up-20230331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

________________

FORM 10-Q

________________

[Mark One]


þ			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2023


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________ to ____________

Commission File Number: 001-04321

WHEELS UP EXPERIENCE INC.

(Exact Name of Registrant as Specified in Its Charter)


Delaware (State or Other Jurisdiction of Incorporation or Organization)						98-1617611 (I.R.S. Employer Identification No.)

601 West 26th Street, Suite 900, New York, New York (Address of Principal Executive Offices)						10001 (Zip Code)

Registrant’s Telephone Number, Including Area Code: (212) 257-5252

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Class A common stock, $0.0001 par value per share

New York Stock Exchange

Redeemable warrants, each whole warrant exercisable for one share of Class A common stock at an exercise price of $11.50

UP WS

New York Stock Exchange

Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes þ No ☐

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulations S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes þ No ☐

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☐

Accelerated filer

Non-accelerated Filer

☐

Smaller reporting company

☐

Emerging Growth Company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No þ

As of May 8, 2023, 251,613,698 shares of Class A common stock, $0.0001 par value per share, were outstanding.

TABLE OF CONTENTS


		Page
PART I.	Financial Information
Item 1.	Financial Statements	1
	Condensed Consolidated Balance Sheets as of March 31, 2023 and December 31, 2022	1
	Condensed Consolidated Statements of Operations for the three months ended March 31, 2023 and 2022	3
	Condensed Consolidated Statements of Comprehensive Loss for the three months ended March 31, 2023 and 2022	4
	Condensed Consolidated Statements of Equity for the three months ended March 31, 2023 and 2022	5
	Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2023 and 2022	7
	Notes to the Condensed Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	30
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	42
Item 4.	Controls and Procedures	43

PART II.	Other Information
Item 1.	Legal Proceedings	45
Item 1A.	Risk Factors	45
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	46
Item 3.	Defaults Upon Senior Securities	46
Item 4.	Mine Safety Disclosures	46
Item 5.	Other Information	46
Item 6.	Exhibits	47
	Signatures	48

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (this “Quarterly Report”) contains certain “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements are predictions, projections and other statements about future events that are based on current expectations and assumptions and, as a result, are subject to known and unknown risks, uncertainties, assumptions and other important factors, many of which are outside of the control of Wheels Up Experience Inc. (“Wheels Up”, or “we”, “us”, or “our”), that could cause actual results to differ materially from the results discussed in the forward-looking statements. These forward-looking statements include, but are not limited to, statements regarding the expectations, hopes, beliefs, intentions or strategies of Wheels Up regarding the future, including, without limitation, statements regarding: (i) the size, demands and growth potential of the markets for Wheels Up’s products and services and Wheels Up’s ability to serve those markets; (ii) the degree of market acceptance and adoption of Wheels Up’s products and services including member program changes; (iii) Wheels Up’s ability to develop innovative products and services and compete with other companies engaged in the private aviation industry; (iv) Wheels Up’s ability to attract and retain customers; (v) the impact of Wheels Up’s operational efficiency and cost reduction efforts on its business and results of operations, including the timing and magnitude of such expected reductions and any associated expenses and impact of the new member operations center; (vi) Wheels Up’s ability to maintain cost discipline and achieve positive Adjusted EBITDA (as defined herein) pursuant to the schedule that it has announced; (vii) Wheels Up’s liquidity, future cash flows, acquisition activities, measures intended to increase Wheels Up’s operational efficiency and certain restrictions related to our debt obligations; and (viii) general economic and geopolitical conditions, including due to fluctuations in interest rates, inflation, foreign currencies, consumer and business spending decisions, and general levels of economic activity. In addition, any statements that refer to projections, forecasts, or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. The words “anticipate,” “believe,” continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “strive,” “would” and similar expressions may identify forward-looking statements, but the absence of these words does not mean that statement is not forward-looking. These forward-looking statements are subject to a number of risks, uncertainties and assumptions that could cause actual events and results to differ materially from those contained in such forward-looking statements, including those described in our Annual Report on Form 10-K for the year ended December 31, 2022 under Part I, Item 1A — “Risk Factors,” in this Quarterly Report under Part I, Item 2 — “Management’s Discussion and Analysis of Operations” and Part II, Item 1A — “Risk Factors,” and elsewhere in this Quarterly Report. Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties arise from time to time, and it is impossible for us to predict these events or how they may affect us. You are cautioned not to place undue reliance upon any forward-looking statements, which speak only as of the date made, and Wheels Up undertakes no obligation to update or revise the forward-looking statements, whether as a result of new information, changes in expectations, future events or otherwise. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by law, we do not intend to update any of these forward-looking statements after the date of this Quarterly Report or to conform these statements to actual results or revised expectations.

