sale of 100% of the issued and outstanding equity interests of Circadian Aviation LLC, our indirect subsidiary (“Circadian”). The Divestiture Closing Date fair value of the aggregate consideration transferred was $19.1 million and the Company recognized a loss on the sale of $3.0 million. The $19.1 million was comprised of $13.2 million of cash received on the Divestiture Closing Date, contingent consideration with a fair value of $4.8 million, an escrow receivable of
$0.6 million and a non-contingent consideration receivable of $0.5 million. The fair value of the contingent consideration was deemed to be the approximate contract value as of the Divestiture Closing Date. During the year ended December 31, 2024, we received $3.4 million upon finalization of the working capital adjustment under the Equity Purchase Agreement, recognized within Gain (loss) on divestiture in the consolidated statement of operations.
Circadian was released from all guarantor obligations with respect to the 2022 Term Equipment Notes and Credit Facility (as each term is defined in Note 8) on the Divestiture Closing Date pursuant to certain debt release letters entered into concurrently with the Equity Purchase Agreement. Concurrently with entering into the Purchase Agreement: (i) WUP entered into a transition services agreement with Circadian, pursuant to which WUP provided Circadian certain specified services on a temporary basis; (ii) WUP LLC entered into a master operating agreement with Circadian, pursuant to which Circadian, pursuant to which Circadian conducted certain on-demand charter operations for certain of WUP LLC’s owned aircraft after the Divestiture Closing Date while such aircraft were transitioned from the U.S. Federal Aviation Administration (“FAA”) operating certificate held by Circadian to the Company’s subsidiaries, and WUP LLC provided certain maintenance, pilots services, management and other related services for WUP LLC’s owned aircraft during the transition period; and (iii) certain of the Company’s subsidiaries entered into fleet management agreements with Circadian, pursuant to which Circadian provided certain maintenance, pilots services, management and other related services for managed aircraft after the Divestiture Closing Date while they were transitioned from a FAA operating certificate held by the applicable Company subsidiary to Circadian. The parties obligations under the foregoing post-closing services agreements substantially concluded during the year ended December 31, 2024.
Acquisition of 17 Phenom 300 Series Aircraft and Related Assets
On November 14, 2024 (the “Phenom Acquisition Closing Date”), WUP LLC acquired 17 Embraer Phenom 300 and Phenom 300E aircraft, certain related maintenance assets to support the fleet, and the existing customer program (collectively, the “Acquired Phenom Assets”) from Grandview Aviation LLC (“GVA” and such acquisition, the “Phenom Asset Acquisition”), pursuant to an Asset Purchase Agreement, dated October 22, 2024 (the “APA”), among WUP LLC, GVA and Global Medical Response, Inc., the ultimate parent entity of GVA. The closing date cash payment made by WUP LLC in respect of the purchase price for the Acquired Phenom Assets under the APA was approximately $95.0 million, reflective of the $105.0 million base purchase price less certain closing date adjustments, which was subject to a customary post-closing true-up related to estimated assumed liabilities at closing. Subsequent to the year ended December 31, 2024, we received an insignificant amount from GVA upon finalization of the post-closing true-up adjustment under the APA.
Concurrently with the closing under the APA, WUP LLC and GVA entered into: (i) a transition services agreement (the “Phenom TSA”), pursuant to which GVA will provide WUP LLC certain specified services on a temporary basis; and (ii) a master aircraft operating agreement (the “Phenom Operating Agreement” and together with the Phenom TSA, the “Phenom Post-Closing Agreements”), pursuant to which GVA conducted certain on-demand flight operations using the Acquired Phenom Assets while such aircraft were transitioned from the FAA operating certificate held by GVA to the FAA operating certificate held by Wheels Up Private Jets LLC, our indirect subsidiary (“WUPJ” and such transition, the “Phenom Fleet Transition”). The Phenom Post-Closing Agreements will terminate upon completion of the Phenom Fleet Transition and the final payment of any sums owed by WUP LLC thereunder. Also on the Phenom Acquisition Closing Date, the Company and GVA terminated an agreement pursuant to which GVA had provided the Company’s members and customers with certain dedicated Embraer Phenom 300 and Phenom 300E aircraft since November 2021.
6. GOODWILL AND INTANGIBLE ASSETS
Goodwill
The following table presents goodwill carrying value and the movements, by reporting unit, during the years ended December 31, 2024 and 2023 (in thousands):
| | | | | | | | | | | | | | | | | |
| WUP Legacy | | Air Partner | | Total |
Balance as of December 31, 2022 (1) | $ | 270,467 | | | $ | 77,651 | | | $ | 348,118 | |
Acquisitions (2) | — | | | 350 | | | 350 | |
| Impairment of goodwill | (126,200) | | | — | | | (126,200) | |
Divestitures (3) | (8,169) | | | — | | | (8,169) | |
| Foreign currency translation adjustment | — | | | 4,109 | | | 4,109 | |
Balance as of December 31, 2023 (4) | 136,098 | | | 82,110 | | | 218,208 | |
| Foreign currency translation adjustment | — | | | (1,163) | | | (1,163) | |
| Balance as of December 31, 2024 | $ | 136,098 | | | $ | 80,947 | | | $ | 217,045 | |
(1) Net of accumulated impairment losses of $180 million, all of which was recognized during the year ended December 31, 2022.
(2) Reflects the current period impact of measurement period adjustments (see Note 5). (3) Reflects the amount of goodwill allocated to the divestiture of the aircraft management business (see Note 5). (4) Net of accumulated impairment losses of $306.2 million.
Goodwill Impairment
During the third quarter of 2022, we determined that because of continued deterioration in our stock price, resulting in a market capitalization that was below the carrying value of our equity, there was an indication that a triggering event occurred and the carrying value of WUP Legacy may not be recoverable. As a result, we performed a quantitative impairment test using the income approach. The fair value using the income approach was based on the present value of estimated future cash flows. The significant underlying unobservable inputs used to measure the fair value included forecasted revenue growth rates and margins, weighted average cost of capital, normalized working capital level and projected long-term growth rates. As a result of this assessment, a goodwill impairment charge of $62.0 million was recorded to WUP Legacy as of September 30, 2022. The decline in the fair value of the reporting unit, as compared to the quantitative analysis performed as of June 1, 2022, was primarily due to an increase in the discount rate.
During December 2022, we saw sustained decreases in the quoted price of our Common Stock and revised our forecast for the WUP Legacy reporting unit. As a result of these factors, we concluded a triggering event had occurred for WUP Legacy and, accordingly, performed an interim quantitative impairment test over the reporting unit as of December 31, 2022. Using the income approach, we calculated the fair value of WUP Legacy as of December 31, 2022, based on the present value of estimated future cash flows. The significant underlying unobservable inputs used to measure the fair value included forecasted revenue growth rates and margins, weighted average cost of capital, normalized working capital level and projected long-term growth rates. As a result of this assessment, a goodwill impairment charge of $118.0 million was recorded to WUP Legacy. The decline in the fair value of the reporting unit, as compared to the quantitative impairment test performed as of October 1, 2022, was primarily due to the revised forecast for the reporting unit.
During the second quarter of 2023, we determined that, because of continued negative cash flows and changes in our management and business strategy, we determined that there was an indication that it was more likely than not that the fair value of our WUP Legacy reporting unit was less than its carrying amount. We performed an interim quantitative impairment assessment of goodwill as of June 1, 2023. Using a discounted cash flow approach, we calculated the fair value of WUP Legacy based on the present value of estimated future cash flows. The significant underlying inputs used to measure the fair value included forecasted revenue growth rates and margins, weighted average cost of capital, normalized working capital level and projected long-term growth rates. As a result of this
assessment, we recognized a goodwill impairment charge of $70.0 million relating to the WUP Legacy reporting unit during the three months ended June 30, 2023. The decline in the fair value of the reporting unit was primarily due to a more material reduction in working capital than expected during the three months ended June 30, 2023, as well as an increase in the discount rate.
To facilitate reconciliation of the fair value of our reporting units to our market capitalization as of June 1, 2023, we elected to perform a quantitative impairment assessment of the Air Partner reporting unit as of June 1, 2023, using a combination of the discounted cash flow and guideline public company methods, which did not result in impairment to goodwill. Based on the valuation, the fair value of the Air Partner reporting unit exceeded its carrying value by more than 10%.
During the third quarter of 2023, we determined that upon entering into the Credit Agreement (as defined in Note 8) on September 20, 2023 (see Note 8), and due to associated changes to our ownership and governance structure on that same date (see Note 11), there was an indication that the fair value of the WUP Legacy reporting unit was less than its carrying amount. We performed an interim quantitative impairment assessment of goodwill as of September 20, 2023. Using a discounted cash flow approach, we calculated the fair value of WUP Legacy, based on the present value of estimated future cash flows. The significant underlying inputs used to measure the fair value included forecasted revenue growth rates and margins, weighted average cost of capital, normalized working capital level and projected long-term growth rates. As a result of this assessment, we recognized a goodwill impairment charge of $56.2 million relating to the WUP Legacy reporting unit during the three months ended September 30, 2023. The impairment charge represented the amount by which the carrying value of the reporting unit as of the assessment date exceeded the estimated fair value of the reporting unit as of the assessment date. Since the previous analysis on June 1, 2023, the fair value of the reporting unit increased as a result of the run-off of unprofitable periods in our estimated future cash flows; however, the carrying value of the reporting unit increased in a substantially equivalent amount due to the issuance of the Term Loan (see Note 8) and Initial Shares (as defined in Note 11). To facilitate reconciliation of the fair value of our reporting units to our market capitalization as of September 20, 2023, we elected to perform a quantitative impairment assessment of the Air Partner reporting unit as of September 20, 2023, using a combination of the discounted cash flow and guideline public company methods, which did not result in impairment to goodwill. Based on the valuation, the fair value of the Air Partner reporting unit exceeded its carrying value by more than 20%.
We completed our annual goodwill impairment tests over our reporting units as of September 1, 2024, and determined that there was no impairment as of that date.
Intangible Assets
The gross carrying value, accumulated amortization and net carrying value of intangible assets consisted of the following (in thousands):
| | | | | | | | | | | | | | | | | |
| December 31, 2024 |
| Gross Carrying
Value | | Accumulated Amortization | | Net Carrying
Value |
| Status | $ | 80,000 | | | $ | 37,410 | | | $ | 42,590 | |
| Customer relationships | 89,121 | | | 45,700 | | | 43,421 | |
| Trade name | 10,709 | | | 5,196 | | | 5,513 | |
| Developed technology | 20,056 | | | 14,767 | | | 5,289 | |
| Leasehold interest – favorable | 600 | | | 124 | | | 476 | |
| Foreign currency translation adjustment | (808) | | | (423) | | | (385) | |
| Total | $ | 199,678 | | | $ | 102,774 | | | $ | 96,904 | |
| | | | | | | | | | | | | | | | | |
| December 31, 2023 |
| Gross Carrying
Value | | Accumulated Amortization | | Net Carrying
Value |
| Status | $ | 80,000 | | | $ | 31,325 | | | $ | 48,675 | |
| Customer relationships | 89,121 | | | 34,920 | | | 54,201 | |
| Trade name | 11,939 | | | 5,402 | | | 6,537 | |
| Developed technology | 20,556 | | | 12,329 | | | 8,227 | |
| Leasehold interest – favorable | 600 | | | 102 | | | 498 | |
| Foreign currency translation adjustment | (589) | | | (217) | | | (372) | |
| Total | $ | 201,627 | | | $ | 83,861 | | | $ | 117,766 | |
Amortization expense of intangible assets was $20.8 million, $23.3 million and $24.4 million for the years ended December 31, 2024, 2023 and 2022, respectively.
