Wheels Up Experience Inc. - Quarter Report: 2023 March (Form 10-Q)

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

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 leased corporate headquarters and other office space including expenses for non-lease components are included in 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 either of the three month periods ended March 31, 2023 and 2022.

Supplemental cash flow information related to leases were as follows (in thousands):


	Three Months Ended March 31,
	2023		2022
Cash paid for amounts included in the measurement of operating lease liabilities:
Operating cash flows paid for operating leases	$	10,102	$	9,119
Right-of-use assets obtained in exchange for operating lease obligations	$	5,420	$	37,180

Supplemental balance sheet information related to leases are as follows:


	March 31, 2023		December 31, 2022
Weighted-average remaining lease term (in years):
Operating leases	6.1		5.9
Weighted-average discount rate:
Operating leases	9.1	%	9.0	%

Maturities of lease liabilities, as of March 31, 2023, were as follows (in thousands):


Year ending December 31,	Operating Leases
2023 (remaining)	$	27,104
2024	33,849
2025	19,937
2026	12,293
2027	8,168
2028 and Thereafter	43,054
Total lease payments	144,405
Less: Imputed interest	(37,723)
Total lease obligations	$	106,682

10. STOCKHOLDERS’ EQUITY AND EQUITY-BASED COMPENSATION

Pursuant to the Wheels Up Experience Inc. certificate of incorporation, we are authorized to issue 2,500,000,000 shares of Class A common stock, par value of $0.0001 per share, and 25,000,000 shares of preferred stock, par value $0.0001 per share. Holders of Class A common stock are entitled to one vote per share.

As of March 31, 2023, we have nine equity-based compensation plans that were approved by the board of directors of WUP prior to the Business Combination (as defined below), which collectively constitute the “WUP Management Incentive Plan”, and the Wheels Up Partners Holdings LLC Option Plan, which is the “WUP Option Plan.” Following the consummation of the Business Combination (as defined below), no new grants can be made under the WUP Management Incentive Plan or WUP Option Plan.

In connection with the Business Combination (as defined below), the board of directors (the “Board”) and stockholders of Wheels Up adopted the Wheels Up Experience Inc. 2021 Long-Term Incentive Plan (the “2021 LTIP”), for employees, consultants and other qualified persons.

On June 30, 2022, the Board adopted the Wheels Up Experience Inc. 2022 Inducement Grant Plan (the “2022 Inducement Plan”) to be used for a one-time employment inducement grant for our Chief Financial Officer, Todd Smith, pursuant to New York Stock Exchange Rule 303A.08. The maximum number of awards that could be granted under the 2022 Inducement Plan were 2,051,282 shares of Class A common stock, which were all granted in the form of restricted stock units to Mr. Smith on July 1, 2022. Restricted stock unit awards granted under the 2022 Inducement Grant Plan contain generally the same terms as other restricted stock unit awards granted under the 2021 LTIP during the fiscal year ended December 31, 2022.

WUP Management Incentive Plan

WUP Profits Interests

As of March 31, 2023, an aggregate of 31.3 million WUP profits interests have been authorized and issued under the WUP Management Incentive Plan. Vested WUP profits interests are eligible to be exchanged into shares

of Class A common stock. 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 Class A common stock. The actual number of shares of Class A common stock received upon exchange of such WUP profits interests will depend on the trading price per share of Class A 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 March 31, 2023:


	Number of WUP Profits Interests	Weighted-Average Grant Date Fair Value
	(in thousands)
Outstanding WUP profits interests as of January 1, 2023	28,813	$	0.42
Granted	—	—
Exchanged	—	—
Expired/forfeited	—	—
Outstanding WUP profits interests as of March 31, 2023	28,813	$	0.42

The weighted-average remaining contractual term as of March 31, 2023, for WUP profits interests outstanding was approximately 8.3 years.

The following table summarizes the status of non-vested WUP profits interests as of March 31, 2023:


	Number of WUP Profits Interests	Weighted-Average Grant Date Fair Value
	(in thousands)
Non-vested WUP profits interests as of January 1, 2023	1,697	$	0.42
Granted	—	—
Vested	(1,430)	0.45
Forfeited	—	—
Non-vested WUP profits interests as of March 31, 2023	267	$	0.24

The total unrecognized compensation cost related to non-vested WUP profits interests was nominal as of March 31, 2023 and is expected to be recognized over a weighted-average period of 0.4 years. The total fair value for WUP profits interests that vested was approximately $0.6 million for the three months ended March 31, 2023.

WUP Option Plan

As of March 31, 2023, the number of WUP stock options authorized and issued in aggregate under the WUP Option Plan was 17.5 million. Each outstanding stock option is exercisable for one share of Class A common stock.

The following table summarizes the activity under the WUP Option Plan as of March 31, 2023:


	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, 2023	12,984	$	7.51	$	1.20
Granted	—	—		—
Exercised	—	—		—
Forfeited	(86)	7.27		0.73
Expired	—	—		—
Outstanding WUP stock options as of March 31, 2023	12,898	$	7.51	$	1.20
Exercisable WUP stock options as of March 31, 2023	11,974	$	7.46	$	1.13

The aggregate intrinsic value as of March 31, 2023, for WUP stock options that were outstanding and exercisable was nil, respectively.

The weighted-average remaining contractual term as of March 31, 2023, for WUP stock options that were outstanding and exercisable was approximately 6.4 years and 6.3 years, respectively.