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

WHEELS UP EXPERIENCE INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)


	March 31, 2023 (Unaudited)		December 31, 2022
ASSETS
Current assets:
Cash and cash equivalents	$	363,177	$	585,881
Accounts receivable, net	107,659		112,383

Parts and supplies inventories, net	39,326		29,000
Aircraft inventory	10,368		24,826

Prepaid expenses	47,356		39,715
Other current assets	35,243		27,814
Total current assets	603,129		819,619
Property and equipment, net	398,710		394,559
Operating lease right-of-use assets	99,036		106,735
Goodwill	350,233		348,118
Intangible assets, net	136,189		141,765

Other non-current assets	123,166		112,429
Total assets	$	1,710,463	$	1,923,225

LIABILITIES AND EQUITY
Current liabilities:
Current maturities of long-term debt	$	27,006	$	27,006
Accounts payable	42,225		43,166
Accrued expenses	137,718		148,947
Deferred revenue, current	975,735		1,075,133


Other current liabilities	48,964		49,968
Total current liabilities	1,231,648		1,344,220
Long-term debt, net	220,397		226,234

Operating lease liabilities, non-current	77,138		82,755


Other non-current liabilities	18,093		18,096
Total liabilities	1,547,276		1,671,305

Commitments and contingencies (Note 13)

Equity:
Class A common stock, $0.0001 par value; 2,500,000,000 authorized; 254,258,113 and 251,982,984 shares issued and 251,613,698 and 249,338,569 common shares outstanding as of as of March 31, 2023 and December 31, 2022, respectively	25		25
Additional paid-in capital	1,556,718		1,545,508
Accumulated deficit	(1,376,739)		(1,275,873)
Accumulated other comprehensive loss	(9,130)		(10,053)


Treasury stock, at cost, 2,644,415 and 2,644,415 shares, respectively	(7,687)		(7,687)
Total Wheels Up Experience Inc. stockholders’ equity	163,187		251,920
Non-controlling interests	—		—
Total equity	163,187		251,920
Total liabilities and equity	$	1,710,463	$	1,923,225

The accompanying notes are an integral part of these condensed consolidated financial statements.

WHEELS UP EXPERIENCE INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited, in thousands, except share and per share data)


	Three Months Ended March 31,
	2023		2022
Revenue	$	351,812	$	325,635

Costs and expenses:
Cost of revenue	353,791		332,758
Technology and development	15,873		11,191
Sales and marketing	25,803		23,243
General and administrative	39,416		38,904
Depreciation and amortization	14,445		14,228
Gain on sale of aircraft held for sale	(866)		(1,971)
Total costs and expenses	448,462		418,353

Loss from operations	(96,650)		(92,718)

Other income (expense):
Change in fair value of warrant liability	125		3,631
Interest income	3,821		77
Interest expense	(8,119)		—
Other expense, net	145		(30)
Total other income (expense)	(4,028)		3,678

Loss before income taxes	(100,678)		(89,040)

Income tax expense	(188)		—

Net loss	(100,866)		(89,040)
Less: Net loss attributable to non-controlling interests	—		(387)
Net loss attributable to Wheels Up Experience Inc.	$	(100,866)	$	(88,653)