Intangible Liabilities
Associated with our acquisition of Delta Private Jets on January 17, 2020, we recognized intangible liabilities for the fair value of complimentary Connect Memberships provided to existing Delta SkyMiles® 360 customers as of the acquisition date. The gross carrying value, accumulated amortization and net carrying value of intangible liabilities consisted of the following (in thousands):
| | | | | | | | | | | | | | | | | |
| December 31, 2024 |
| Gross Carrying
Value | | Accumulated Amortization | | Net Carrying
Value |
| Intangible liabilities | $ | 20,000 | | | $ | 9,323 | | | $ | 10,677 | |
| | | | | | | | | | | | | | | | | |
| December 31, 2023 |
| Gross Carrying
Value | | Accumulated Amortization | | Net Carrying
Value |
| Intangible liabilities | $ | 20,000 | | | $ | 7,798 | | | $ | 12,202 | |
Amortization of intangible liabilities, which reduces amortization expense was $1.5 million, $1.9 million and $2.0 million for the years ended December 31, 2024, 2023 and 2022, respectively.
Future amortization expense of intangible assets and intangible liabilities held as of December 31, 2024 are as follows (in thousands):
| | | | | | | | | | | |
| Year ending December 31, | Intangible
Assets | | Intangible
Liabilities |
| 2025 | $ | 20,282 | | | $ | 1,525 | |
| 2026 | 19,418 | | | 1,525 | |
| 2027 | 14,880 | | | 1,525 | |
| 2028 | 14,232 | | | 1,525 | |
| 2029 | 13,488 | | | 1,525 | |
| Thereafter | 14,604 | | | 3,052 | |
| Total | $ | 96,904 | | | $ | 10,677 | |
7. CASH, CASH EQUIVALENTS AND RESTRICTED CASH
A reconciliation of Cash and cash equivalents and Restricted cash from the consolidated balance sheets to the consolidated statements of cash flows is shown below (in thousands):
| | | | | | | | | | | |
| December 31, 2024 | | December 31, 2023 |
| Cash and cash equivalents | $ | 216,426 | | | $ | 263,909 | |
| Restricted cash | 30,042 | | | 28,916 | |
| Total | $ | 246,468 | | | $ | 292,825 | |
Cash Equivalents
Cash and cash equivalents consisted of the following (in thousands):
| | | | | | | | | | | |
| December 31, 2024 | | December 31, 2023 |
| Cash | $ | 135,614 | | | $ | 263,815 | |
| Money market funds | 80,812 | | | 94 | |
| Total | $ | 216,426 | | | $ | 263,909 | |
Interest income from cash equivalents of $2.2 million, $6.1 million and $3.7 million was recorded in Interest income in the consolidated statements of operations for the years ended December 31, 2024, 2023 and 2022, respectively.
Restricted Cash
As of December 31, 2024 and December 31, 2023, Restricted cash primarily consisted of $18.8 million and $17.9 million, respectively, related to funds held but unavailable for immediate use due to contractual restrictions, and $6.2 million and $6.2 million, respectively, held by financial institutions to establish standby letters of credit required by the lessors of certain corporate office space that we leased as of such dates, and $5.0 million and $3.4 million, respectively, held by financial institutions to collateralize against our credit card programs. The standby letters of credit required by lessors expire on December 31, 2033 and June 30, 2034.
8. LONG-TERM DEBT
The following table presents the components of Long-term debt, net on our consolidated balance sheet at December 31, 2024 (in thousands, except interest rates):
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Maturity Date | | Interest Rate per Annum as of December 31, 2024 | | December 31, 2024 | | December 31, 2023 |
| 2022 Term Equipment Notes | | 2025 to 2029 | | 12.0% | | $ | — | | | $ | 214,878 | |
| 2024 Revolving Equipment Notes | | 2029 | | SOFR + 1.75% | | 317,484 | | — | |
Term Loan(1) | | 2028 | | 10.0% | | 443,864 | | | 400,453 | |
| Total debt | | | | | | 761,348 | | | 615,331 | |
| Less: Total unamortized debt discount and debt issuance costs | | | | | | 353,292 | | | 356,259 | |
| Less: Current maturities of long-term debt | | | | | | 31,748 | | | 23,998 | |
| Long-term debt, net | | | | | | $ | 376,308 | | | $ | 235,074 | |
_________
(1) As of December 31, 2024, includes $1.1 million outstanding in connection with the Credit Support Premium (as defined below), which will become due and payable in-full upon the earlier of repayment and extinguishment of the Revolving Equipment Note Facility (as defined below) and the termination of Delta’s obligation to provide credit support for the Revolving Equipment Notes Facility. The Credit Support Premium is deemed a Revolving Loan (as defined in the Credit Agreement) under the Credit Agreement; however, any such accrued amounts do not reduce Delta’s $100.0 million commitment available to be borrowed by the Company from time to time under the Revolving Credit Facility (as defined below).
Maturities of our debt for the next five years are as follows (in thousands):
| | | | | |
| Maturities |
| 2025 | $ | 31,748 | |
| 2026 | 31,748 | |
| 2027 | 33,336 | |
| 2028 | 480,842 | |
| 2029 | 183,674 | |
| |
| Total | $ | 761,348 | |
Long-Term Debt Arrangements as of December 31, 2024
2024 Revolving Equipment Notes
On November 13, 2024 (the “Initial Revolving Equipment Notes Closing Date”), WUP LLC entered into a Note Purchase Agreement, dated as of the Initial Revolving Equipment Notes Closing Date (the “2024 Note Purchase Agreement”), with Wilmington Trust, National Association (“Wilmington Trust”), as subordination agent and trustee, and Wheels Up Class A-1 Loan Trust 2024-1, a Delaware statutory trust (the “2024-1 Trust”), which provides for the revolving issuance from time to time by WUP LLC of Series A-1 equipment notes (the “Revolving Equipment Notes”) in an aggregate principal amount up to $332.0 million (the “Revolving Equipment Notes Facility”), of which approximately $331.3 million aggregate principal amount was initially funded by Bank of America, N.A., the sole lead arranger, and issued on the Initial Revolving Equipment Notes Closing Date. The initial Revolving Equipment Notes were issued by WUP LLC, and loans were made to the 2024-1 Trust, for gross proceeds equal to approximately 98.75% of the principal amount of the initial Revolving Equipment Notes. The
maturity date for the Revolving Equipment Notes Facility is five years after the Initial Revolving Equipment Notes Closing Date, or November 13, 2029 (the “Revolving Equipment Notes Maturity Date”).
Pursuant to the 2024 Note Purchase Agreement, any amounts of principal repaid by WUP LLC on and after the Initial Revolving Equipment Notes Closing Date and prior to November 13, 2027 (the “Availability Period”), either through regular principal amortization payments or from the early redemption of principal amounts related to any aircraft secured by the Revolving Equipment Notes Facility, will become available to be re-borrowed by WUP LLC for the purchase of additional aircraft to be secured by such facility during the Availability Period, subject to certain conditions. WUP LLC must also pay a customary commitment fee on unused amounts available to be borrowed under the Revolving Equipment Note Facility. As of December 31, 2024, the Revolving Equipment Notes were secured by first-priority liens on 96 of the Company’s owned aircraft and in the future will be secured by first-priority liens on any additional aircraft for which a Revolving Equipment Note is issued from time to time (collectively, the “Revolving Equipment Notes Collateral”).
The Revolving Equipment Notes Facility utilizes an enhanced equipment trust certificate (“EETC”) loan structure. Pursuant to the 2024 Note Purchase Agreement, Revolving Equipment Notes are issued pursuant to a Trust Indenture and Mortgage (together with any supplements thereto, the “2024 Trust Indenture”) entered into by WUP LLC and Wilmington Trust, as the mortgagee thereunder, on the Initial Revolving Equipment Notes Closing Date. The Revolving Equipment Notes bear interest at the variable rate of the then applicable three-month secured overnight funds rate (“SOFR”) plus 1.75% per annum from the Initial Revolving Equipment Notes Closing Date to the end of the Availability Period, SOFR plus 2.25% immediately after the end of the Availability Period to November 13, 2028, and SOFR plus 2.75% from November 13, 2028 to the Revolving Equipment Notes Maturity Date, with annual amortization of principal amount equal to 10% per annum from the Initial Revolving Equipment Notes Closing Date through the end of the Availability Period and 12% per annum thereafter. Interest on the Revolving Equipment Notes is payable quarterly on each February 15, May 15, August 15 and November 15 of each year, beginning on February 15, 2025, and on the Revolving Equipment Notes Maturity Date. Principal payments on the Revolving Equipment Notes are scheduled for payment on the same dates as interest payments.
WUP LLC may redeem any Revolving Equipment Note in connection with the sale of an aircraft that constitutes Revolving Equipment Notes Collateral or otherwise, at any time, and is not required to pay any prepayment premiums in connection with such early redemptions. The maturity of the Revolving Equipment Notes may be accelerated upon the occurrence of certain events of default, including the failure by WUP LLC (in some cases after notice or the expiration of a grace period, or both) to make payments thereunder when due, a failure to comply with certain covenants and certain bankruptcy events involving the Company, its guarantors or Delta. WUP LLC’s obligations under the Revolving Equipment Notes are guaranteed by the Company, WUP and WUPJ, which has a FAA Part 135 operating certificate. In the future, WUP LLC must cause certain additional subsidiaries and affiliates of WUP LLC that hold a FAA Part 135 operating certificate to become a guarantor under the Revolving Equipment Note Facility under certain circumstances.
The 2024 Note Purchase Agreement, 2024 Trust Indenture and related guarantees contain certain covenants, including a covenant that limits the maximum loan to value ratio of all aircraft financed under the Revolving Equipment Notes Facility, a covenant that limits the maximum concentration of the outstanding aggregate principal amount for Revolving Equipment Notes for specified models of aircraft relative to the outstanding aggregate principal amount of all aircraft financed under the Revolving Equipment Notes Facility, and a requirement to maintain a liquidity reserve in the form of a cash amount or a letter of credit equal to six months of interest charges based on the aggregate principal amount of Revolving Equipment Notes outstanding on any regularly scheduled principal and interest payment date, in each case subject to certain cure rights of the Company. The 2024 Trust Indenture contains customary events of default for transactions of this type, as well as an event of default that is triggered upon the occurrence and continuation of an event of default by Delta under its current revolving credit agreement or any replacements thereof.
Issuance costs of $1.5 million were incurred in connection with the initial issuance of the Revolving Equipment Notes during the three months ended December 31, 2024. The initial carrying value of the Revolving Equipment Notes was $331.8 million, which reflected the $1.5 million of issuance costs and $4.2 million of debt discount recognized. Amortization of debt discounts and deferred issuance costs associated with the Revolving Equipment
Notes of $0.2 million were recognized in Interest expense in the consolidated statement of operations for the year ended December 31, 2024.
Credit Support
In connection with the initial closing of the Revolving Equipment Notes Facility, Delta agreed to provide credit support for the Revolving Equipment Notes Facility, which effectively guarantees WUP LLC’s payment obligations thereunder upon the occurrence and continuation of specified events of default, in exchange for an annual fee as a percentage of the aggregate principal amounts drawn under the Revolving Equipment Notes Facility that is payable-in-kind by the Company and accrues interest over the life of the Revolving Equipment Notes Facility (the “Credit Support Premium”). The Credit Support Premium constitutes a revolving loan payable to Delta under the Revolving Credit Facility. Amounts in respect of the Credit Support Premium accrue while the Revolving Equipment Notes are outstanding and include interest that is compounded and capitalized on the last day of each calendar quarter; however, any such accrued amounts do not reduce Delta’s $100.0 million commitment available to be borrowed by the Company from time to time under the Revolving Credit Facility. The Credit Support Premium will become due and payable in-full upon the earlier of repayment and extinguishment of the Revolving Equipment Note Facility and the termination of Delta’s obligation to provide credit support for the Revolving Equipment Notes Facility.