The following table summarizes the status of non-vested WUP stock options as of March 31, 2023:


	Number of WUP Stock Options	Weighted-Average Grant Date Fair Value
	(in thousands)
Non-vested WUP stock options as of January 1, 2023	1,044	$	2.00
Granted	—	—
Vested	(115)	1.13
Expired	—	—
Forfeited	(6)	1.60
Non-vested WUP stock options as of March 31, 2023	923	$	2.11

The total unrecognized compensation cost related to non-vested WUP stock options was $0.7 million as of March 31, 2023 and is expected to be recognized over a weighted-average period of 0.4 years. The total fair value for WUP stock options that vested was $0.1 million for the three months ended March 31, 2023.

2021 LTIP

As of March 31, 2023, an aggregate of 27.3 million shares were authorized for issuance under the 2021 LTIP.

Restricted Stock Units (“RSUs”)

The following table summarizes the activity under the 2021 LTIP related to RSUs as of March 31, 2023:


	Number of RSUs(1)	Weighted-Average Grant Date Fair Value
	(in thousands)
Non-vested RSUs as of January 1, 2023	16,162	$	3.46
Granted(2)	15,136	0.63
Vested	(2,142)	3.92
Forfeited	(1,334)	3.75
Non-vested RSUs as of March 31, 2023	27,822	$	1.87

(1) RSU awards granted under the 2022 Inducement Grant Plan contain generally the same terms as other RSU awards granted under the 2021 LTIP during the fiscal year ended December 31, 2022. The number of RSUs and weighted-average grant date fair value include 2,051,282 RSUs granted under the 2022 Inducement Grant Plan in July 2022, of which 683,760 RSUs had vested as of January 1, 2023 and the remaining 1,367,522 RSUs are scheduled to vest in equal installments on December 30, 2023 and December 30, 2024, subject to continued service through each such vesting date.

(2) RSU awards granted during the three months ended of March 31, 2023 are liability classified because such awards are contingent on receipt of approval by the Company’s stockholders of the Amended and Restated Wheels Up Experience Inc. 2021 Long-Term Incentive Plan (the "Amended and Restated 2021 LTIP”) at the Company’s 2023 annual meeting of stockholders (the “2023 Annual Meeting”). If the Company’s stockholders do not approve the Amended and Restated 2021 LTIP at the 2023 Annual Meeting, the Compensation Committee of the Board will settle such awards in cash upon vesting based on the fair market value per share of Class A common stock on the applicable vesting date.

The total unrecognized compensation cost related to non-vested RSUs was $42.7 million as of March 31, 2023 and is expected to be recognized over a weighted-average period of 1.4 years. The total fair value for RSUs that vested was approximated $8.4 million for the three months ended March 31, 2023.

Performance-Based Restricted Stock Units (“PSUs”)

Under the terms of the non-vested PSUs granted to certain employees, upon the achievement of certain pre-determined performance objectives, each PSU may settle into shares of our Class A common stock. The PSUs will vest, if at all, upon the actual achievement of the related performance objective, subject to specified change of control exceptions.

The following table summarizes the activity under the 2021 LTIP related to PSUs as of March 31, 2023:


	Number of PSUs	Weighted-Average Grant Date Fair Value
	(in thousands)
Non-vested PSUs as of January 1, 2023	957	$	2.17
Granted(1)	1,262	0.63
Vested	(133)	2.50
Forfeited	—	—
Non-vested PSUs as of March 31, 2023(2)	2,086	$	1.22

(1) PSU awards granted during the three months ended March 31, 2023 are liability classified because such awards are contingent on receipt of approval by the Company’s stockholders of the Amended and Restated 2021 LTIP at the 2023 Annual Meeting. If the Company’s stockholders do not approve the Amended and Restated 2021 LTIP at the 2023 Annual Meeting, the Compensation Committee of the Board will settle such awards in cash upon vesting based on the fair market value per share of Class A common stock on the applicable vesting date.

(2) Non-vested PSUs reflected in the table above include approximately 0.6 million of the PSUs reflected in this table may settle into shares of our Class A common stock equal to 0-120% of the PSUs and 1.3 million PSUs that may settle into shares of Class A common stock equal to 0-200% of the PSUs, in each case based on the level of performance.

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. Total unrecognized compensation cost related to non-vested PSUs was $2.5 million as of March 31, 2023. As of

March 31, 2023, the achievement of the performance objectives associated with unvested awards was deemed not probable of being achieved and, accordingly, no compensation cost has been recognized. Compensation cost recognized during the three months ended March 31, 2023 associated with PSUs which vested during the period was $0.1 million.

RSUs Subject to Market-Based Vesting Conditions (“Market-Based RSUs”)

Under the terms of the non-vested Market-Based RSUs granted to certain employees each Market-Based RSU may settle into shares of our Class A common stock. The Market-Based RSUs will vest, if at all, based on the closing trading price per share of our Class A common stock over any 30 consecutive trading day-period that occurs prior to the end date specified in the underlying award agreement, subject to continued service through each such vesting date.

The grant-date fair value of outstanding Market-Based RSUs, using a Monte Carlo simulation model, was $0.3 million. The derived service period for such Market-Based RSUs began on June 8, 2022 with a weighted average period of 3.8 years. Based on the Class A common stock trading price, the market conditions for the outstanding Market-Based RSUs were not met, and no shares vested as of March 31, 2023. The total unrecognized compensation cost related to such Market-Based RSUs was $0.2 million as of March 31, 2023 and is expected to be recognized over 3.0 years.