Net loss per share of Class A common stock:
Basic and diluted	$	(0.40)	$	(0.36)


Weighted-average shares of Class A common stock outstanding:
Basic and diluted	253,345,272		244,609,635

The accompanying notes are an integral part of these condensed consolidated financial statements

WHEELS UP EXPERIENCE INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(Unaudited, in thousands)


	Three Months Ended March 31,
	2023		2022
Net loss	$	(100,866)	$	(89,040)
Other comprehensive loss:
Foreign currency translation adjustments	923		—
Comprehensive loss	(99,943)		(89,040)
Less: Comprehensive loss attributable to non-controlling interests	—		—
Comprehensive loss attributable to Wheels Up Experience Inc.	$	(99,943)	$	(89,040)

The accompanying notes are an integral part of these condensed consolidated financial statements

WHEELS UP EXPERIENCE INC.

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(Unaudited, in thousands, except share data)


	Class A common stock									Treasury stock
	Shares	Amount		Additional paid-in capital		Accumulated deficit		Accumulated other comprehensive loss		Shares	Amount		Non-controlling interests		Total
Balance as of December 31, 2022	251,982,984	$	25	$	1,545,508	$	(1,275,873)	$	(10,053)	2,644.415	$	(7,687)	$	—	$	251,920
Equity-based compensation	—	—		9,951		—		—		—	—		1,259		11,210
Change in non-controlling interests allocation	—	—		1,259		—		—		—	—		(1,259)		—

Issuance of Class A common stock upon settlement of restricted stock units	2,275,129	—		—		—		—		—	—		—		—
Net loss	—	—		—		(100,866)		—		—	—		—		(100,866)
Other comprehensive loss	—	—		—		—		923		—	—		—		923
Balance as of March 31, 2023	254,258,113	$	25	$	1,556,718	$	(1,376,739)	$	(9,130)	2,644,415	$	(7,687)	$	—	$	163,187

The accompanying notes are an integral part of these condensed consolidated financial statements.

WHEELS UP EXPERIENCE INC.

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(Unaudited, in thousands, except share data)


	Class A common stock							Treasury stock
	Shares	Amount		Additional paid-in capital		Accumulated deficit		Shares	Amount		Non-controlling interests		Total
Balance as of December 31, 2021	245,834,569	$	25	$	1,450,839	$	(720,713)	—	$	—	$	6,077	$	736,228
Equity-based compensation	—	—		13,659		—		—	—		8,895		22,554
Change in non-controlling interests allocation	—	—		11,743		—		—	—		(11,743)		—
Shares withheld for employee taxes on vested equity awards	—	—		—		—		1,682,380	(6,107)		—		(6,107)
Issuance of Class A common stock upon settlement of restricted stock units	76,732	—		—		—		—	—		—		—
Net loss	—	—		—		(88,653)		—	—		(387)		(89,040)
Balance as of March 31, 2022	245,911,301	$	25	$	1,476,241	$	(809,366)	1,682,380	$	(6,107)	$	2,842	$	663,635

The accompanying notes are an integral part of these condensed consolidated financial statements.

WHEELS UP EXPERIENCE INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited, in thousands)


	Three Months Ended March 31,
	2023		2022
Cash flows from operating activities
Net loss	$	(100,866)	$	(89,040)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	14,445		14,228
Equity-based compensation	11,538		22,554
Amortization of deferred financing costs and debt discount	915		—
Change in fair value of warrant liability	(125)		(3,631)


Gain on sale of aircraft held for sale	(866)		(1,971)
Other	(146)		(384)

Changes in assets and liabilities:
Accounts receivable	4,118		3,088

Parts and supplies inventories	(10,323)		(277)
Aircraft inventory	4,878		—
Prepaid expenses	(8,540)		(8,747)

Other non-current assets	(8,363)		(25,688)

Accounts payable	(812)		7,599
Accrued expenses	(10,276)		(6,648)