On the Initial Revolving Equipment Notes Closing Date, the Company entered into Amendment No. 2 to Credit Agreement (the “Second Credit Agreement Amendment”), by and among the Company, as borrower, the other Loan Parties (as defined below) party thereto, as guarantors, Delta and CK Wheels LLC (“CK Wheels”), together constituting the Required Lenders and Lead Lenders (as each term is defined in the Credit Agreement (as defined below)) thereunder, and the Agent (as defined below), to make certain technical amendments to the Credit Agreement to permit the Revolving Equipment Notes Facility and provide for the Credit Support Premium. The Second Credit Agreement Amendment did not materially amend any of the events of default or covenants, collateral provisions, terms related to existing borrowings and repayments, the maturity date or otherwise alter Delta’s existing $100.0 million commitment under the Revolving Credit Facility.
Term Loan and Revolving Credit Facility
On September 20, 2023 (the “Credit Agreement Closing Date”), the Company entered into a Credit Agreement (the “Original Credit Agreement”), by and among the Company, as borrower, certain subsidiaries of the Company, as guarantors (collectively with the Company, the “Loan Parties”), Delta, CK Wheels, and Cox Investment Holdings LLC (“CIH” and, collectively with Delta and CK Wheels, the “Initial Lenders”), and U.S. Bank Trust Company, N.A., as administrative agent for the Lenders (as defined below) and as collateral agent for the secured parties (the “Agent”), pursuant to which (i) the Initial Lenders provided a term loan facility (the “Initial Term Loan”) in the aggregate original principal amount of $350.0 million and (ii) Delta provided a commitment for a revolving loan facility (the “Revolving Credit Facility”) in the aggregate original principal amount of $100.0 million. On September 20, 2023, the Company issued the Initial Term Loan of $350.0 million to the Initial Lenders for net proceeds before transaction-related expenses of $343.0 million.
On November 15, 2023 (the “Final Credit Agreement Closing Date”), the Company entered into Amendment No. 1 to Credit Agreement (the “First Credit Agreement Amendment” and, collectively with the Original Credit Agreement and Second Credit Agreement Amendment, the “Credit Agreement”), by and among the Company, as borrower, the other Loan Parties party thereto, as guarantors, the Initial Lenders, and certain other lenders named therein (collectively, the “Incremental Term Lenders” and, collectively with the Initial Lenders, the “Lenders”), and the Agent, pursuant to which, among other things, the Incremental Term Lenders joined the Credit Agreement and provided an additional term loan facility (the “Incremental Term Loan” and, together with the Initial Term Loan, the “Term Loan” and, together with the Revolving Credit Facility, the “Credit Facility”) in the aggregate original principal amount of $40.0 million. On the Final Credit Agreement Closing Date, the Company issued the Incremental Term Loan of $40.0 million to the Incremental Term Lenders for net proceeds before transaction-related expenses of $39.2 million. Upon the closing of the Incremental Term Loan, the loans under the Credit Facility consisted of (i) the Term Loan in the aggregate principal amount of $390.0 million and (ii) the Revolving Credit Facility with a commitment from Delta in the aggregate original principal amount of $100.0 million.
The scheduled maturity date for the Term Loan is September 20, 2028, and the scheduled maturity date for the Revolving Credit Facility is the earlier of September 20, 2028 and the first date after September 20, 2025 on which all amounts owed with respect to borrowings under the Revolving Credit Facility have been repaid, subject in each case to earlier termination upon acceleration or termination of any obligations upon the occurrence and continuation of an event of default. Interest on the Term Loan and any borrowings under the Revolving Credit Facility (each, a “Loan” and collectively, the “Loans”) accrues at a rate of 10% per annum on the unpaid principal balance of the Loans then outstanding. Accrued interest on each Loan is payable-in-kind as compounded interest and capitalized to the principal amount of the applicable Loan on the last day of each of March, June, September and December, and the applicable maturity date. If in the future the Company or its subsidiaries either redeem in-full the outstanding Revolving Equipment Notes or commence payoff at maturity thereof, the Company may elect to make interest payments or some portion thereof on any Loans then outstanding in cash. Also, upon the occurrence and during the continuation of an event of default under the Credit Agreement, interest will accrue on (i) the unpaid principal balance of the Loans at the rate then applicable to such Loans plus 2% per annum and (ii) all other outstanding liabilities, interest, expenses, fees and other sums under the Credit Agreement, at a rate equal to the Alternate Base Rate (as defined in the Credit Agreement) plus 2% per annum.
The Credit Agreement also contains certain covenants and events of default, in each case customary for transactions of this type. The obligations under the Credit Agreement are secured by a first-priority lien on unencumbered assets of the Loan Parties (excluding any segregated account exclusively holding customer deposits and certain other assets, in each case as specified in the Credit Agreement) and a junior lien on the Revolving Equipment Note Collateral. The Credit Agreement is guaranteed by all U.S. and certain non-U.S. direct and indirect subsidiaries of the Company and the equity interests of such subsidiaries have been pledged as collateral. In the future, the Company may be required to add any new or after-acquired subsidiaries of the Company that meet certain criteria as guarantors. As of December 31, 2024, we were in compliance with the covenants under the Credit Agreement and related credit documents.
In connection with the funding of the Initial Term Loan, the Company entered into the Investment and Investor Rights Agreement, dated as of the Credit Agreement Closing Date (the “Original Investor Rights Agreement”), by and among the Company and the Initial Lenders, pursuant to which the Company issued to the Initial Lenders 141,313,671 shares of Common Stock in the aggregate (the “Initial Shares”) in a private placement (the “Initial Issuance”) on the Credit Agreement Closing Date. In addition, the Company agreed to issue an additional 529,926,270 shares of Common Stock in the aggregate (the “Deferred Shares” and, together with the Initial Shares, the “Investor Shares”) in a subsequent private placement (the “Deferred Issuance” and, together with the Initial Issuance, the “Investor Issuances”).
On November 9, 2023, the Company’s stockholders approved, at a special meeting of the Company’s stockholders, the Amended and Restated Certificate of Incorporation of Wheels Up, filed with the Secretary of State of the State of Delaware on November 15, 2023 (the “Amended and Restated Certificate of Incorporation”), which, among other things, increased the number of shares of Common Stock available for issuance thereunder. In connection with the transactions contemplated by the First Credit Agreement Amendment, the Company entered into Amendment No. 1 to Investment and Investor Rights Agreement Amendment, dated as of the Final Credit Agreement Closing Date (the “First Investor Rights Agreement Amendment” and, collectively with the Original Investor Rights Agreement, Amendment No. 2 to Investment and Investor Rights Agreement, dated September 22, 2024, and the Investor Rights Agreements Joinders (as defined below), the “Investor Rights Agreement”), with each Initial Lender, which contained, among others, certain revisions to reflect the issuance of the Deferred Shares. Substantially concurrently with entering into the First Investor Rights Agreement Amendment, on the Final Closing Date, the Company and Initial Lenders entered into joinders to the Investor Rights Agreement (collectively, the “investor Rights Agreement Joinders”) with each Incremental Term Lender (or its applicable affiliate), pursuant to which each Incremental Term Lender (or its applicable affiliate) joined the Investor Rights Agreement and assumed the rights and obligations of an Additional Investor (as defined in the Investor Rights Agreement) thereunder, including the right to receive a pro rata portion of the Investor Shares. The Company issued the Deferred Shares to the Lenders on the Final Credit Agreement Closing Date in a private placement. Following the Deferred Issuance, each Lender had been issued a number of shares equal to its pro rata portion of the Investor Shares based on its participation in the Term Loan.
In accordance with ASC 480, Distinguishing Liabilities from Equity, and ASC 815, Derivatives and Hedging, the Company determined that the Term Loan, Initial Issuance and Deferred Issuance did not contain any features that would qualify as a derivative or embedded derivative and require bifurcation. In addition, the Company determined the Initial Issuance and Deferred Issuance should be classified as equity. In accordance with ASC 470, Debt, the allocation on a relative fair value basis resulted in gross amounts recorded of $44.9 million for the Initial Term Loan, $64.2 million for the Initial Issuance and $240.9 million for the Deferred Issuance, in each case during the year ended December 31, 2023.
In accordance with ASC 815, Derivatives and Hedging, the Company determined the reallocation of the Deferred Issuance between the Lenders in connection with the First Credit Agreement Amendment and Investor Rights Agreement Joinders that resulted in a pro rata portion of the Investor Shares being issued to the Incremental Term Lenders on the Final Credit Agreement Closing Date represented a modification of a freestanding equity-classified written call option and the modification was to be recognized as if cash had been paid as consideration for the shares of Common Stock issued to the Incremental Term Lenders (collectively, the “Reallocated Shares”). Accordingly, the Reallocated Shares were treated as a debt discount in accordance with the guidance in ASC 835, Interest, and the value of the Incremental Term Loan and the Reallocated Shares was apportioned using a relative fair value allocation that resulted in gross amounts recorded during the three months ended December 31, 2023 of $9.4 million for the Incremental Term Loan and $30.6 million for the Reallocated Shares.
Aggregate issuance costs of $29.5 million were incurred in connection with the Original Credit Agreement, First Credit Agreement Amendment, Original Investor Rights Agreement and First Investor Rights Agreement Amendment. The deferred issuance costs were allocated on a relative fair value basis, resulting in an allocation of $4.1 million in the aggregate for the Term Loan and $25.4 million in the aggregate for the Investor Issuances. The initial carrying value of the Term Loan was $41.1 million as of September 20, 2023, which reflected $3.4 million of unamortized debt issuance costs and $305.2 million of unamortized debt discount. The initial carrying value of the Incremental Term Loan was $8.7 million as of November 15, 2023, which reflected $0.7 million of unamortized debt issuance costs and $30.6 million of unamortized debt discount.
Accretion of debt discounts and deferred issuance costs associated with the Term Loan of $4.4 million and $3.4 million were recorded in Interest expense in the consolidated statement of operations for the years ended December 31, 2024 and December 31, 2023, respectively.
Long-Term Debt Extinguished as of or Prior to December 31, 2024
Amortization expense for debt discounts and deferred financing costs, which were associated with debt extinguished as of or prior to December 31, 2024, of $4.4 million, $0.6 million and $0.8 million were recorded in interest expense in the consolidated statement of operations for the years ended December 31, 2024, December 31, 2023 and December 31, 2022, respectively.
2022 Term Equipment Notes
On October 14, 2022, WUP LLC issued $270.0 million aggregate principal of 12% fixed rate equipment notes (collectively, the “2022 Term Equipment Notes”) using an EETC loan structure. The 2022 Term Equipment Notes were issued for net proceeds before transaction-related expenses of $259.2 million. The 2022 Term Equipment Notes were initially secured by first-priority liens on 134 of the Company’s owned aircraft fleet and by liens on certain intellectual property assets of the Company and certain of its subsidiaries (the “2022 Term Equipment Notes Collateral”). On the Initial Revolving Equipment Notes Closing Date, the Company used a portion of the net proceeds from the initial closing of the Revolving Equipment Notes and $20.0 million held as a deposit for the benefit of the lenders under the 2022 Term Equipment Notes to redeem in-full all amounts due and owing under the 2022 Term Equipment Notes, including accrued interest and any premiums thereon (the “2022 Term Equipment Notes Redemption”).
Prior to the 2022 Term Equipment Notes Redemption, the unpaid balance of the 2022 Term Equipment Notes accrued interest at the rate of 12% per annum with annual amortization of principal amount equal to 10% per annum and balloon payments due at each maturity date. Interest and principal payments on the 2022 Term Equipment Notes were payable quarterly on each January 15, April 15, July 15 and October 15, beginning on January 15, 2023.