Wheels Up Stock Options

The following table summarizes the activity under the 2021 LTIP related to Wheels Up stock options as of March 31, 2023:


	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, 2023	768	$	10.00	$	4.75
Granted	—	—		—
Exercised	—	—		—
Forfeited	—	—		—
Expired	—	—		—
Outstanding Wheels Up stock options as of March 31, 2023	768	$	10.00	$	4.75
Exercisable Wheels Up stock options as of March 31, 2023	768	$	10.00	$	4.75

The aggregate intrinsic value as of March 31, 2023, for Wheels Up stock options that were outstanding and exercisable was nil.

The weighted-average remaining contractual term as of March 31, 2023, for Wheels Up stock options that were outstanding and exercisable was approximately 4.6 years, respectively. All Wheels Up stock options vested in prior periods.

Equity-Based Compensation Expense

Compensation expense for WUP profits interests recognized in the condensed consolidated statements of operations was $0.1 million and $0.7 million for the three months ended March 31, 2023 and March 31, 2022, respectively.

Compensation expense for WUP restricted interests recognized in the condensed consolidated statements of operations was nil and $0.2 million for the three months ended March 31, 2023 and March 31, 2022, respectively.

Compensation expense for WUP stock options under the WUP Option Plan and Wheels Up stock options under the 2021 LTIP recognized in the condensed consolidated statements of operations was $0.5 million and $3.1 million for the three months ended March 31, 2023 and March 31, 2022, respectively.

Compensation expense for RSUs, PSUs, and Market-Based RSUs recognized in the condensed consolidated statements of operations was $5.7 million and $9.0 million for the three months ended March 31, 2023 and March 31, 2022, respectively.

The following table summarizes equity-based compensation expense recognized by condensed consolidated statement of operations line item (in thousands):


	Three Months Ended March 31,
	2023		2022
Cost of revenue	$	1,179	$	4,432
Technology and development	484		641
Sales and marketing	700		2,701
General and administrative	9,175		14,780
Total equity-based compensation expense	$	11,538	$	22,554

Earnout Shares

On July 13, 2021 (the “Closing Date”), we consummated the transactions contained in the Agreement and Plan of Merger with Aspirational Consumer Lifestyle Corp. (“Aspirational”), a blank check company, dated as of February 1, 2021, as amended on May 6, 2021 (the “Business Combination”). As part of the Business Combination, existing holders of WUP equity, including certain holders of WUP profits interests and restricted interests, but excluding holders of WUP stock options, have the right to receive up to an aggregate of 9 million additional shares of our Class A common stock in three equal tranches, which are issuable upon the achievement of share price thresholds of $12.50, $15.00 and $17.50 for any 20 trading days within a period of 30 consecutive trading days within five years of the Closing Date, respectively (the “Earnout Shares”). Earnout Shares are not attributable to any equity compensation plan.

Earnout Shares that are attributable to WUP profits interests and restricted interests require continued employment as of the date on which each of the Earnout Share market conditions are met. There have been no forfeitures of Earnout Shares as of March 31, 2023.

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 Closing Date and is a weighted-average period of 1.7 years.

Based on the Class A common stock trading price, the market conditions were not met, and no Earnout Shares vested as of March 31, 2023. Compensation expense for Earnout Shares recognized in the condensed consolidated statements of operations was $1.4 million and $9.5 million for the three months ended March 31, 2023 and March 31, 2022, respectively.

Treasury Stock

As of March 31, 2023 and December 31, 2022, we had 2,644,415 shares of treasury stock. Treasury stock has historically consisted of shares of Class A common stock withheld to settle employee taxes due upon the vesting of RSUs and WUP restricted interests, none of which occurred during the three months ended March 31, 2023.

11. WARRANTS

Prior to the Business Combination, Aspirational issued 7,991,544 public warrants (“Public Warrants”) and 4,529,950 private warrants (“Private Warrants”). On the Closing Date, Wheels Up assumed the warrants. Each

whole warrant entitles the holder to purchase one share of Class A common stock at a price of $11.50 per share. The Public Warrants and Private Warrants became exercisable on September 25, 2021, which was 12 months from the closing of the Aspirational initial public offering, and expire on July 13, 2026 or earlier upon redemption or liquidation.

In connection with the Business Combination, we filed a Registration Statement on Form S-1 that was declared effective by the SEC on August 24, 2021, as amended by Post-Effective Amendment No. 1 thereto that was declared effective by the SEC on March 21, 2022, as further amended by Post-Effective Amendment No. 2 to Form S-1 on Form S-3 filed with the SEC on July 20, 2022, and as further amended by Post-Effective Amendment No. 3 to Form S-1 on Form S-3 that was declared effective by the SEC on August 10, 2022 (collectively, the “Selling Stockholder Registration Statement”). The Selling Stockholder Registration Statement relates to the issuance of an aggregate of 12,521,494 shares of Class A common stock underlying the Public Warrants and Private Warrants. As of March 31, 2023, there have not been any warrants exercised and 12,521,494 remain outstanding.