Deferred revenue	(99,760)		(30,406)
Other assets and liabilities	1,701		(1,893)
Net cash used in operating activities	(202,482)		(121,216)

Cash flows from investing activities
Purchases of property and equipment	(8,750)		(66,343)
Purchases of aircraft held for sale	(98)		(51,073)
Proceeds from sale of aircraft held for sale, net	5,697		14,942
Acquisitions of businesses, net of cash acquired	—		(11,530)
Capitalized software development costs	(7,984)		(5,548)
Other	100		—
Net cash used in investing activities	(11,035)		(119,552)

Cash flows from financing activities


Purchase of Shares for Treasury	—		(6,107)


Repayments of long-term debt	(6,752)		—


Net cash used in financing activities	(6,752)		(6,107)

Effect of exchange rate changes on cash, cash equivalents and restricted cash	(86)		—

Net decrease in cash, cash equivalents and restricted cash	(220,355)		(246,875)
Cash, cash equivalents and restricted cash, beginning of period	620,153		786,722
Cash, cash equivalents and restricted, cash end of period	$	399,798	$	539,847

Supplemental disclosure of cash flow information:
Cash paid for interest	$	8,100	$	—

The accompanying notes are an integral part of these condensed consolidated financial statement

WHEELS UP EXPERIENCE INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1.SUMMARY OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES

Wheels Up Experience Inc. (together with its consolidated subsidiaries, “Wheels Up”, the “Company”, “we”, “us”, or “our”) is a leading provider of on-demand private aviation in the U.S. and one of the largest private aviation companies in the world. Wheels Up offers a complete global aviation solution with a large, modern and diverse fleet, backed by an uncompromising commitment to safety and service. Customers can access membership programs, charter, aircraft management services and whole aircraft sales, as well as unique commercial travel benefits through a strategic partnership with Delta Air Lines, Inc. (“Delta”). Wheels Up also offers freight, safety and security solutions and managed services to individuals, industry, government and civil organizations.

Wheels Up is guided by the mission to connect private flyers to aircraft, and one another, through an open platform that seamlessly enables life’s most important experiences. Powered by a global private aviation marketplace connecting its base of over 12,000 members and customers to a network of more than 1,500 safety-vetted and verified private aircraft, Wheels Up is widening the aperture of private travel for millions of consumers globally. With the Wheels Up mobile app and website, members and customers have the digital convenience to search, book and fly.

Basis of Presentation

The unaudited interim condensed consolidated financial statements and accompanying notes have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) for interim financial reporting and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the financial information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of the Company’s management, the unaudited condensed consolidated financial statements include all adjustments necessary for the fair presentation of the Company’s balance sheet as of March 31, 2023, and its results of operations, including its comprehensive loss, stockholders' equity and its cash flows for the three months ended March 31, 2023 and 2022. All adjustments are of a normal recurring nature. The results for the three months ended March 31, 2023 are not necessarily indicative of the results to be expected for any subsequent quarter or for the fiscal year ending December 31, 2023.

These unaudited interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2022, filed with the Securities and Exchange Commission (the “SEC”) on March 31, 2023.

Principles of Consolidation

The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. We consolidate Wheels Up Partners 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 12). All intercompany transactions and balances have been eliminated in consolidation.

Use of Estimates

Preparing the condensed 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 condensed 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, impairment assessments, the determination of the valuation allowance for deferred tax assets and the incremental borrowing rate for leases.

Foreign Currency Translation Adjustments

Assets and liabilities of foreign subsidiaries, where the functional currency is not the United States (“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 condensed consolidated balance sheets and the condensed consolidated statements of other comprehensive loss as a cumulative translation adjustment.

Adopted Accounting Pronouncements and Accounting Pronouncements Note Yet Effective

There have been no recent accounting pronouncements, changes in accounting pronouncements or recently adopted accounting guidance during the three months ended March 31, 2023 that are of significance or potential significance to us.