WUP LLC’s obligations under the 2022 Term Equipment Notes were guaranteed by the Company and certain of its subsidiaries. In connection with the 2022 Term Equipment Notes Redemption, WUP LLC and each of the guarantors under the 2022 Term Equipment Notes entered into, among other customary documents, a Release Agreement, dated as of the Initial Revolving Equipment Notes Closing Date (the “2022 Term Equipment Notes Release Agreement”), with Wheels Up Class A-1 Loan Trust 2022-1 and Wilmington Trust, not in its individual capacity but as mortgagee, facility agent, security trustee, subordination agent and trustee, which terminated the operative documents to which the Company and its subsidiaries were parties in relation to 2022 Term Equipment Notes, fully released 2022 Term Equipment Notes Collateral from the liens under such documents, and fully released the related guarantees by the Company and certain of its subsidiaries thereunder. As a result, effective as of the Initial Revolving Equipment Notes Closing Date, all of the Company’s obligations under the 2022 Term Equipment Notes were satisfied.
Amortization expense for debt discounts and deferred financing costs attributable to the 2022 Term Equipment Notes of $13.0 million and $3.7 million were recorded in Interest expense in the consolidated statement of operations for the years ended December 31, 2024 and 2023, respectively.
Delta Promissory Note
On August 8, 2023, the Company entered into a Secured Promissory Note (the “Promissory Note”) with Delta, as payee, which was subsequently amended pursuant to the First Amendment thereto, dated August 15, 2023, the Second Amendment thereto, dated August 21, 2023, the Third Amendment thereto, dated September 6, 2023, and the Fourth Amendment thereto, dated September 14, 2023 (collectively with the Promissory Note, the “Amended Promissory Note”), pursuant to which Delta provided $70.0 million aggregate principal amount of short-term funding to the Company at an interest rate of 10% per annum, which was payable-in-kind and capitalized to the outstanding principal amount of the Amended Promissory Note on a quarterly basis. The Amended Promissory Note was secured by a first-priority lien on unencumbered assets of the Company and its direct and indirect U.S. subsidiaries, including unencumbered aircraft of WUP LLC. The Amended Promissory Note was guaranteed by the Company’s U.S. subsidiaries. On September 20, 2023, the Company repaid all amounts due and owed under the Amended Promissory Note using a portion of the proceeds from the Term Loan and entered into a Letter Agreement, dated as of September 20, 2023 with Delta, which terminated the Amended Promissory Note and released all liens and guarantees thereunder. The repayment of all amounts due and owed under the Amended Promissory Note was accounted for as a debt extinguishment and no gain or loss was recognized.
9. FAIR VALUE MEASUREMENTS
Financial instruments that are measured at fair value on a recurring basis and their corresponding placement in the fair value hierarchy consist of the following as of the dates indicated in the tables below (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2024 |
| Level 1 | | Level 2 | | Level 3 | | Fair Value |
| Assets: | | | | | | | |
| Money market funds | $ | 80,812 | | | $ | — | | | $ | — | | | $ | 80,812 | |
| Total assets | $ | 80,812 | | | $ | — | | | $ | — | | | $ | 80,812 | |
| | | | | | | |
| Liabilities: | | | | | | | |
| Warrant liability - Public Warrants | $ | — | | | $ | 13 | | | $ | — | | | $ | 13 | |
| Warrant liability - Private Warrants | — | | | 7 | | | — | | | 7 | |
| Revolving Equipment Notes | — | | | — | | | 317,484 | | | 317,484 | |
| Term Loan | — | | | — | | | 284,845 | | | 284,845 | |
| Total liabilities | $ | — | | | $ | 20 | | | $ | 602,329 | | | $ | 602,349 | |
| | | | | | | |
| December 31, 2023 |
| Level 1 | | Level 2 | | Level 3 | | Fair Value |
| Assets: | | | | | | | |
| Money market funds | $ | 94 | | | $ | — | | | $ | — | | | $ | 94 | |
| Total assets | $ | 94 | | | $ | — | | | $ | — | | | $ | 94 | |
| | | | | | | |
| Liabilities: | | | | | | | |
| Warrant liability - Public Warrants | $ | 7 | | | $ | — | | | $ | — | | | $ | 7 | |
| Warrant liability - Private Warrants | — | | | 5 | | | — | | | 5 | |
| 2022 Term Equipment Notes | — | | | — | | | 256,256 | | | 256,256 | |
| Term Loan | — | | | — | | | 297,800 | | | 297,800 | |
| Total liabilities | $ | 7 | | | $ | 5 | | | $ | 554,056 | | | $ | 554,068 | |
The carrying amount of money market funds approximates fair value and is classified within Level 1, because we determined the fair value through quoted market prices.
The Warrants were accounted for as a liability in accordance with ASC 815-40 (see Note 12). The Warrant liability was measured at fair value upon assumption and on a recurring basis, with changes in fair value presented in the consolidated statements of operations. As of December 31, 2024 and 2023, we used Level 2 inputs for the Warrants. See Note 12 for additional information about the Warrants. The estimated fair values of the Revolving Equipment Notes and 2022 Term Equipment Notes are categorized as Level 3 valuations. We considered the appraised value of aircraft subject to first-priority liens under the Revolving Equipment Notes, as sourced during the fourth quarter of 2024 and as required under the Revolving Equipment Notes, to determine the fair value of the Revolving Equipment Notes as of December 31, 2024. We considered the appraised value of aircraft subject to first-priority liens under the Equipment Notes, as sourced during the third quarter of 2023 and as required under the Equipment Notes, to determine the fair value of the Equipment Notes as of December 31, 2023.
The estimated fair value of the Term Loan, which includes amounts outstanding in connection with the Credit Support Premium, is categorized as a Level 3 valuation. The estimated fair value as of December 31, 2024 was estimated using a discounted cash flows analysis, based on our current estimated incremental borrowing rate for a similar type of borrowing arrangement.
The following table presents the changes in the fair value of the Warrant liability (in thousands):
| | | | | | | | | | | | | | | | | |
| Public Warrants | | Private Warrants | | Total
Warrant Liability |
| Fair value as of December 31, 2022 | $ | 479 | | | $ | 272 | | | $ | 751 | |
| Change in fair value of warrant liability | (472) | | | (267) | | | (739) | |
| Fair value as of December 31, 2023 | 7 | | | 5 | | | 12 | |
| Change in fair value of warrant liability | 6 | | | 2 | | | 8 | |
| Fair value as of December 31, 2024 | $ | 13 | | | $ | 7 | | | $ | 20 | |
10. LEASES
Leases primarily pertain to certain controlled aircraft, office spaces and operational facilities, which are all accounted for as operating leases. Certain of these operating leases have renewal options to further extend for additional time periods at our discretion.
We have certain variable lease agreements with aircraft owners that contain payment terms based on an hourly lease rate multiplied by the number of flight hours during a month. Variable lease payments are not included in the right-of-use asset and lease liability balances, but rather are expensed as incurred.
The components of total lease costs are as follows (in thousands):
| | | | | | | | | | | | | | | | | |
| Year Ended December 31, |
| 2024 | | 2023 | | 2022 |
| Operating lease costs | $ | 28,630 | | | $ | 38,442 | | | $ | 38,818 | |
| Short-term lease costs | 668 | | | 7,215 | | | 10,725 | |
| Variable lease payments | 20,542 | | | 30,854 | | | 17,997 | |
| Total lease costs | $ | 49,840 | | | $ | 76,511 | | | $ | 67,540 | |
Lease costs related to leased aircraft and operational facilities are included in Cost of revenue in the consolidated statements of operations. Lease costs related to our leased corporate headquarters and other office space, including expenses for non-lease components, are allocated to Technology and development, Sales and marketing and General and administrative expense in the consolidated statements of operations.
Sublease income is presented in General and administrative expenses in the consolidated statements of operations. Sublease income was not material for any of the years ended December 31, 2024, 2023 and 2022.
Supplemental cash flow information related to leases are as follows (in thousands):
| | | | | | | | | | | | | | | | | |
| Year Ended December 31, |
| 2024 | | 2023 | | 2022 |
| Cash paid for amounts included in the measurement of operating lease liabilities: | | | | | |
| Operating cash flows paid for operating leases | $ | 29,594 | | | $ | 35,914 | | | $ | 38,934 | |
| Right-of-use assets obtained in exchange for operating lease obligations | $ | 16,885 | | | $ | 7,989 | | | $ | 50,385 | |
Supplemental balance sheet information related to leases are as follows:
| | | | | | | | | | | |
| December 31, 2024 | | December 31, 2023 |
| Weighted-average remaining lease term (in years): | | | |
| Operating leases | 6.6 | | 6.7 |
| Weighted-average discount rate: | | | |
| Operating leases | 10.1% | | 9.2% |
Future maturities of lease liabilities, as of December 31, 2024, were as follows (in thousands):
| | | | | |
| Year ending December 31, | Operating Leases |
| 2025 | $ | 19,559 | |
| 2026 | 13,331 | |
| 2027 | 11,230 | |
| 2028 | 10,002 | |
| 2029 | 9,645 | |
| Thereafter | 25,944 | |
| Total lease payments | 89,711 | |
| Less: Imputed interest | (24,948) | |
| Total lease obligations | $ | 64,763 | |
11. STOCKHOLDERS’ EQUITY AND EQUITY-BASED COMPENSATION
Stockholders’ Equity
Authorized Shares
Pursuant to the Amended and Restated Certificate of Incorporation, we are authorized to issue up to 1,525,000,000 shares, consisting of up to 1,500,000,000 shares of Common Stock and 25,000,000 shares of preferred stock. Holders of Common Stock are entitled to one vote per share; provided, that by agreement: (i) certain parties to the Investor Rights Agreement that are not a “citizen of the United States” (as defined in 49 USC § 40102(a)(15)(C)) (collectively, the “Non-Citizen Investors”) may be afforded collective voting rights equal to 1% of all shares of Common Stock entitled to vote at a meeting of the Company’s stockholders; (ii) for so long as such Non-Citizen Investors collectively hold such shares of Common Stock, the shares of Common Stock held by CK Wheels in excess of 23.9% of all shares of Common stock entitled to vote at a meeting of the Company’s stockholders will not have voting rights (subject to ratable adjustment if the Non-Citizen Investors cease to own (beneficially or of record) a certain number of shares of Common Stock); and (iii) any shares of Common Stock
owned by Delta above 29.9% will be neutral shares with respect to voting rights and will be voted in proportion to all other votes cast (“for”, “against” or “abstain”) at a meeting of the Company’s stockholders by stockholders other than by Delta.
2023 Common Stock Issuances
Pursuant to the Original Investor Rights Agreement, the Company issued the Initial Lenders 141,313,671 Initial Shares in a private placement on the Credit Agreement Closing Date. The Initial Shares were issued such that each Initial Lender received a pro rata portion of the Initial Shares equal to the proportion of its participation in the Term Loan as of the Credit Agreement Closing Date. The amount recorded for the Initial Issuance was determined using the relative fair value basis, which resulted in allocated gross proceeds of $64.2 million for the Initial Issuance. Issuance costs of $4.9 million were recorded as a reduction to Additional paid-in capital.
In connection with entering into the First Investor Rights Agreement Amendment, and substantially concurrently therewith on the Final Credit Agreement Closing Date, the Company entered into the Investor Rights Agreement Joinders with each Incremental Term Lender (or its applicable affiliate). Thereafter, the Company issued 529,926,270 Deferred Shares to the Lenders in a private placement on the Final Credit Agreement Closing Date. The Investor Shares were issued such that after the Investor Issuances, each Lender was issued a number of shares equal to its pro rata portion of the Investor Shares based on its participation in the Term Loan.
The Company recorded the Deferred Issuance as a forward contract for Common Stock within Additional paid-in capital on the consolidated balance sheet during the three months ended September 30, 2023. The amount recorded for the Deferred Issuance was determined using the relative fair value basis, which resulted in allocated gross proceeds of $240.9 million for the Deferred Issuance. Issuance costs of $18.3 million were recorded as a reduction to Additional paid-in capital during the year ended December 31, 2023.