12. 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, allowing members of MIP LLC, subject to certain restrictions, to exchange their vested WUP profits interests for cash or a corresponding number of shares of Class A 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 Class A 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. Future exchanges of WUP profits interests, if settled in Class A common stock at the discretion of Wheels Up, will reduce the amount recorded as non-controlling interests and increase additional paid-in-capital on the condensed consolidated balance sheets.

The calculation of non-controlling interests was as follows:


	March 31, 2023				December 31, 2022
Number of WUP common units held by Wheels Up(1)	251,613,698		100.0	%	249,338,569	100.0	%
Number of vested WUP profits interests attributable to non-controlling interests(2)	—	%	—	%	—	—	%
Total WUP common units and vested WUP profits interests outstanding	251,613,698		100.0	%	249,338,569	100.0	%

(1) WUP common units represent an equivalent ownership of Class A common stock outstanding.

(2) Based on the closing price of Class A common stock on the last trading day of the period covered by this Quarterly Report, there would be no WUP common units issuable upon conversion of vested and unvested WUP profits interests outstanding as of March 31, 2023.

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% and 0.4% for the three months ended March 31, 2023 and March 31, 2022, respectively.

13. COMMITMENTS AND CONTINGENCIES

Legal Proceedings

We are party to various legal actions arising in the normal course of business. While we do not expect that the ultimate resolution of any of these pending actions will have a material effect on our consolidated results of operations, financial position, or cash flows, litigation is subject to inherent uncertainties. As such, there can be no assurance that any pending legal action, which we believe to be immaterial as of March 31, 2023, does not become material in the future.

Sales and Use Tax Liability

We regularly provide services to members in various states within the continental 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 March 31, 2023 and December 31, 2022, we estimate the potential exposure to such tax liability was $10.5 million and $10.4 million, respectively, the expense for which was included in accrued expenses on the condensed consolidated balance sheets and cost of revenue in the condensed consolidated statements of operations as of and for the applicable periods presented.

14. 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 $0.6 million and $0.3 million for the three months ended March 31, 2023 and 2022, respectively, from transactions related to a commercial cooperation agreement with our stockholder Delta. As of March 31, 2023 and December 31, 2022, $2.9 million and $2.4 million, respectively, were included in Accrued expenses on the condensed consolidated balance sheets related to transactions associated with the commercial cooperation agreement.

Other transactions with related parties during the three months ended March 31, 2023 and 2022 were immaterial individually and in the aggregate for financial reporting purposes.

15. 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 estimated that we would incur approximately $14 million in total pre-tax charges in connection with the Restructuring Plan, primarily related to severance payments, employee benefits and equity-based compensation.

As of March 31, 2023, we have incurred $17.7 million of charges associated with the Restructuring Plan related to severance payments, employee benefits and equity-based compensation, which represents substantially all cash and non-cash charges expected under the Restructuring Plan. During the three months ended December 31, 2022, we recorded $7.2 million of expenses related to actions taken in the fourth quarter of 2022 and in connection with the Restructuring Plan. During the three months ended March 31, 2023, $10.5 million of expenses related to the Restructuring Plan were recorded in the Company’s condensed consolidated statement of net income, as follows (in thousands):


Cost of revenue	$	755
Technology and development	2,299
Sales and marketing	5,379
General and administrative	2,058
Total restructuring expenses	$	10,491

Approximately $2.7 million of charges associated with the Restructuring Plan remained unpaid and were included within Accrued expenses in the Company’s condensed consolidated balance sheet as of March 31, 2023 and are expected to be paid during the second quarter of fiscal 2023.

16. 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 from 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.

We recorded income tax expense of $0.2 million for the three months ended March 31, 2023, and $0 for the three months ended March 31, 2022. The effective tax rate was (0.2) % for the three months ended March 31, 2023, and 0% for the three months ended March 31, 2022. Our effective tax rate for the three months ended March 31, 2023 differs from the federal statutory rate of 21% primarily due to a full valuation allowance against the majority of our net deferred tax assets where it is more likely than not that the deferred tax assets will not be realized and geographical mix of our earnings.

We currently expect the undistributed earnings of our foreign subsidiaries to be indefinitely reinvested. Accordingly, the Company has not provided for 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.

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 the 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 differences, projected future taxable income, and tax-planning strategies. As of March 31, 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 U.S. deferred tax assets will not be realized. Accordingly, a valuation allowance has been established on the majority of our net deferred tax assets in the U.S.

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.

On August 16, 2022, the U.S. government enacted the Inflation Reduction Act (“IRA Act”), which is effective January 1, 2023 and contains provisions implementing a 15% minimum corporate income tax and a 1% excise tax on stock repurchases. While we are continuing to evaluate the impact of the IRA Act, at this time, we do not believe it will have a material impact on our consolidated financial statements.

17. NET LOSS PER SHARE

The following table sets forth the computation of basic and diluted net loss per share (in thousands, except per share data):


	Three Months Ended March 31,
	2023		2022
Numerator:
Net loss attributable to Wheels Up Experience Inc. - basic and diluted	$	(100,866)	$	(88,653)
Denominator:
Weighted-average shares of Class A common stock outstanding - basic and diluted	253,345,272		244,609,635
Basic and diluted net loss per share of Class A common stock	$	(0.40)	$	(0.36)

There were no dividends declared or paid during each of the three months ended March 31, 2023 or 2022.

Basic and diluted net loss per share were computed using the two-class method. 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. All issued and outstanding shares of restricted stock are included in the weighted-average shares of Class A common stock outstanding.