2. REVENUE RECOGNITION

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):


	Three Months Ended March 31,
	2023		2022
Services transferred at a point in time:
Flights, net of discounts and incentives	$	231,762	$	236,363
Aircraft management	61,242		58,049
Other	31,807		7,178

Services transferred over time:
Memberships	21,680		20,647
Aircraft management	2,452		2,457
Other	2,869		941
Total	$	351,812	$	325,635

Revenue in the condensed consolidated statements of operations is presented net of discounts and incentives of $1.6 million for the three months ended March 31, 2023, and $3.2 million for the three months ended March 31, 2022.

Other revenue included within services transferred at a point in time is primarily related to whole aircraft sales of $10.7 million, group charter of $6.4 million and safety and security of $5.9 million for the three months ended March 31, 2023, and whole aircraft sales of $1.1 million for the three months ended March 31, 2022.

Contract Balances

Accounts receivable, net consists of the following (in thousands):


	March 31, 2023		December 31, 2022
Gross receivables from members and customers	$	108,890	$	112,243
Undeposited funds	6,404		10,122
Less: Allowance for credit losses	(7,635)		(9,982)
Accounts receivable, net	$	107,659	$	112,383

Deferred revenue consists of the following (in thousands):


	March 31, 2023		December 31, 2022
Flights - Prepaid Blocks	$	927,607	$	1,023,985
Memberships - annual dues	41,624		43,970
Memberships - initiation fees	3,677		3,899
Flights - credits	2,423		4,246
Other	2,096		775
Deferred revenue - total	977,427		1,076,875

Less: Deferred revenue - current	(975,735)		(1,075,133)
Deferred revenue - non-current	$	1,692	$	1,742

Changes in deferred revenue for the three months ended March 31, 2023 were as follows (in thousands):


Deferred revenue as of December 31, 2022	$	1,076,875
Amounts deferred during the period	173,226
Revenue recognized from amounts included in the deferred revenue beginning balance	(219,462)
Revenue from current period sales	(53,212)
Deferred revenue as of March 31, 2023	$	977,427

Revenue expected to be recognized in future periods for performance obligations that are unsatisfied, or partially unsatisfied, as of March 31, 2023 were as follows (in thousands):


Remainder of 2023	$	478,252
2024	323,290
2025	88,253
2026	87,632
Total	$	977,427

Costs to Obtain a Contract

Capitalized costs related to sales commissions and referral fees were $1.6 million for the three months ended March 31, 2023, and $4.3 million for the three months ended March 31, 2022.

As of March 31, 2023 and December 31, 2022, capitalized sales commissions and referral fees of $6.7 million and $8.7 million, respectively, were included in Other current assets and $1.1 million and $1.3 million, respectively, were included in Other non-current assets on the condensed consolidated balance sheets. Amortization expense related to capitalized sales commissions and referral fees included in sales and marketing expense in the condensed consolidated statements of operations was $3.7 million for the three months ended March 31, 2023, and $3.5 million for the three months ended March 31, 2022.

3. PROPERTY AND EQUIPMENT

Property and equipment consist of the following (in thousands):


	March 31, 2023		December 31, 2022
Aircraft	$	563,934	$	566,338
Software development costs	73,098		65,303
Leasehold improvements	15,769		11,930
Computer equipment	3,719		3,014
Buildings and improvements	1,424		1,424
Furniture and fixtures	3,110		3,208
Tooling	3,998		3,835
Vehicles	1,834		1,538
	666,886		656,590

Less: Accumulated depreciation and amortization	(268,176)		(262,031)
Total	$	398,710	$	394,559

Depreciation and amortization expense of property and equipment was $9.0 million for the three months ended March 31, 2023 and $9.5 million for the three months ended March 31, 2022.

Amortization expense related to software development costs, included as part of depreciation and amortization expense of property and equipment, was $2.8 million for the three months ended March 31, 2023, and $2.3 million for the three months ended March 31, 2022.