In connection with entering into the First Investor Rights Agreement Amendment and the Investor Rights Agreement Joinders, on the Final Credit Agreement Closing Date, the Reallocated Shares were issued to the Incremental Term Lenders. The Company recorded the Reallocated Shares within Additional paid-in capital on the consolidated balance sheet during the three months ended December 31, 2023. The amount recorded for the Reallocated Shares was determined using the relative fair value basis, which resulted in allocated gross proceeds of $30.6 million. Issuance costs of $2.2 million were recorded as a reduction to Additional paid-in capital during the year ended December 31, 2023.
Equity-Based Compensation
The Company’s outstanding equity-based compensation awards to its directors, executive officers, employees and other eligible personnel have been made pursuant to the Wheels Up Experience Inc. 2021 Long-Term Incentive Plan, as amended and restated effective April 1, 2023 (as amended by the LTIP Amendment (as defined below), the “Amended and Restated 2021 LTIP”), the Wheels Up Experience Inc. 2022 Inducement Grant Plan, dated June 30, 2022 (the “2022 Inducement Grant Plan”), the Wheels Up Experience Inc. Performance Award Agreement, dated as of November 30, 2023, granted to George Mattson (the “CEO Performance Award”), the Wheels Up Experience Inc. Performance Award Agreement, dated as of March 3, 2024, granted to our former Chief Financial Officer (the “Forfeited CFO Performance Award”), the Wheels Up Experience Inc. Performance Award Agreement, dated as of May 20, 2024, granted to David Harvey (the “CCO Performance Award” and, collectively with the CEO Performance Award and Forfeited CFO Performance Award, the “Executive Performance Awards”), and nine equity-based compensation plans (collectively, the “WUP Management Incentive Plan”) and the Wheels Up Partners Holdings LLC Option Plan (the “WUP Option Plan”), each of which were approved by the board of directors of WUP prior to the Business Combination. Additional details about these equity-based compensation arrangements are below.
WUP Management Incentive Plan
In March 2014, the WUP Management Incentive Plan was established, which provided for the issuance of WUP profits interests, restricted or unrestricted, to employees, consultants and other qualified persons. Following the consummation of the Business Combination, no new grants can be made under the WUP Management Incentive
Plan. As of December 31, 2024, an aggregate of 3.1 million profits interests had been authorized and issued under the WUP Management Incentive Plan. Vested WUP profits interests are eligible to be exchanged into shares of Common Stock before July 13, 2031. Amounts of WUP profits interests reported in the tables below represent the maximum number of WUP profits interests outstanding or that could be realized upon vesting and immediately exchanged for the maximum number of shares of Common Stock. The actual number of shares of Common Stock received upon exchange of such WUP profits interests will depend on the trading price per share of Common Stock at the time of such exchange.
The following table summarizes the WUP profits interests activity under the WUP Management Incentive Plan as of December 31, 2024:
| | | | | | | | | | | |
| Number of WUP
Profits Interests | | Weighted-Average Grant
Date Fair Value |
| (in thousands) | | |
| Outstanding WUP profits interests as of January 1, 2024 | 2,881 | | | $ | 4.16 | |
| Granted | — | | | — | |
| Exchanged | — | | | — | |
| Expired/forfeited | — | | | — | |
| Outstanding WUP profits interests as of December 31, 2024 | 2,881 | | | 4.16 | |
The weighted-average remaining contractual term as of December 31, 2024 for WUP profits interests outstanding was approximately 6.5 years. All WUP profits interests were vested as of December 31, 2023.
WUP Restricted Interests
WUP restricted interests were time- and performance-based awards that vested when both of the following conditions were met: (i) ratably over a four-year service period; and (ii) upon the first to occur of (A) a change of control of WUP and (B) the later to occur of (1) six months after an initial public offering of WUP and (2) 30 days after the expiration of any applicable lock-up period in connection with an initial public offering of WUP. As a result, we started recording compensation cost for WUP restricted interests on the Business Combination Closing Date. The WUP restricted interests lock-up period expired on February 8, 2022 and all remaining WUP restricted interests vested during the year ended December 31, 2022.
WUP Option Plan
In December 2016, the WUP Option Plan was established, which provided for the issuance of stock options to purchase WUP common interests at an exercise price based on the fair market value of the interests on the date of grant. Generally, WUP stock options granted vested over a four-year service period and expire on the tenth anniversary of the grant date. As of December 31, 2024, the number of WUP stock options authorized and issued in aggregate under the WUP stock option plan was 1.8 million. Each outstanding WUP stock option is exercisable for one share of Common Stock.
The following table summarizes the activity under the WUP Option Plan as of December 31, 2024:
| | | | | | | | | | | | | | | | | |
| Number of WUP
Stock Options | | Weighted-
Average Exercise
Price | | Weighted-Average Grant
Date Fair Value |
| (in thousands) | | | | |
| Outstanding WUP stock options as of January 1,2024 | 1,129 | | | $ | 75.45 | | | $ | 12.64 | |
| Granted | — | | | — | | | — | |
| Exercised | — | | | — | | | — | |
| Forfeited | (303) | | | 78.83 | | | 15.55 | |
| Expired | — | | | — | | | — | |
| Outstanding WUP stock options as of December 31, 2024 | 826 | | | 74.21 | | | 11.57 | |
| Exercisable WUP stock options as of December 31, 2024 | 826 | | | $ | 74.21 | | | 11.57 | |
The aggregate intrinsic value as of December 31, 2024 for WUP stock options that were outstanding and exercisable was nil. The weighted-average remaining contractual term as of December 31, 2024 for WUP stock options that were outstanding and exercisable was approximately 4.2 years, respectively. All WUP stock options were vested as of December 31, 2023.
Amended and Restated 2021 LTIP & 2022 Inducement Grant Plan
In connection with the Business Combination, the Wheels Up Board of Directors (the “Board”) and stockholders of Wheels Up adopted the Wheels Up Experience Inc. 2021 Long-Term Incentive Plan (the “Original 2021 LTIP”), for employees, consultants and other qualified persons. Following approval by the Board, (i) at the 2023 annual meeting of the Company’s stockholders, the Company’s stockholders approved the Amended and Restated 2021 LTIP to increase the aggregate number of shares of Common Stock available for awards made thereunder by 2,415,000 shares and amend certain other plan provisions, and (ii) at the 2024 annual meeting of the Company’s stockholders (the “2024 Annual Meeting”), the Company’s stockholders approved Amendment No. 1 to the Amended and Restated 2021 LTIP (the “LTIP Amendment”), to increase the aggregate number of shares of Common Stock available for awards made under the Amended and Restated 2021 LTIP by 25,000,000 shares and extend the termination date of such plan to April 15, 2034. The Amended and Restated 2021 LTIP provides for the grant of incentive options, nonstatutory options, restricted stock, RSUs, PSUs, rights, dividend equivalents, other stock-based awards, performance awards, cash awards or any combination of the foregoing. As of December 31, 2024, an aggregate of 30.1 million shares were authorized for issuance under the Amended and Restated 2021 LTIP.
On June 30, 2022, the Board adopted the 2022 Inducement Grant Plan to be used for a one-time employment inducement grant, pursuant to New York Stock Exchange (“NYSE”) Rule 303A.08, to our former Chief Financial Officer, in connection with his appointment as Chief Financial Officer. The maximum number of awards that could be granted under the 2022 Inducement Grant Plan were 205,128 shares of Common Stock, which were all granted in the form of RSUs to our former Chief Financial Officer on July 1, 2022. RSU awards granted under the 2022 Inducement Grant Plan contained generally the same terms as other awards granted under the Original 2021 LTIP during the fiscal year ended December 31, 2022. Due to such similarities, the RSUs granted under the 2022 Inducement Grant Plan are consolidated with those issued under the Amended and Restated 2021 LTIP in the discussion of RSUs below. Upon the departure of our former Chief Financial Officer from the Company in September 2024, the 2022 Inducement Grant Plan terminated and all unvested RSUs thereunder were forfeited.
RSUs
RSUs granted under the Amended and Restated 2021 LTIP generally vest at intervals up to a four-year service period, subject to the grantee’s continued service to the Company through the applicable vesting date. The following table summarizes the activity under the Amended and Restated 2021 LTIP and 2022 Inducement Grant Plan related to RSUs as of December 31, 2024:
| | | | | | | | | | | |
| Number of RSUs(1) | | Weighted-Average Grant
Date Fair Value |
| (in thousands) | | |
| Non-vested RSUs as of January 1, 2024 | 1,848 | | | $ | 9.35 | |
| Granted | 10,606 | | | 2.54 | |
| Vested | (1,178) | | | 8.29 | |
| Forfeited | (1,142) | | | 5.61 | |
| Non-vested RSUs as of December 31, 2024 | 10,134 | | | 2.76 | |
(1) The number of non-vested RSUs as of January 1, 2024, the number of forfeited RSUs and the related weighted-average grant date fair values include 68,376 RSUs granted under the 2022 Inducement Grant Plan, which were forfeited in September 2024.The total unrecognized compensation cost related to non-vested RSUs was $22.3 million as of December 31, 2024 and is expected to be recognized over a weighted-average period of 2.7 years.
PSUs
Under the terms of the PSUs granted to certain employees, upon the achievement of certain pre-determined performance objectives, each PSU may settle into shares of our Common Stock. The PSUs will vest, if at all, upon the actual achievement of the related performance objectives, subject to specified change of control exceptions and the grantee’s continued service to the Company through the applicable vesting date.
The following table summarizes the activity under the Amended and Restated 2021 LTIP related to PSUs as of December 31, 2024:
| | | | | | | | | | | |
| Number of PSUs | | Weighted-Average Grant
Date Fair Value |
| (in thousands) | | |
| Non-vested PSUs as of January 1, 2024 | 18 | | | $ | 2.89 | |
| Granted | 482 | | | 3.07 | |
| Vested | — | | | — | |
| Forfeited | (113) | | | 3.03 | |
| Non-vested PSUs as of December 31, 2024 | 387 | | | 3.05 | |
Compensation expense associated with PSUs is recognized over the vesting period of the awards that are ultimately expected to vest when the achievement of the related performance objectives becomes probable. As of December 31, 2024, the achievement of the performance objectives associated with certain non-vested PSUs was deemed not probable of being achieved and no expense has been recognized associated with those awards. The total unrecognized compensation cost related to non-vested PSUs deemed probable of being achieved was $0.4 million as of December 31, 2024, and is expected to be recognized over a weighted-average period of 1.9 years.
Market-Based RSUs
The Company previously granted RSUs subject to market-based vesting conditions (“Market-Based RSUs”) to certain employees, which were settleable into shares of Common Stock. Market-Based RSUs were subject to
vesting, if at all, based on the closing trading price per share of our Common Stock over any 30 consecutive trading day-period that occurred prior to the end date specified in the underlying award agreement, subject to continued service through each such vesting date. Based on the Common Stock trading price, the market conditions for the outstanding Market-Based RSUs were not met, and no shares had vested as of June 30, 2023. All outstanding unvested Market-Based RSUs were forfeited and cancelled during the three months ended June 30, 2023.
Wheels Up Stock Options
Wheels Up stock options granted under the Amended and Restated 2021 LTIP vest quarterly over a three-year service period and expire on the tenth anniversary of the grant date. The following table summarizes the activity under the Amended and Restated 2021 LTIP related to Wheels Up stock options as of December 31, 2024:
| | | | | | | | | | | | | | | | | |
| Number of Wheels Up
Stock Options | | Weighted-
Average Exercise
Price | | Weighted-Average Grant
Date Fair Value |
| (in thousands) | | | | |
| Outstanding Wheels Up stock options as of January 1, 2024 | 77 | | | $ | 100.00 | | | $ | 47.52 | |
| Granted | — | | | — | | | — | |
| Exercised | — | | | — | | | — | |
| Forfeited | — | | | — | | | — | |
| Expired | — | | | — | | | — | |
| Outstanding Wheels Up stock options as of December 31, 2024 | 77 | | | 100.00 | | | 47.52 | |
| Exercisable Wheels Up stock options as of December 31, 2024 | 77 | | | 100.00 | | | 47.52 | |
The aggregate intrinsic value as of December 31, 2024 for Wheels Up stock options that were outstanding and exercisable was nil. The weighted-average remaining contractual term as of December 31, 2024 for Wheels Up stock options that were outstanding and exercisable was approximately 2.9 years.