WUP profits interests held by other members of MIP LLC are not subject to the net loss per share calculation until such time the vested WUP profits interests are actually exchanged for shares of Class A common stock.

The following securities were not included in the computation of diluted shares outstanding, because the effect would be anti-dilutive, and issuance of such shares is contingent upon the satisfaction of certain conditions which were not satisfied by the end of the period:


	Three Months Ended March 31,
	2023	2022
Warrants	12,521,494	12,521,494
Earnout Shares	9,000,000	9,000,000
RSUs(1)	27,852,662	15,633,060
Stock options	13,665,147	16,193,621
Total anti-dilutive securities	63,039,303	53,348,175

(1) Includes RSUs, PSUs and CEO Market-Based RSUs outstanding as of March 31, 2023.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following management’s discussion and analysis of our financial condition and results of operations (“MD&A”) should be read in conjunction with our unaudited condensed consolidated financial statements and the related notes included in Part I, Item 1 of this Quarterly Report and our audited consolidated financial statements included in our most recent Annual Report on Form 10-K for the year ended December 31, 2022. This discussion contains forward-looking statements which involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements. See “Cautionary Note Regarding Forward-Looking Statements” included in this Quarterly Report. Unless the context otherwise requires, references in this MD&A section to “Wheels Up”, “we,” “us,” “our,” and “the Company” are intended to mean the business and operations of Wheels Up Experience Inc. and its consolidated subsidiaries.

Overview of Our Business

Wheels Up strives to disrupt private aviation by delivering innovative, accessible, travel through simple-to-use proprietary technology and mobile applications. We have become a recognized market leader and are redefining private flying by leveraging our unique technology-enabled marketplace platform. We connect flyers to private aircraft, and to one another, creating memorable lifestyle experiences.

We have a diversified and evolving business model generating revenue through flights, membership fees, management of aircraft and other services. Our chief operating decision maker, Kenny Dichter, our Chief Executive Officer and Chairman of our Board of Directors, reviews our financial information presented on a consolidated basis, and accordingly, we operate under one reportable segment, which is private aviation services.

Flight revenue includes both retail and wholesale charter. Wheels Up has one of the largest and most diverse mix of available aircraft in the industry. As of March 31, 2023, we had over 200 aircraft in our owned and leased fleet that includes Turboprops, Light, Midsize, Super-Midsize and Large-Cabin jets, approximately half of which are Wheels Up branded aircraft. As of March 31, 2023, we also had a managed fleet across all private aircraft cabin classes of over 100 aircraft and an extensive network of third-party operators available in our program fleet from whom we can access over 1,200 additional safety vetted and verified partner aircraft.

Members pay a fixed quoted amount for flights plus certain incidental or additional costs, if applicable. The quoted amount can be based on a contractual capped hourly rate or dynamically priced based on a number of variables at time of booking. Wholesale customers, such as charter flight brokers and third-party operators, primarily pay a fixed rate for flights. Members are also able to purchase dollar-denominated credits that can be applied to future costs incurred by members, including annual dues, flight services and other incidental costs such as catering and ground transportation (“Prepaid Blocks”). Prepaid Block sales allow us to have a certain amount of revenue visibility into future flight and travel demand, and are an important source of cash for our operations. Members who elect not to purchase a Prepaid Block “pay as they fly” by paying for their flights at the time of booking or after their flights based on then-current market rates.

Membership revenue is generated from initiation and annual renewal fees across three different annual subscription tiers — Connect, Core and Business — each of which is designed to provide the varying services required across a range of existing and potential private flyers. Core membership is ideal for the more frequent individual private flyer who wants guaranteed availability and pricing, high-touch account management, capped rates and values ultimate convenience and flexibility. The Business membership is best suited for companies of any size that want a broader group of individuals in their organization to be able to book and fly, while also requiring maximum flexibility to meet their business needs. Our Business customers include companies that fully-outsource their private travel solution to Wheels Up, including but not necessarily managing their privately owned aircraft, and those that use Wheels Up to serve or supplement their in-house flight desks. We have offered Core and Business memberships with guaranteed aircraft availability and fixed rate pricing since our inception. The Connect membership, our introductory tier, offers variable rate pricing on a per trip basis and is designed for the consumer with less frequent flight needs or who has more flexibility in their schedule or does not seek capped rate pricing. All membership options provide access through the Wheels Up mobile app to on-demand charter flights, dynamic

pricing, a variety of Shared Flights, empty-leg Hot Flights, Shuttles and The Community, an online platform of members-only forums to facilitate flight sharing, enabling members to reduce their cost of flying private. In addition, customers can qualify for Delta Air Lines, Inc. (“Delta”) miles in the Delta SkyMiles Program as part of their membership.

In addition, non-member customers now have access to a full-scale marketplace of private aircraft through the Wheels Up mobile app, available on iOS and Android where they can view real-time dynamic pricing for available aircraft classes, making it possible to instantaneously search, book and fly. These flyers are not required to purchase a membership but may pay additional transaction fees not applicable to members and do not receive membership benefits. In addition, non-member flyers do not have aircraft availability guarantees as members do and flights are priced dynamically at rates that are not capped.

We also manage aircraft for owners in exchange for a recurring contractual fee. Under the terms of many of our management agreements, in addition to owners utilizing their own aircraft, the managed aircraft may be used by us to fulfill member and non-member flights on a revenue sharing arrangement with the owner. Revenue associated with the management of aircraft also includes the recovery of owner incurred expenses, as well as the recharging of certain incurred aircraft operating costs.