4. ACQUISITIONS

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 expands 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 condensed consolidated statements of operations for the three months ended March 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 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.

Air Partner plc Acquisition

On April 1, 2022, we acquired all of the outstanding equity of Air Partner plc (“Air Partner”) for a total purchase price of $108.2 million in cash. Air Partner is a United Kingdom-based international aviation services group that provides us with operations in 18 locations across four continents. Acquisition-related costs for Air Partner included in general and administrative expense in the condensed consolidated statements of operations for the three months ended March 31, 2022 were immaterial. 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 (see Note 8). The valuation method used for the Air Partner intangible assets was the income approach.

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 three months ended March 31, 2022, as well as the effects of pro forma adjustments for the transactions in 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).


	Three Months Ended March 31,
	2022
Net revenue	$	363,454
Net loss	$	(87,689)
Net loss attributable to Wheels Up Experience Inc.	$	(87,313)
Net loss per share	$	(0.36)

5. GOODWILL AND INTANGIBLE ASSETS

Goodwill

The following table presents goodwill carrying value and the change in balance, by reporting unit, during the three months ended March 31, 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
Foreign currency translation adjustment	—		1,765		1,765
Balance as of March 31, 2023	$	270,467	$	79,766	$	350,233

(1) Net of accumulated impairment losses of $180 million, all of which was recognized on the goodwill attributable to the WUP Legacy reporting unit during the year ended December 31, 2022.

(2) Reflects the current period impact of measurement period adjustments (See Note 4).

Intangible Assets

The gross carrying value, accumulated amortization and net carrying value of intangible assets consisted of the following (in thousands):


	March 31, 2023
	Gross Carrying Value		Accumulated Amortization		Net Carrying Value
Status	$	80,000	$	25,645	$	54,355
Customer relationships	91,121		27,349		63,772
Non-competition agreement	210		210		—
Trade name	16,161		8,636		7,525
Developed technology	20,556		10,082		10,474
Leasehold interest - favorable	600		85		515
Backlog	1,458		1,024		434
Foreign currency translation adjustment	(1,219)		(333)		(886)
Total	$	208,887	$	72,698	$	136,189


	December 31, 2022
	Gross Carrying Value		Accumulated Amortization		Net Carrying Value
Status	$	80,000	$	23,644	$	56,356
Customer relationships	91,121		24,613		66,508
Non-competition agreement	210		210		—
Trade name	16,161		8,294		7,867
Developed technology	20,556		9,332		11,224
Leasehold interest - favorable	600		80		520
Backlog	1,458		880		578
Foreign currency translation adjustment	(1,662)		(374)		(1,288)
Total	$	208,444	$	66,679	$	141,765

Amortization expense of intangible assets was $5.9 million for the three months ended March 31, 2023, and $5.2 million for the three months ended March 31, 2022.

Intangible Liabilities

The gross carrying value, accumulated amortization and net carrying value of intangible liabilities consisted of the following (in thousands):


	March 31, 2023
	Gross Carrying Value		Accumulated Amortization		Net Carrying Value
Intangible liabilities	$	20,000	$	6,417	$	13,583


	December 31, 2022
	Gross Carrying Value		Accumulated Amortization		Net Carrying Value
Intangible liabilities	$	20,000	$	5,917	$	14,083

Amortization of intangible liabilities, which reduces amortization expense, was $0.5 million for each of the three months ended March 31, 2023, and 2022, respectively.

Future amortization expense of intangible assets and intangible liabilities held as of March 31, 2023, were as follows (in thousands):


	Intangible Assets		Intangible Liabilities
Remainder of 2023	$	17,757	$	1,500
2024	22,969		2,000
2025	22,555		2,000
2026	21,694		2,000
2027	17,193		2,000
2028 and Thereafter	34,021		4,083
Total	$	136,189	$	13,583

6. CASH EQUIVALENTS AND RESTRICTED CASH

Cash Equivalents

As of March 31, 2023 and December 31, 2022, cash equivalents on the condensed consolidated balance sheets were $269.0 million and $430.3 million, respectively, and generally consisted of investments in money market funds, U.S. treasury bills and time deposits.