Executive Performance Awards
The Compensation Committee of the Board approved the CEO Performance Award granted to George Mattson, the Company’s Chief Executive Officer, Forfeited CFO Performance Award granted to our former Chief Financial Officer, and CCO Performance Award granted to David Harvey, the Company’s Chief Commercial Officer, on November 30, 2023, March 3, 2024 and May 20, 2024, respectively. Except as set forth in Section III.A of the Amended and Restated 2021 LTIP, the Executive Performance Awards incorporate the terms of the Amended and Restated 2021 LTIP, as it may be amended from time-to-time. Each Executive Performance Award is intended to constitute a standalone equity incentive plan and any shares of Common Stock issued under such awards will not be issued under, or count against the number of shares of Common Stock reserved pursuant to, any of the Company’s other equity-based compensation plans or awards. Upon the departure of our former Chief Financial Officer from the Company in September 2024, the Forfeited CFO Performance Award was terminated and any right to receive shares of Common Stock or cash payments thereunder in the future was forfeited. No shares of Common Stock had been issued or cash payments made to our former Chief Financial Officer under the Forfeited CFO Performance Award prior to forfeiture. In addition, all compensation expense associated with the Forfeited CFO Performance Award was reversed during the year December 31, 2024.
The issuance of any shares under the Executive Performance Awards upon vesting is contingent upon receipt of the approval of each standalone plan by the Company’s stockholders. At the 2024 Annual Meeting, the Company’s stockholders approved the CEO Performance Award and the potential issuance of up to 73.0 million shares of Common Stock thereunder, subject to the satisfaction of the applicable performance- and service-based vesting conditions under such award, if at all. The Company currently intends to obtain approval of the CCO Performance Award as a standalone plan by the Company’s stockholders at a future meeting of the Company’s stockholders or by written consent of the Company’s stockholders. If on any Determination Date (as defined below) there is not a sufficient amount of shares authorized by the Company’ stockholders to deliver the number of shares due under the
Executive Performance Awards or any such Executive Performance Award has not been approved by the Company’s stockholders, then upon vesting, if at all, any amounts payable under any such Executive Performance Award will not be paid in the form of the issuance of new shares of Common Stock and instead will be payable in cash.
The Executive Performance Awards are one-time performance awards granted to our Chief Executive Officer and Chief Commercial Officer in lieu of future annual equity compensation grants and are intended to provide each of them with the opportunity to share in the long-term growth of the value of the Company. The Executive Performance Awards consist of a contingent right to receive a number of newly issued shares of Common Stock upon: (i) repayment of $390.0 million of the Company’s borrowings under the Term Loan, plus any additional amounts drawn on the Term Loan, if at all; and (ii) satisfaction of service-based vesting conditions, which provide that 25% of each Executive Performance Award will be eligible to vest on each of September 20, 2024, 2025, 2026 and 2027, so long as such officer remains employed with the Company as of such dates. A “Repayment Event” includes certain refinancings of the Term Loan on or before September 20, 2028, the scheduled maturity date of the Term Loan. Subject to the satisfaction of the applicable performance- and service-based vesting conditions described above, the number of shares of Common Stock that may vest and be issued under any Executive Performance Award will first be determined on December 31st of the year in which a Repayment Event occurs, and then on December 31st of each subsequent year (each such date, a “Determination Date”) until December 31, 2028 (the “Final Determination Date”). At any Determination Date following a Repayment Event, the number of shares of Common Stock issuable under any Executive Performance Award in connection with such Determination Date, if any, will be determined using the then applicable percentage associated with the service-based vesting condition (the “Service Vested Percentage”).
The number of shares of Common Stock subject to vesting and issuance, if any, under any Executive Performance Award on each Determination Date following a Repayment Event is based on a formula that aligns the number of shares of Common Stock issuable under such Executive Performance Award with the repayment or refinancing of the Term Loan and Revolving Credit Facility, the then applicable dollar value of the shares of Common Stock issued to the Lenders under the Investor Rights Agreement and the volume weighted average price per share of Common Stock during the 60 trading day period prior to the applicable Determination Date. The number of shares of Common Stock, if any, issuable under the Executive Performance Awards will vary depending on, among other things: (i) the occurrence and timing of a Repayment Event; (ii) the Total Investor Return (as defined in the Executive Performance Awards) as a multiple of the aggregate principal amount of the Term Loan and any borrowings under the Revolving Credit Facility as of the applicable Determination Date, if any; and (iii) the Service Vested Percentage as of the applicable Determination Date. There can be no assurance that the performance- and service-based vesting conditions under the Executive Performance Awards will be satisfied or that the foregoing variables will result in the vesting and issuance of any shares of Common Stock or cash payments pursuant to the Executive Performance Awards.
As of December 31, 2024, the performance-based vesting conditions for the outstanding and unvested Executive Performance Awards were not met and no shares had vested under the plans. As of December 31, 2024, the achievement of the related performance objective was deemed probable of being achieved on September 20, 2028, the scheduled maturity date of the Term Loan. The grant-date fair value of the CCO Performance Award as of May 20, 2024, using a Monte Carlo simulation model, was $43.9 million.
The total unrecognized compensation cost related to the outstanding and unvested Executive Performance Awards was $154.6 million as of December 31, 2024 and is expected to be recognized over 4.0 years. As of December 31, 2024, the carrying amount of the CEO Performance Award was classified as equity in the consolidated balance sheet under Additional paid-in capital; however, since we have not obtained approval from the Company’s stockholders of the CCO Performance Award as a standalone plan and for the issuance of any shares of Common Stock to satisfy settlement of shares of Common Stock issuable thereunder, the carrying amount associated with the plan has been classified as mezzanine equity in the consolidated balance sheet under Contingent performance awards.
Fair Value Estimates
We estimated fair value to measure compensation cost of the Executive Performance Awards on the date of grant using techniques that are considered to be consistent with the objective of measuring fair value. In selecting the appropriate technique, management considered, among other factors, the nature of the instrument, the market risks that it embodies, and the expected means of settlement.
Estimating fair values of the Executive Performance Awards requires the development of significant and subjective estimates that may, and are likely to, change over the duration of the instrument with related changes in internal and external factors. In addition, option-pricing models are highly volatile and sensitive to changes.
The following table summarizes the significant assumptions used to estimate the fair value on the date of grant for the outstanding and unvested Executive Performance Awards:
| | | | | | | | | | | | | |
| 2024(1) | | 2023 (2) | | |
| Expected term (in years) | 4.7 | | 5.2 | | |
| Volatility | 70% | | 60% | | |
| Risk-free rate | 4.4% | | 4.3% | | |
| Expected dividend rate | —% | | —% | | |
(1) Assumptions used in the Monte Carlo simulation related to the CCO Performance Award, which was granted on May 20, 2024.
(2) Assumptions used in the Monte Carlo simulation related to the CEO Performance Award, which was granted on November 30, 2023.
Equity-Based Compensation Expense
Compensation expense for WUP profits interests recognized in the consolidated statements of operations was nil, $0.1 million and $1.3 million for the years ended December 31, 2024, 2023 and 2022, respectively.
Compensation expense for WUP restricted interests recognized in the consolidated statements of operations was nil, nil and $4.3 million for the years ended December 31, 2024, 2023 and 2022, respectively.
Compensation expense for WUP stock options under the WUP Option Plan and Wheels Up stock options under the Amended and Restated 2021 LTIP recognized in the consolidated statements of operations was nil, $1.1 million and $7.7 million for the years ended December 31, 2024, 2023 and 2022, respectively.
Compensation expense for RSUs and PSUs under the Amended and Restated 2021 LTIP recognized in the consolidated statements of operations was $10.9 million, $16.7 million and $41.1 million for the years ended December 31, 2024, 2023 and 2022, respectively.
Compensation expense for the Executive Performance Awards recognized in the consolidated statements of operations was $35.1 million, $2.5 million and nil for the years ended December 31, 2024, 2023 and 2022, respectively.
The following table summarizes equity-based compensation expense recognized by consolidated statement of operations line item (in thousands):
| | | | | | | | | | | | | | | | | |
| Year Ended December 31, |
| 2024 | | 2023 | | 2022 |
| Cost of revenue | $ | 2,228 | | | $ | 3,927 | | | $ | 14,456 | |
| Technology and development | 1,302 | | | 2,096 | | | 3,180 | |
| Sales and marketing | 661 | | | 1,764 | | | 11,009 | |
| General and administrative | 41,786 | | | 17,846 | | | 60,334 | |
| Total equity-based compensation expense | $ | 45,977 | | | $ | 25,633 | | | $ | 88,979 | |
Earnout Shares
As part of the Business Combination, existing holders of WUP equity, including certain holders of WUP profits interests and restricted interests under the WUP Management Incentive Plan, but excluding holders of WUP stock options, have the right to receive up to 0.9 million additional shares of Common Stock (the “Earnout Shares”) that will vest, if at all, upon the achievement of separate market conditions. One-third of the Earnout Shares will meet the market conditions when the closing Common Stock price is greater than or equal to $125.00 for any 20 trading days within a period of 30 consecutive trading days on or before July 13, 2026. An additional one-third will vest when the Common Stock is greater than or equal to $150.00 over the same measurement period. The final one-third will vest when the Common Stock is greater than or equal to $175.00 over the same measurement period.
Earnout Shares are attributable to vested WUP profits interests and restricted interests as of the date each of the Earnout Share market conditions are met. No Earnout Shares had been issued as of December 31, 2024.
The grant-date fair value of the Earnout Shares attributable to the holders of WUP profits interests and restricted interests, using a Monte Carlo simulation model, was $57.9 million. The derived service period began on the Business Combination Closing Date and had a weighted-average period of 1.7 years.
Based on the Common Stock trading price, the market conditions were not met and no Earnout Shares vested as of December 31, 2024. Compensation expense for Earnout Shares recognized in the consolidated statements of operations was nil, $1.4 million and $38.5 million for the years ended December 31, 2024, 2023 and 2022, respectively.
Treasury Stock
As of December 31, 2024, we had 439,451 shares of treasury stock. The increase in treasury stock during the year ended December 31, 2024 reflects shares of Common Stock withheld to settle employee taxes due upon the vesting of RSUs. During the year ended December 31, 2024, we did not cancel or reissue any shares of Common Stock held as treasury stock.
12. WARRANTS
Prior to the Business Combination, Aspirational issued 7,991,544 redeemable public warrants as part of its initial public offering (“Public Warrants”) and 4,529,950 redeemable private warrants (“Private Warrants” and together with the Public Warrants, the “Warrants”). On the Business Combination Closing Date, Wheels Up assumed the Warrants. Each whole Warrant entitles the holder to purchase 1/10th of one share of Common Stock at an exercise price of $115.00 per whole share of Common Stock. The Warrants expire on July 13, 2026 or earlier
upon redemption or liquidation. As of December 31, 2024, no Warrants had been exercised and 12,521,494 remain outstanding.
The Warrants are redeemable if certain conditions are met, as described below:
Redemption of Warrants when the price of Common Stock equals or exceeds $180.00: Once the Warrants become exercisable, Wheels Up may redeem the outstanding Warrants (except as described below with respect to the Private Warrants):
•in whole and not in part;
•at a price of $0.01 per Warrant;
•upon a minimum of 30 days’ prior written notice of redemption to each Warrant holder;
•if, and only if, the last reported Common Stock sales price for any 20 trading days within a 30 trading day period ending on the third trading day prior to the date on which Wheels Up sends the notice of redemption to the Warrant holders (the “Reference Value”) equals or exceeds $180.00 per share (as adjusted); and
•if there is an effective registration statement covering the issuance of the shares of Common Stock issuable upon exercise of the Warrants available during the 30-day redemption period.
