Executive Summary / Key Takeaways

• flyExclusive is undergoing a significant transformation, shedding inefficient legacy aircraft and investing in modern, profitable jets like the Challenger 350, aiming for positive adjusted EBITDA and free cash flow in 2025.
• The company's vertically integrated model, particularly its proprietary maintenance technology targeting faster turnaround times and lower costs, provides a key competitive advantage in operational efficiency and reliability compared to peers.
• Recent financial results show tangible progress, with Q1 2025 revenue up 10.2% year-over-year, gross margin improving significantly to 13%, and Adjusted EBITDA loss narrowing by nearly 70%, driven by fleet modernization benefits and SG&A reduction.
• Growth is accelerating in higher-margin, recurring revenue streams like the Jet Club and Fractional programs, supported by new offerings like JC25 and strategic partnerships such as the Volato agreement and the proposed Jet.AI merger.
• While risks remain, including economic sensitivity, competition, and execution challenges in fleet transition and integration, management's clear targets for dispatch availability, SG&A efficiency, and capital strategy (including planned Shelf filing) underpin the investment thesis focused on operational leverage and profitability expansion.

The Vertically Integrated Advantage Takes Center Stage

flyExclusive, Inc. (NYSEAMERICAN: FLYX) is positioning itself as a premier owner-operator in the private aviation sector, driven by an ambition to be the world's most vertically integrated player. This strategy, encompassing in-house control over flight operations, maintenance, refurbishment, and sales, forms the bedrock of its competitive approach. The company's history reflects a dynamic evolution, from achieving significant growth in flight hours since 2019 to strategically launching its MRO operations in 2021 and successfully navigating the termination of a major customer agreement in 2023 by pivoting to expand its direct-to-customer channels. Becoming a public company in late 2023 marked a new phase, initiating a critical transformation aimed at shedding legacy inefficiencies and capitalizing on its integrated model.

In the competitive landscape, flyExclusive stands among notable players like Wheels Up Experience Inc. (UP), Textron Inc. (TXT), and Embraer S.A. (ERJ), as well as private operators like Flexjet. While competitors like UP may hold advantages in digital booking platforms or TXT/ERJ in aircraft manufacturing efficiency, flyExclusive differentiates itself through its operational control and service bundling. The company has demonstrated its ability to gain market share, growing flight hours significantly faster than the top 25 operators in the first half of 2024. A key operational metric highlighting its service commitment is its low member-to-aircraft ratio, stated at 12.8 in Q1 2025, significantly lower than some competitors who operate with 30-plus customers per aircraft, providing ample runway for growth while maintaining service quality.

Central to flyExclusive's operational edge is its proprietary maintenance technology. This in-house capability is designed to offer tangible benefits, targeting 20% faster turnaround times for aircraft maintenance. This efficiency is expected to reduce maintenance costs by 15%, directly enhancing the company's Return on Invested Capital (ROIC) and cash flow generation. By controlling maintenance internally, flyExclusive aims for higher reliability rates and fewer downtime hours compared to competitors who rely more heavily on outsourced services. While specific R&D targets for future technological advancements like next-gen maintenance systems are not detailed beyond these goals, the strategic intent is clear: leverage technology to maximize fleet uptime and minimize operational expense, reinforcing the vertical integration moat. This focus on operational efficiency through technology is a critical component of the investment thesis, promising improved margins and a stronger competitive stance, particularly against peers with higher operational costs.

Transformation Takes Hold: Operational and Financial Momentum

The strategic transformation initiated in late 2023 is now yielding tangible results, evident in the company's recent operational and financial performance. A core component of this shift is the fleet modernization program, which began in Q4 2023. This involves divesting older, non-performing aircraft that were a significant drag on profitability due to low dispatch availability (around 30%) and high operating costs (peaking at over $3 million per month). By Q1 2025, flyExclusive had substantially reduced this burden, decreasing the negative impact by approximately 80% to under $600,000 per month.

Replacing these legacy jets are modern, more efficient aircraft, primarily Challenger 350s and new Citation XLS Gen 2s. The Challenger 350s are highlighted as key profit drivers, with the first aircraft exceeding expectations by achieving nearly 300% better dispatch availability than the aircraft it replaced and delivering 250% higher contribution on average. As of Q1 2025, flyExclusive had five Challengers in operation, with a sixth on-site, and plans to accelerate additions to reach 12-15 by year-end 2025, targeting these aircraft to represent as much as 30% of overall revenue. This strategic fleet upgrade is directly contributing to improved operational metrics; total flight hours increased by 6% in Q1 2025 year-over-year, even with fewer aircraft on certificate, demonstrating enhanced utilization and availability. The company targets a 15% improvement in overall dispatch availability in 2025.

Financially, this operational momentum is translating into improved results. Q1 2025 revenue grew to $88.1 million, a 10.2% increase from $79.97 million in Q1 2024. This growth was broad-based, with Jet Club and charter revenue increasing 3.5% and fractional ownership revenue surging by 112%, driven by membership expansion. MRO external revenue also saw an 18.2% increase.