Restricted Cash

As of March 31, 2023 and December 31, 2022, restricted cash, which is presented within Other assets on the condensed consolidated balance sheets, included $7.7 million 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. The standby letters of credit expire on December 31, 2033 and June 30, 2034. The balances as of March 31, 2023 and December 31, 2022 also included $28.2 million and $26.3 million, respectively, related to funds held but unavailable for immediate use due to contractual restrictions.

A reconciliation of cash and cash equivalents and restricted cash from the condensed consolidated balance sheets to the condensed consolidated statements of cash flows is as follows (in thousands):


	March 31, 2023		December 31, 2022
Cash and cash equivalents	$	363,177	$	585,881
Restricted cash	36,621		34,272
Total	$	399,798	$	620,153

7. LONG-TERM DEBT

The following table presents the components of long-term debt on our condensed consolidated balance sheets (in thousands):


	Weighted Average Interest Rate		March 31, 2023		December 31, 2022
Equipment Notes	12.0	%	$	263,249	$	270,000
Total debt			263,249		270,000
Less: Total unamortized deferred financing costs and debt discount			15,845		16,760
Less: Current maturities of long-term debt			27,006		27,006
Long-term debt			$	220,397	$	226,234

Maturities of our debt for the next five years are as follows (in thousands):


	Maturities
Remainder of 2023	$	20,255
2024	45,767
2025	40,760
2026	35,111
2027	23,211
2028 and Thereafter	98,145
Total	$	263,249

2022-1 Equipment Note Financing

On October 14, 2022, Wheels Up Partners LLC, our indirect subsidiary (“WUP LLC”), issued $270.0 million aggregate principal amount of 12% fixed rate equipment notes (collectively, the “Equipment Notes”) using an EETC (enhanced equipment trust certificate) loan structure. The Equipment Notes were issued for net proceeds (before transaction-related expense) of $259.2 million. The final expected distribution date of the Equipment Notes varies from July 15, 2025 to October 15, 2029, unless redeemed earlier by WUP LLC. The Equipment Notes bear 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. The Equipment Notes are 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 Equipment Notes were sold pursuant to a Note Purchase Agreement, dated as of October 14, 2022 (the “Note Purchase Agreement”), and issued under separate Trust Indentures and Mortgages, dated as of October 14, 2022 (each, an “Indenture” and collectively, the “Indentures”). The Note Purchase Agreement and the Indentures and related guarantees contain certain covenants, including a liquidity covenant that requires the Company to maintain minimum liquidity of $125 million, a covenant that limits the maximum loan to appraised value ratio of all aircraft financed, subject to certain cure rights of the Company, and restrictive covenants that provide limitations under certain circumstances on, among other things: (i) certain acquisitions, mergers or disposals of its assets; (ii) making certain investments or entering into certain transactions with affiliates; (iii) prepaying, redeeming or repurchasing the Equipment Notes, subject to certain exceptions; and (iv) paying dividends and making certain other specified restricted payments. Each Indenture contains customary events of default for Equipment Notes of this type, including cross-default provisions among the Equipment Notes. WUP LLC’s obligations under the Equipment Notes are guaranteed by the Company and certain of its subsidiaries. WUP LLC is also obligated to cause additional subsidiaries and affiliates of WUP LLC to become guarantors under certain circumstances. The Equipment Notes issued with respect to each aircraft are cross-collateralized by the other aircraft for which Equipment Notes were

issued under the Indentures. The maturity of the Equipment Notes may be accelerated upon the occurrence of certain events of default under the Note Purchase Agreement and each Indenture and the related guarantees. As of March 31, 2023, we were in compliance with the covenants under the Note Purchase Agreement and each Indenture and the related guarantees.

As of March 31, 2023, the carrying value of the aircraft that are subject to first-priority liens under the Equipment Notes was $323.4 million.