We earn other revenue from sales of whole aircraft, group charter, cargo, maintenance, repair and operations (“MRO”), ground services and fixed-base operator (“FBO”) activities. In addition, other revenue includes safety and security revenue, flight management software subscription fees from third-party operators for access to our proprietary cloud-based flight management system, UP FMS, sponsorships and partnership fees, and special missions revenue, including government, defense, emergency and medical transport.

Recent Developments

Operational Efficiency and Cost Reduction Initiatives

Member Program Changes

On May 9, 2023, we announced changes to our member program that we expect will better serve members and customers, while also improving our operational efficiency and flight margins. These member program changes include, among others, creating two primary service areas – one East of the Mississippi River and one focused in the Western region of the country – that we believe will allow us to better position our King Air and Light, Mid and Super-Midsize jet fleets to enhance flight experience and member service in our primary operating areas. We will continue to provide flight services to all regions in the United States. Regions outside of our primary service areas will be dynamically priced at competitive market rates. We currently expect these latest member program changes to take effect in June 2023. The nature of these program changes could cause financial variability in the short-term during the period of implementation. However, we believe that these program changes will support our previously announced goal of delivering positive Adjusted EBITDA in 2024.

Certificate Consolidation and Operational Efficiency Efforts

We expect the consolidation of our FAA operating certificates will simplify our flight operations by harmonizing our procedures across the entire company versus the multiple operating silos that exist today. In February 2023, we consolidated the legacy Alante Air Charter operations and our Cessna CJ3 aircraft onto one certificate. We anticipate that our certificate consolidation and related operational efficiency efforts will contribute meaningfully to our service delivery and financial results in future periods. In addition, we have also implemented changes to our aircraft fleet management and maintenance operations intended to improve the efficiency of our operations and the availability of our aircraft. We are also conducting a strategic review to further simplify our business and focus on our core charter operations, which could include divesting some of our non-core assets.

Restructuring Plan

In March 2023, we announced the adoption of a restructuring plan (the “Restructuring Plan”) as part of the Company’s previously announced focus on delivering positive Adjusted EBITDA in 2024. The Restructuring Plan is

intended to streamline the Company’s organization and reduce headcount in areas of the business that do not directly impact the Company’s operations or its customers’ experience. Excluded from these actions were key operationally focused employee groups such as pilots, maintenance and operations-support personnel.

Atlanta Member Operations Center

In October 2022, we announced our plan to relocate significant elements of our member operations team from Columbus, Ohio to Atlanta, Georgia, which will include construction of a 34,000 square foot Member Operations Center (the “Atlanta Member Operations Center”) and the relocation of certain employees to the Atlanta area. Establishment of the Atlanta Member Operations Center is expected to centralize our critical functions with the goal of better serving our members and customers. The Atlanta Member Operations Center is expected to open on May 15, 2023.

UP Global Response

In November 2022, we announced a partnership with AirMed International, a global leader in air medical transport, to bring an array of medical-travel services to our members and their families through our new UP Global Response membership offering. UP Global Response provides the member and up to 11 additional designated individuals with access to air medical transport from nearly any location in the world should they have a covered medical event while traveling more than 150 miles from home. The membership also includes access to a 24/7 global medical services referral hotline, and a transport of mortal remains benefit, among other features. We began offering the UP Global Response membership to our current and prospective members in January 2023.

Non-GAAP Financial Measures

In addition to our results of operations below, we report certain key financial measures that are not required by, or presented in accordance with, U.S. Generally Accepted Accounting Principles (“U.S. GAAP”).

These non-GAAP financial measures are in addition to, and not a substitute for, measures of financial performance prepared in accordance with U.S. GAAP and should not be considered as an alternative to any performance measures derived in accordance with U.S. GAAP. We believe that these non-GAAP financial measures of financial results provide useful supplemental information about Wheels Up to investors and are utilized internally by our management team to assess certain aspects of our performance. However, there are a number of limitations related to the use of these non-GAAP financial measures and their nearest U.S. GAAP equivalents, including that they exclude significant expenses that are required by U.S. GAAP to be recorded in Wheels Up’s financial measures. In addition, other companies may calculate non-GAAP financial measures differently or may use other measures to calculate their financial performance, and therefore, our non-GAAP financial measures may not be directly comparable to similarly titled measures of other companies.

Adjusted EBITDA

We calculate Adjusted EBITDA as net income (loss) adjusted for (i) interest income (expense), (ii) income tax expense, (iii) depreciation and amortization, (iv) equity-based compensation expense, (v) acquisition and integration related expenses and (vi) other items not indicative of our ongoing operating performance, including but not limited to, restructuring charges. We include Adjusted EBITDA as a supplemental measure for assessing operating performance and for the following:

•To be used in conjunction with bonus program target achievement determinations, strategic internal planning, annual budgeting, allocating resources and making operating decisions; and

•To provide useful information for historical period-to-period comparisons of our business, as it removes the effect of certain non-cash expenses and variable amounts.