Crucially, the gross margin improved significantly to roughly 13% in Q1 2025, a 600 basis point improvement year-over-year, attributed primarily to the benefits of fleet modernization.

Cost discipline is another key area of progress. Selling, General, and Administrative (SG&A) expenses decreased by 16.7% in Q1 2025 compared to the prior year, reflecting efforts to optimize the workforce and reduce reliance on expensive outside consulting. SG&A as a percentage of revenue declined over seven points to approximately 24% in Q1 2025. Management targets further efficiency, aiming for approximately 2 SG&A employees per aircraft by the end of 2025.

The combined effect of revenue growth, margin expansion, and cost control is visible in the Adjusted EBITDA trend. The Adjusted EBITDA loss narrowed to $6.3 million in Q1 2025, a substantial $13 million (nearly 70%) improvement compared to the $19.4 million loss in Q1 2024. This continues the sequential improvement seen throughout 2024, where the Adjusted EBITDA loss decreased from $19 million in Q1 to $16 million in Q2, $10.3 million in Q3, and $6 million in Q4.

Strategic Growth and Capital Strategy

flyExclusive's strategy for future growth centers on expanding its higher-margin, recurring revenue streams and leveraging its vertically integrated platform through strategic partnerships. The Jet Club program continues to show strong momentum, with membership growth and a 25% increase in sales in Q1 2025 year-over-year. The introduction of the JC25 program, offering access to the super-mid category and simplified pricing, is expected to be a key growth driver. The Fractional program is also a significant focus, with Q1 2025 activity (sales and flight revenue) doubling year-over-year. The robust pipeline of fractional sales, particularly for the in-demand Challenger jets, is expected to accelerate, potentially boosted by the anticipated return of 100% bonus depreciation.

Strategic partnerships are enhancing the company's reach and operational leverage. The Volato (VLTO) agreement, effective September 1, 2024, allowed flyExclusive to acquire Volato's customer base and manage their fleet, demonstrating the scalability of flyExclusive's platform by handling the added volume with significantly fewer employees than Volato previously required. The proposed merger with Jet.AI's (JETAI) aviation business, expected to close in Q2 2025, is anticipated to provide additional capital, a complementary fleet, and further customer acquisition opportunities, leveraging flyExclusive's integrated operations for synergies.

Financially, flyExclusive is actively managing its liquidity and capital structure to support growth and improve its balance sheet. While operating with a historical working capital deficit common in the industry due to deferred revenue from prepaid flights, the company believes its existing cash, operating cash flows, and proceeds from the fractional program are sufficient to fund operations and capital expenditures for at least the next 12 months. Recent financing activities include preferred equity raises, repayment of a $59 million line of credit in Q1 2025 (resulting in $3.6 million annual savings), and the conversion of a sponsor loan to equity.

The company is developing multiple financing options and plans to file an S3 Shelf registration around June 2, 2025, to access additional funds for aircraft acquisitions, enhance liquidity, reduce leverage, and address warrant overhang.

Risks and Outlook

Despite the positive momentum, flyExclusive faces notable risks. As private aviation is a luxury service, economic downturns could negatively impact demand. The competitive landscape remains intense, with rivals vying for market share based on price, service, and availability. Pilot availability and attrition also pose potential operational challenges. The termination of the Wheels Up agreement, while largely replaced, still involves significant billed but unrecorded amounts ($59 million as of March 31, 2025), and there is uncertainty regarding the potential repayment of $9.0 million in Employee Retention Credits. The proposed Jet.AI merger is subject to closing conditions, and its failure could negatively impact the stock price and divert resources. Furthermore, the potential for substantial future sales of registered Class A stock by existing holders could pressure the market price.

However, management's outlook remains optimistic, grounded in the progress of the transformation. They expect to incur operating losses in the near term but are targeting positive adjusted EBITDA and positive free cash flow in 2025. This outlook is based on the continued elimination of non-performing aircraft, acceleration of Challenger and XLS Gen 2 additions, sustained growth in Jet Club and Fractional programs, ongoing SG&A efficiency improvements (targeting 2 SG&A employees per aircraft by year-end), and a projected 15% improvement in dispatch availability in 2025. The expected return of 100% bonus depreciation and the closing of the Jet.AI merger are seen as potential catalysts. The planned Shelf filing provides strategic flexibility for future capital needs.

Conclusion

flyExclusive is in the midst of a significant and promising transformation. By aggressively addressing legacy inefficiencies through fleet modernization and cost optimization, the company is demonstrating tangible progress towards profitability. The vertically integrated model, bolstered by proprietary maintenance technology, provides a distinct operational advantage in a competitive market. Recent financial and operational results, including strong revenue growth, margin expansion, and sequential EBITDA improvement, offer evidence that the strategy is taking hold. While risks associated with economic sensitivity, competition, and execution remain, flyExclusive's clear strategic roadmap, focus on high-margin customer programs, and proactive capital management position it for potential sustained EBITDA growth and positive free cash flow in 2025. Investors should closely monitor the continued execution of the fleet transition, improvements in dispatch availability, SG&A efficiency gains, and the successful integration of strategic partnerships as key indicators of the company's trajectory.