Interest and principal payments on the Equipment Notes are payable quarterly on each January 15, April 15, July 15 and October 15, which began on January 15, 2023. Amortization expense for debt discounts and deferred financing costs of $0.9 million was recorded in interest expense in the condensed consolidated statement of operations for the three months ended March 31, 2023.

8. FAIR VALUE MEASUREMENTS

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability, an exit price, in an orderly transaction between unaffiliated willing market participants on the measurement date under current market conditions. Assets and liabilities recorded at fair value are measured and classified in accordance with a three-tier fair value hierarchy based on the observability of the inputs available and activity in the markets used to measure fair value. A financial instrument’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement.


Level 1 -			Quoted prices, unadjusted, in active markets for identical assets or liabilities that can be accessed at the measurement date.

Level 2 -			Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.

Level 3 -			Unobservable inputs developed using our own estimates and assumptions, which reflect those that market participants would use in pricing the asset or liability.

Financial instruments that are measured at fair value on a recurring basis and their corresponding placement in the fair value hierarchy consisted of the following (in thousands):


	March 31, 2023
	Level 1		Level 2		Level 3		Fair Value
Assets:
Money market funds	$	268,940	$	—	$	—	268,940

Total assets	$	268,940	$	—	$	—	$	268,940

Liabilities:
Warrant liability - Public Warrants	$	400	$	—	$	—	$	400
Warrant liability - Private Warrants	—		226		—		226
Equipment Notes	—		—		263,249		263,249
Total liabilities	$	400	$	226	$	263,249	$	263,875

	December 31, 2022
	Level 1		Level 2		Level 3		Fair Value
Assets:
Money market funds	$	230,626	$	—	$	—	$	230,626
Treasury bills	199,700		—		—		199,700
Total assets	$	430,326	$	—	$	—	$	430,326

Liabilities:
Warrant liability - Public Warrants	$	479	$	—	$	—	$	479
Warrant liability - Private Warrants	—		272		—		272
Equipment Notes	—		270,000		—		270,000
Total liabilities	$	479	$	270,272	$	—	$	270,751

The carrying amount of cash equivalents approximates fair value and is classified within Level 1, because we determined the fair value through quoted market prices.

The estimated fair value of the Equipment Notes is categorized as a Level 3 valuation. We considered the relatively short time period between the issuance of the Equipment Notes and the measurement date of March 31, 2023, as well as the estimated fair value of aircraft subject to first priority liens under the Equipment Notes to determine the fair value of the Equipment Notes as of March 31, 2023.

The warrants were accounted for as a liability in accordance with Accounting Standards Codification 815-40 (see Note 11). The warrant liability was measured at fair value upon assumption and on a recurring basis, with changes in fair value presented in the condensed consolidated statements of operations. As of March 31, 2023 and December 31, 2022, we used Level 1 inputs for the Public Warrants (as defined below) and Level 2 inputs for the Private Warrants (as defined below). We valued the Private Warrants by applying the valuation technique of a Monte Carlo simulation model to reflect the redemption conditions. The Private Warrants are substantially similar to the Public Warrants, but are not directly traded or quoted on an active trading market.

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	(80)		(45)		(125)
Fair value as of March 31, 2023	$	399	$	227	$	626

9. LEASES

Leases primarily pertain to certain controlled aircraft, corporate headquarters and operational facilities, including aircraft hangars, which are all accounted for as operating leases. We sublease an aircraft hangar at Cincinnati/Northern Kentucky International Airport from Delta. Certain of these operating leases have renewal options to further extend for additional time periods at our discretion.

Our leases do not contain residual value guarantees, covenants or other associated restrictions. 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 net lease cost were as follows (in thousands):


	Three Months Ended March 31,
	2023		2022
Operating lease costs	$	11,694	$	9,102
Short-term lease costs	2,486		5,293
Variable lease costs	5,833		4,362
Total lease costs	$	20,013	$	18,757