The following table reconciles Adjusted EBITDA to net loss, which is the most directly comparable U.S. GAAP measure (in thousands):


	Three Months Ended March 31,
	2023		2022
Net loss	$	(100,866)	$	(89,040)
Add back (deduct)
Interest expense	8,119		—
Interest income	(3,821)		(77)
Income tax expense	188		—
Other expense, net	(145)		30
Depreciation and amortization	14,445		14,228
Change in fair value of warrant liability	(125)		(3,631)
Equity-based compensation expense	11,538		22,554
Acquisition and integration expense(1)	2,034		3,834
Restructuring charges(2)	10,491		2,674
Atlanta Member Operations Center set-up expense(3)	6,960		—
Certificate consolidation expense(4)	2,647		—
Other(5)	(380)		—
Adjusted EBITDA	$	(48,915)	$	(49,428)

__________________

(1)Consists of expenses incurred associated with acquisitions as well as integration-related charges incurred within one year of acquisition date primarily related to system conversions, re-branding costs and fees paid to external advisors.

(2)For the three months ended March 31, 2023, includes restructuring charges related to the Restructuring Plan and other strategic business initiatives. For the three months ended March 31, 2022, includes restructuring charges for employee separation programs following strategic business decisions.

(3)Consists of expenses associated with establishing the Atlanta Member Operations Center and its operations.

(4)Consists of expenses incurred to execute our consolidation of our FAA operating certificates.

(5)Includes collections of certain aged receivables which were added back to Net Loss in the reconciliation presented for the three and twelve months ended December 31, 2022.

Adjusted Contribution and Adjusted Contribution Margin

We calculate Adjusted Contribution as gross profit (loss) excluding depreciation and amortization and adjusted further for equity-based compensation included in cost of revenue and other items included in cost of revenue that are not indicative of our ongoing operating performance. Adjusted Contribution Margin is calculated by dividing Adjusted Contribution by total revenue. We include Adjusted Contribution and Adjusted Contribution Margin as supplemental measures for assessing operating performance and for the following:

•To be used to understand our ability to achieve profitability over time through scale and leveraging costs; and

•To provide useful information for historical period-to-period comparisons of our business and to identify trends.

The following table reconciles Adjusted Contribution to gross profit (loss), which is the most directly comparable U.S. GAAP measure (in thousands, except percentages):


	Three Months Ended March 31,
	2023			2022
Revenue	$	351,812		$	325,635
Less: Cost of revenue	(353,791)			(332,758)
Less: Depreciation and amortization	(14,445)			(14,228)
Gross profit (loss)	$	(16,424)		$	(21,351)
Gross margin	(4.7)		%	(6.6)		%
Add back:
Depreciation and amortization	$	14,445		$	14,228
Equity-based compensation expense in cost of revenue	1,179			4,432

Restructuring expense in cost of revenue(1)	755			—
Atlanta Member Operations Center set-up expense in cost of revenue(2)	3,799			—
Certificate consolidation expense in cost of revenue(3)	2,601			—
Adjusted Contribution	$	6,355		$	(2,691)
Adjusted Contribution Margin	1.8		%	(0.8)		%

__________________

(1)For the three months ended March 31, 2023, includes restructuring charges related to the Restructuring Plan and other strategic business initiatives. For the three months ended March 31, 2022, includes restructuring charges for employee separation programs following strategic business decisions.

(2)Consists of expenses associated with establishing the Atlanta Member Operations Center and its operations.

(3)Consists of expenses incurred to execute our consolidation of our FAA operating certificates.

Key Operating Metrics

In addition to financial measures, we regularly review certain key operating metrics to evaluate our business, determine the allocation of resources and make decisions regarding business strategies. We believe that these metrics can be useful for understanding the underlying trends in our business.

The following table summarizes our key operating metrics:


	As of March 31,
	2023		2022		% Change
Active Members	12,285		12,424		(1)	%

	Three Months Ended March 31,
	2023		2022		% Change
Active Users	13,336		12,547		6	%

Live Flight Legs	15,389		17,626		(13)	%

Flight revenue per Live Flight Leg	$	15,060	$	13,410	12	%

Active Members

We define Active Members as the number of Connect, Core and Business membership accounts that generated membership revenue in a given period and are active as of the end of the reporting period. We use Active Members

to assess the adoption of our premium offerings which is a key factor in our penetration of the market in which we operate and a key driver of membership and flight revenue.

Active Users

We define Active Users as Active Members as of the reporting date plus unique non-member consumers who completed a revenue generating flight at least once in a given period and excluding wholesale flight activity. While a unique consumer can complete multiple revenue generating flights on our platform in a given period, that unique user is counted as only one Active User. We use Active Users to assess the adoption of our platform and frequency of transactions, which are key factors in our penetration of the market in which we operate and our growth in revenue.

Live Flight Legs

We define Live Flight Legs as the number of completed one-way revenue generating flight legs in a given period. The metric excludes empty repositioning legs and owner legs related to aircraft under management. We believe Live Flight Legs are a useful metric to measure the scale and usage of our platform, and our growth in flight revenue.

Components of Results of Our Operations

The key components of our results of operations include:

Revenue

Revenue is derived from flight, membership, aircraft management and other services.

Flight revenue consists of retail and wholesale flights and certain related fees and surcharges. Members can either pay as they fly or prepay for flights when they purchase a Prepaid Block.