Redemption of Warrants when the price of Common Stock equals or exceeds $100.00: Once the Warrants become exercisable, Wheels Up may redeem the outstanding Warrants:
•in whole and not in part;
•at a price of $0.10 per Warrant upon a minimum of 30 days’ prior written notice of redemption; provided, that holders will be able to exercise their Warrants on a cashless basis prior to redemption and receive that number of shares determined based on the redemption date and the then applicable fair market value per whole share of Common Stock;
•if, and only if, the Reference Value equals or exceeds $100.00 per share (as adjusted); and
•if the Reference Value is less than $180.00 per share (as adjusted), the Private Warrants must also be concurrently called for redemption on the same terms as the outstanding Public Warrants.
The exercise price and number of shares issuable upon exercise of the Public Warrants may be adjusted in certain circumstances including in the event of a share dividend or subdivision of shares, extraordinary dividend, share consolidation or combination, or recapitalization, reorganization, merger or consolidation. However, except as described below, the Public Warrants will not be adjusted for issuances of shares at a price below its exercise price. Additionally, in no event will Wheels Up be required to net cash settle the Public Warrants.
The Private Warrants are identical to the Public Warrants underlying the units sold in the Aspirational initial public offering, except that the Private Warrants and the Common Stock issuable upon the exercise of the Private Warrants were not transferable, assignable or salable until 30 days after the Business Combination Closing Date, subject to certain limited exceptions. Additionally, the Private Warrants will be exercisable on a cashless basis and be non-redeemable, except as described above, so long as they are held by the initial purchasers or their permitted transferees. If the Private Warrants are held by someone other than the initial purchasers or their permitted transferees, the Private Warrants will be redeemable by Wheels Up and exercisable by such holders on the same basis as the Public Warrants.
The warrant agreement governing the Warrants includes a provision that provides for potential changes to the settlement amounts dependent upon the characteristics of the holder of the Warrants. In addition, the warrant agreement includes a provision that in the event of a tender or exchange offer made to and accepted by holders of
more than 50% of the outstanding shares of a single class of ordinary shares, all holders of the Warrants would be entitled to receive cash for their Warrants (the “Tender Offer Provision”).
We evaluated the Warrants under ASC 815-40-15, which addresses equity versus liability treatment and classification of equity-linked financial instruments, including warrants, and states that a warrant may be classified as a component of equity only if, among other things, the warrant is indexed to the issuer’s common stock. Under ASC 815-40-15, a warrant is not indexed to the issuer’s common stock if the terms of the warrant require an adjustment to the exercise price upon a specified event and that event is not an input to the fair value of the warrant. We determined that the Private Warrants are not indexed to Common Stock in the manner contemplated by ASC 815-40-15 because the holder of the instrument is not an input into the pricing of a fixed-for-fixed option on equity shares. In addition, we concluded the Tender Offer Provision included in the warrant agreement fails the classified as equity criteria as contemplated by ASC 815-40-25. As a result of the above, the Warrants are classified as derivative liabilities.
13. NON-CONTROLLING INTERESTS
MIP LLC is a single purpose entity formed for the purpose of administering and effectuating the award of WUP profits interests to employees, consultants and other qualified persons. Wheels Up is the sole managing member of MIP LLC and, as a result, consolidates the financial results of MIP LLC. We record non-controlling interests representing the ownership interest in MIP LLC held by other members of MIP LLC. In connection with the Business Combination, the Seventh Amended and Restated LLC Agreement of WUP was adopted, which granted MIP LLC limited liability company interests corresponding to outstanding vested WUP profits interests that enable members of MIP LLC, subject to certain restrictions, to exchange their vested WUP profits interests for cash or a corresponding number of shares of Common Stock, at the option of Wheels Up, based on the value of such WUP profits interests relative to their applicable participation threshold.
The decision of whether to exchange WUP profits interests for cash or Common Stock is made solely at the discretion of Wheels Up. Accordingly, the WUP profits interests held by MIP LLC are treated as permanent equity and changes in the ownership interest of MIP LLC are accounted for as equity transactions. Any future exchanges of WUP profits interests, which would also reduce the WUP limited liability company interests corresponding to MIP LLC and result in the issuance of a number of shares of Common Stock depending on the applicable participation threshold and the applicable price per share of Common Stock, will reduce the amount recorded as non-controlling interests and increase additional paid-in-capital on the consolidated balance sheets.
The calculation of non-controlling interests is as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2024 | | December 31, 2023 |
Number of WUP common units held by Wheels Up(1) | 697,902,646 | | | 100.0 | % | | 696,856,131 | | | 100.0 | % |
Number of vested WUP profits interests attributable to non-controlling interests(2) | — | | | — | % | | — | | | — | % |
Total WUP common units and vested WUP profits interests outstanding | 697,902,646 | | | 100.0 | % | | 696,856,131 | | | 100.0 | % |
(1) WUP common units represent an equivalent ownership of Common Stock outstanding.
(2) Based on the closing price per share of Common Stock on the last trading day of the period covered by this Annual Report, there would be no WUP common units, and in turn, shares of Common Stock, issuable upon conversion of WUP profits interests outstanding as of December 31, 2024.
Weighted average ownership percentages are used to allocate Net loss to Wheels Up and the non-controlling interest holders. The non-controlling interests weighted average ownership percentage was 0.0%, 0.0% and 0.1% for the years ended December 31, 2024, 2023 and 2022, respectively.
14. COMMITMENTS AND CONTINGENCIES
The Company has contractual obligations and commitments, primarily in the form of obligations to provide services for which we have already received deferred revenue (see Note 3), lease arrangements (see Note 10), repayment of long-term debt (see Note 8), legal proceedings and sales and use tax liability. Legal Proceedings
From time to time, we are subject to various legal proceedings and claims, either asserted or unasserted, which arise in the ordinary course of business. While the outcome of these matters cannot be predicted with certainty, as of the date of this Annual Report we do not believe that the outcome of any of these matters, individually or in the aggregate, will have a material adverse effect on our financial condition, results of operations or cash flows.
GRP Litigation
On July 5, 2023, we filed a lawsuit against Exclusive Jets, LLC d/b/a flyExclusive, a subsidiary of flyExclusive, Inc. (“FE”), in the United States District Court for the Southern District of New York, which was re-filed against FE in the Supreme Court of the State of New York in New York County on August 23, 2023. We instituted the action to enforce our rights and remedies for wrongful termination by FE of that certain Fleet Guaranteed Revenue Program Agreement, dated November 1, 2021, between WUP and FE (the “GRP Agreement”). On June 30, 2023, FE notified us in writing of its immediate termination of the GRP Agreement. We believe that FE wrongfully terminated such agreement in breach thereof. We are seeking compensatory damages, including the return of material deposits held by FE under the GRP Agreement that were recorded in Other non-current assets on our consolidated balance sheets for each of the years ended December 31, 2024 and 2023, as well as attorneys’ fees and costs. On October 31, 2024, FE filed its defenses to the Company’s claims and simultaneously presented certain counterclaims for unpaid amounts it claims it is owed under the GRP Agreement. We filed our answer and defenses to such counterclaims on November 20, 2024. We intend to vigorously pursue the action to recover the outstanding deposits and other damages from FE and defend against any related counterclaims, but there can be no assurance as to the outcome of the dispute with FE. Our success in recovering the amounts from FE will depend upon several factors including the ability of FE to satisfy recoverable amounts using available liquidity or other assets. We are in the process of evaluating the effects of the foregoing events and we cannot make a reasonable estimate of any outcome, recovery or loss at this time.
Sales and Use Tax Liability
We regularly provide services to members in various states within the U.S., which may create sales and use tax nexus via temporary presence, potentially requiring the payment of these taxes. We determined that there is uncertainty as to what constitutes nexus in respective states for a state to levy taxes, fees, and surcharges relating to our activity. As of December 31, 2024 and 2023 we estimate the potential exposure to such tax liability to be $5.5 million and $10.5 million, respectively, the expense for which is included in Accrued expenses on the consolidated balance sheets and cost of revenue in the consolidated statements of operations.
15. RELATED PARTIES
We engage in transactions with certain stockholders who are also members, ambassadors or customers. Such transactions primarily relate to their membership in the Wheels Up program, flights and flight-related services.
We incurred expenses of $1.2 million, $1.9 million and nil for the years ended December 31, 2024, 2023 and 2022, respectively, from transactions related to the Amended CCA with Delta. As of December 31, 2024, and December 31, 2023, $2.4 million and $0.4 million, respectively, were included in Accrued expenses on the consolidated balance sheets, and nil and $3.6 million, respectively, were included in Other non-current liabilities on the consolidated balance sheets related to transactions associated with the Amended CCA with Delta.
The Company completed certain financing transactions with Delta, CK Wheels and CIH during the year ended December 31, 2023, including the Amended Promissory Note, the Term Loan and the issuance of a portion of the
Investor Shares to each such party, as applicable, in each case in pro rata amounts equal to the amount of the Term Loan funded by each such party in relation to the total Term Loan. See Note 8 and Note 11 for additional information about the Term Loan, Revolving Credit Facility and issuance of pro rata portions of the Investor Shares to Delta, CK Wheels and CIH during the year ended December 31, 2024. The remaining transactions with related parties during the years ended December 31, 2024, 2023 and 2022 were immaterial individually and in the aggregate for financial reporting purposes.
16. RESTRUCTURING AND RELATED CHARGES
On March 1, 2023, we announced a restructuring plan (the “Restructuring Plan”) as part of our previously announced focus on implementing cost reductions and improving the efficiency of our operations, which consisted of a reduction in headcount (excluding pilots, maintenance and operations-support personnel).
We incurred $17.7 million of charges associated with the Restructuring Plan during the fourth quarter of 2022 and first quarter of 2023, which primarily consisted of cash and non-cash expenses related to severance payments, employee benefits and equity-based compensation. During the year ended December 31, 2023, we recognized approximately $10.5 million of expenses related to the Restructuring Plan, which were incurred and recorded on the consolidated statement of operations, as follows (in thousands):
| | | | | |
| |
| Cost of revenue | $ | 755 | |
| Technology and development | 2,299 | |
| Sales and marketing | 2,058 | |
| General and administrative | 5,408 | |
| Total restructuring expenses | $ | 10,520 | |
All charges associated with the Restructuring Plan were paid as of December 31, 2023.
17. INCOME TAXES
We are subject to U.S. federal, state and local income taxes with respect to our allocable share of any taxable income or loss of WUP, as well as any standalone income or loss Wheels Up generates. WUP is treated as a partnership for U.S. federal and most applicable state and local income tax purposes and generally does not pay income taxes in most jurisdictions. Instead, any taxable income or loss generated by WUP is passed through to and included in the taxable income or loss of its members, including Wheels Up. We are also subject to income taxes in the various foreign jurisdictions in which we operate.
Income Tax Expense
The components of income (loss) before income taxes are follows (in thousands):
| | | | | | | | | | | | | | | | | |
| Year Ended December 31, |
| 2024 | | 2023 | | 2022 |
| Domestic | $ | (342,405) | | | $ | (493,787) | | | $ | (555,889) | |
| Foreign | 3,996 | | | 7,783 | | | 512 | |
| Loss before income taxes | $ | (338,409) | | | $ | (486,004) | | | $ | (555,377) | |
The components of income tax expense are as follows (in thousands):
| | | | | | | | | | | | | | | | | |
| Year Ended December 31, |
| 2024 | | 2023 | | 2022 |
| Current income taxes | | | | | |
| Federal | $ | — | | | $ | — | | | $ | — | |
| State and local | 150 | | | 139 | | | 101 | |
| Foreign | 2,574 | | | 1,999 | | | 202 | |
| Total current income taxes | 2,724 | | | 2,138 | | | 303 | |
| Deferred income taxes | | | | | |
| Federal | — | | | — | | | — | |
| State and local | — | | | (2) | | | (13) | |
| Foreign | (1,498) | | | (753) | | | (120) | |
| Total deferred income taxes | (1,498) | | | (755) | | | (133) | |
| Income tax expense | $ | 1,226 | | | $ | 1,383 | | | $ | 170 | |
A reconciliation from the statutory federal income tax rate to the effective income tax rate is as follows:
| | | | | | | | | | | | | | | | | |
| Year Ended December 31, |
| 2024 | | 2023 | | 2022 |
| Expected federal income taxes at statutory rate | 21.0 | % | | 21.0 | % | | 21.0 | % |
| State and local income taxes | — | | | — | | | — | |
Permanent differences | (1.1) | | | (0.4) | | | (0.5) | |
Partnership earnings not subject to tax | — | | | — | | | — | |
| Foreign tax rate differential | (0.3) | | | (0.3) | | | — | |
Change in valuation allowance | (20.1) | | | (20.6) | | | (20.5) | |
| Effective income tax rate | (0.5) | % | | (0.3) | % | | — | % |
Our effective tax rate for the years ended December 31, 2024, 2023 and 2022 differs from the federal statutory rate of 21% primarily due to a full valuation allowance against our net deferred tax assets where it is more likely than not that the deferred tax assets will not be realized.
Deferred Tax Assets and Liabilities
The components of deferred tax assets and liabilities, which are presented within other assets in the consolidated balance sheets, are as follows (in thousands):
| | | | | | | | | | | |
| December 31, 2024 | | December 31, 2023 |
| Deferred tax assets | | | |
| Investment in partnership | $ | 160,644 | | | $ | 98,322 | |
Net operating loss carryforwards | 197,493 | | | 145,683 | |
| Transaction costs | 1,103 | | | 1,267 | |
| | | |
| Tax credits | 5,454 | | | 6,377 | |
| Deferred revenue | 1,363 | | | 1,121 | |
| Equity-based compensation | 2,242 | | | 1,851 | |
| Interest expense carryforwards | 40,003 | | | 14,210 | |
Other | 1,772 | | | 566 | |
Total deferred tax assets | 410,074 | | | 269,397 | |
| Valuation allowance | (343,252) | | | (268,045) | |
Deferred tax assets, net | $ | 66,822 | | | $ | 1,352 | |
| | | |
| Deferred tax liabilities | | | |
Intangibles | $ | (1,680) | | | $ | (2,177) | |
OID/DFC interest | (64,150) | | | — | |
Other | (1,224) | | | (864) | |
| Total deferred tax liabilities | $ | (67,054) | | | $ | (3,041) | |
Net deferred tax liabilities | $ | (232) | | | $ | (1,689) | |
As of December 31, 2024, our U.S. federal and state net operating loss carryforwards for income tax purposes were $741.1 million and $878.1 million, respectively. Of our total federal net operating losses, $613.9 million can be carried forward indefinitely, and the remainder will begin to expire in 2032 and fully expire in 2037 if not utilized. Our state net operating losses begin to expire in 2027.
During the fourth quarter of 2024, the Company performed a Section 382 analysis and a debt-equity analysis related to transactions that occurred in 2023. As a result of the analysis, the Company adjusted its deferred tax assets for net operating losses to reflect Section 382 Recognized Built-In Loss (RBIL), as well as its deferred tax liability related to Original Issue Discount (OID) and Deferred Financing Costs (DFC). However, due to our overall valuation allowance position in the U.S., we do not believe these adjustments will have a material impact on our consolidated financial statements.
We evaluate the realizability of our deferred tax assets on a quarterly basis and establish valuation allowances when it is more likely than not that all or a portion of our deferred tax assets may not be realized. In making such a determination, we consider all available positive and negative evidence, including future reversals of existing taxable temporary and tax-planning strategies. As of December 31, 2024 and 2023, we concluded, based on the weight of all available positive and negative evidence, that it is more likely than not that the majority of deferred tax assets will not be realized. Accordingly, a valuation allowance of $343.3 million has been established as of December 31, 2024. The $75.2 million increase in valuation allowance was the result of a charge to deferred tax benefit of $144.8 million from operations and a $69.6 million expense to additional paid in capital.
We currently expect the undistributed earnings of our foreign subsidiaries to be indefinitely reinvested. Accordingly, the Company has not provided the tax effect, if any, of limited outside basis differences of its foreign
subsidiaries. If these foreign earnings are repatriated to the U.S., or if the Company determines that such earnings are repatriated to the U.S. or if the Company determines that such earnings will be remitted in a future period, additional tax provisions may be required.
Additionally, the Company is subject to the income tax effects associated with the Global Intangible Low-Taxed Income (GILTI) provisions. We have elected to recognize GILTI income in the period it arises and do not recognize deferred taxes for basis difference that may reverse in future years.
Section 382 Transaction
In general, under Section 382 of the Internal Revenue Code of 1986 (as amended, the “Code”), a corporation that undergoes an “ownership change” is subject to limitations on its ability to utilize its pre-change net operating losses or tax credits to offset future taxable income or taxes. As a result of the Initial Issuance, the Company experienced an ownership change for the purpose of Section 382 of the Code during the third quarter of 2023, that will limit the availability of our tax attributes to offset future income. Our net operating losses and tax attributes are currently subject to a full valuation allowance. Accordingly, we do not believe it will have a material impact on our consolidated financial statements.
Uncertain Tax Positions
The Company is subject to tax in the U.S. and various foreign jurisdictions in which we operate. There were no reserves for uncertain tax positions as of December 31, 2024 and 2023. Additionally, although WUP is treated as a partnership for U.S. federal and state income taxes purposes, it is still required to file annual federal, state and local income tax returns, which are subject to examination by the taxing authorities. The statute of limitations is generally open for years beginning after 2020 for U.S. federal and state jurisdictions for WUP.
OECD Pillar Two
The organization for Economic Co-operation and Development has issued Pillar Two model rules introducing a new global minimum tax of 15% intended to be effective on January 1, 2024. While the US has not yet adopted the Pillar Two rules, various other governments around the world have implemented the legislation, including jurisdictions in which Wheels Up’s companies operate, and many other jurisdictions are in the process of implementing it. The Company continues to monitor the pending implementation of Pillar Two by individual countries and the potential effects of Pillar Two on our business. The provisions effective in 2024 did not have a materially adverse impact on our results of operations, financial condition or cash flows.
Additionally, the Company is subject to the income tax effects associated with the Global Intangible Low-Taxed Income (“GILTI”) provisions and treats the tax effects of GILTI as a current period expense in the period incurred. The Company estimated $2.3 million of GILTI inclusion for 2024, which was fully offset by the loss generated in the same period.
18. NET LOSS PER SHARE
The following table sets forth the computation of basic and diluted net loss per share (in thousands, except share data):
| | | | | | | | | | | | | | | | | |
| Year Ended December 31, |
| 2024 | | 2023 | | 2022 |
| Numerator: | | | | | |
| Net loss attributable to Wheels Up Experience Inc. - basic and diluted | $ | (339,635) | | | $ | (487,387) | | | $ | (555,160) | |
| Denominator: | | | | | |
| Weighted-average shares of Common Stock outstanding - basic and diluted | 697,713,626 | | | 132,194,747 | | | 24,567,164 | |
| Basic and diluted net loss per share of Common Stock | $ | (0.49) | | | $ | (3.69) | | | $ | (22.60) | |
There were no dividends declared or paid during the years ended December 31, 2024, 2023 or 2022.
Basic and diluted net loss per share were computed using the two-class method. The two-class method is an allocation formula that determines earnings or loss per share for common stock and any participating securities according to dividends declared (whether paid or unpaid) and participation rights in undistributed earnings or losses. Shares of unvested restricted stock are considered participating securities, because these awards contain a non-forfeitable right to participate equally in any dividends prior to forfeiture of the restricted stock, if any, irrespective of whether the awards ultimately vest. WUP restricted interests were converted into shares of restricted stock as of the Business Combination Closing Date. All issued and outstanding shares of restricted stock, whether vested or unvested, were included in the weighted-average shares of Common Stock outstanding beginning on the Business Combination Closing Date.
WUP profits interests held by other members of MIP LLC, which comprise the non-controlling interests (see Note 13), are not subject to the net loss per share calculation until such time the vested WUP profits interests are actually exchanged for shares of Common Stock. The following securities were not included in the computation of diluted shares outstanding for periods during which we incurred a net loss, because the effect would be anti-dilutive, or issuance of such shares is contingent upon the satisfaction of certain conditions which were not satisfied by the end of the period:
| | | | | | | | | | | | | | | | | |
| Year Ended December 31, |
| 2024 | | 2023 | | 2022 |
Warrants(1) | 1,252,149 | | | 1,252,149 | | | 1,252,149 | |
| Earnout Shares | 900,000 | | | 900,000 | | | 900,000 | |
RSUs and PSUs(2) | 10,520,766 | | | 2,115,286 | | | 1,877,105 | |
| Stock options | 902,459 | | | 1,205,754 | | | 1,359,295 | |
Total anti-dilutive securities(3) | 13,575,374 | | | 5,473,189 | | | 5,388,549 | |
(1) Each Warrant entitles the holder to purchase 1/10th of one share of Common Stock at an exercise price of $115.00 per whole share of Common Stock.
(2) Amount outstanding as of December 31, 2022 includes total RSUs, PSUs and Market-Based RSUs.
(3) Excludes shares issuable under the CEO Performance Award and CCO Performance Award, as the number of shares issuable under the CEO Performance Award and CCO Performance Award are not readily determinable until the first Determination Date after vesting and each successive Determination Date thereafter, if applicable.
19. SEGMENT AND GEOGRAPHIC INFORMATION
The Company operates as one operating segment. The Company’s CODM evaluates the Company’s financial information and resources and assesses the performance of these resources on a consolidated basis. The measure of segment profit or loss for the Company's single segment is Net income (loss), which can be found in the consolidated statement of operations. There is no expense or asset information that are supplemental to those disclosed in these consolidated financial statements that are regularly provided to the CODM.
The Company attributes revenue among geographic areas based upon the location of the flight or service. The following table summarizes the geographic allocation of total revenues for the years indicated (in thousands):
| | | | | | | | | | | | | | | | | |
| Year Ended December 31, |
| 2024 | | 2023 | | 2022 |
| United States | $ | 700,289 | | | $ | 1,157,113 | | | $ | 1,499,453 | |
Other(1) | 91,815 | | | 96,204 | | | 80,307 | |
| Total | $ | 792,104 | | | $ | 1,253,317 | | | $ | 1,579,760 | |
(1) Revenue for the year ended December 31, 2022 includes revenue from Air Partner from the date of acquisition, April 1, 2022.
Long-lived assets consist of property, equipment and leasehold improvements, internally developed capitalized software, net of accumulated depreciation and amortization, and operating lease right-of-use assets. The following table presents long-lived assets by geographic area on the dates indicated (in thousands):
| | | | | | | | | | | |
| As of December 31, |
| 2024 | | 2023 |
| United States | $ | 404,094 | | | $ | 401,965 | |
| Other | 1,156 | | | 4,659 | |
| Total | $ | 405,250 | | | $ | 406,624 | |
20. SUBSEQUENT EVENTS
As part of the Company’s continuing cost reduction initiatives, in the first quarter of 2025, the Company leased alternative corporate office space in New York, New York and vacated a larger leased corporate office space in New York, New York, for which the Company is actively seeking a sublease tenant. Due to a general reduction in demand for corporate office space in the locale, the Company anticipates reduced sublease rent rate for the vacated space and that the terms of any sublease may differ from the underlying lease to which the Company is a party. As a result, the Company concluded on March 9, 2025 that it expects to record a non-cash, pre-tax impairment charge related to a right of use asset associated with the vacated corporate office space ranging from approximately $20.0 million to $24.0 million in the first quarter of 2025, virtually all of which will result in future cash expenditures. Following these actions, the Company expects a significant decrease in future operating expenses related to leased corporate office space.