Membership revenue is comprised of a one-time initiation fee paid at the commencement of a membership and recurring annual dues. In the first year of membership, a portion of the initiation fee is applied to annual dues. The remainder of the initiation fee, less any flight credits, is deferred and recognized on a straight-line basis over the estimated duration of the customer relationship period, which is estimated to be three years as of March 31, 2023. Members are charged recurring annual dues to maintain their membership. Revenue related to the annual dues are deferred and recognized on a straight-line basis over the related contractual period. If a member qualifies to earn Delta miles in the Delta SkyMiles Program as part of their membership, then a portion of the membership fee is allocated at contract inception.

Aircraft management revenue consists of contractual monthly management fees charged to aircraft owners, recovery of owner incurred expenses including maintenance coordination, cabin crew and pilots, and recharging of certain incurred aircraft operating costs such as maintenance, fuel, landing fees and parking. We pass recovery and recharge amounts back to owners at either cost or at a predetermined margin.

Other revenue primarily consists of (i) sales of whole aircraft, (ii) group charter revenue, (iii) cargo revenue, and (iv) MRO and FBO revenues. In addition, other revenue includes safety and security revenue, flight management software subscription fees from third-party operators for access to UP FMS, fees from third-party sponsorships and partnership fees, and special missions revenue, including government, defense, emergency and medical transport.

Costs and Expenses

Costs and expenses consist of the following components:

Cost of Revenue

Cost of revenue primarily consists of direct expenses incurred to provide flight services and facilitate operations, including aircraft lease costs, fuel, crew travel, maintenance and third-party flight costs. Cost of revenue

also consists of compensation expenses, including equity-based compensation and related benefits for employees that directly facilitate flight operations. In addition, cost of revenue includes aircraft owner expenses incurred such as maintenance coordination, cabin crew and pilots, and certain aircraft operating costs such as maintenance, fuel, landing fees and parking.

Technology and Development

Technology and development expense primarily consists of compensation expenses for engineering, product development and design employees, including equity-based compensation, expenses associated with ongoing improvements to, and maintenance of, our platform offerings and other technology. Technology and development expense also includes software expenses and technology consulting fees.

Sales and Marketing

Sales and marketing expense primarily consists of compensation expenses in support of sales and marketing such as commissions, salaries, equity-based compensation and related benefits. Sales and marketing expense also includes expenses associated with advertising, promotions of our services, member experience, account management and brand-building.

General and Administrative

General and administrative expense primarily consists of compensation expenses, including allocable portions of equity-based compensation and related benefits for our executive, finance, human resources and legal teams, and other personnel performing administrative functions. General and administrative expense also includes corporate office rent expense, third-party professional fees, acquisition and integration related expenses, and any other cost or expense incurred not deemed to be related to cost of revenue, sales and marketing expense or technology and development expense.

We allocate overhead such as facility costs and telecommunications charges, based on department headcount, as we believe this to be the most accurate measure. As a result, a portion of general overhead expenses are reflected in each operating expense category.

Depreciation and Amortization

Depreciation and amortization expense primarily consists of depreciation of capitalized aircraft as well as amortization of capitalized software development costs and acquired finite-lived intangible assets.

Gain on Sale of Aircraft Held for Sale

Gain on sale of aircraft held for sale consists of the gain on aircraft previously held as property and equipment and subsequently elected to actively market for sale or aircraft purchased where our intent to sell and not to hold the asset long-term.

Change in Fair Value of Warrant Liability

Change in fair value of warrant liability consists of unrealized gain (loss) on warrants assumed as part of the business combination consummated on July 13, 2021 between Wheels Up Partners Holdings LLC, a Delaware limited liability company (“WUP”), and Aspirational Consumer Lifestyle Corp. (“Aspirational”), a blank check company (the “Business Combination’), including 7,991,544 public warrants (“Public Warrants”) and 4,529,950 private warrants (the “Private Warrants” and, together with the Public Warrants, the “Warrants”).

Interest Income

Interest income primarily consists of interest earned on cash equivalents in money market funds, U.S. treasury bills and time deposits.

Interest Expense

Interest expense primarily consists of the interest paid or payable and the amortization of debt discounts and deferred financing costs on our credit facilities, promissory notes and other debt obligations.

Income Tax Expense

Income tax expense consists of income taxes recorded using the asset and liability method. Under this method, deferred tax assets and liabilities are recorded based on the estimated future tax effects of differences between the financial reporting and tax bases of existing assets and liabilities. These differences are measured using the enacted tax rates that are expected to be in effect when these differences are anticipated to reverse. Deferred tax assets are reduced by a valuation allowance to the extent management believes it is not more likely than not to be realized.

Results of Our Operations

The following table sets forth our results of operations for each of the three months ended March 31, 2023 and 2022 (in thousands, except percentages):


	Three Months Ended March 31,				Change in
	2023		2022		$		%
Revenue	$	351,812	$	325,635	$	26,177	8.0	%

Costs and expenses:
Cost of revenue	353,791		332,758		21,033		6.3	%
Technology and development	15,873		11,191		4,682		41.8	%
Sales and marketing	25,803		23,243		2,560		11.0	%
General and administrative	39,416		38,904		512		1.3	%
Depreciation and amortization	14,445		14,228		217		1.5	%
Gain on sale of aircraft held for sale	(866)		(1,971)		1,105		(56.1)	%
Total costs and expenses	448,462		418,353		30,109		7.2	%

Loss from operations	(96,650)		(92,718)		(3,932)		4.2	%

Other income (expense):
Change in fair value of warrant liability	125		3,631		(3,506)		(96.6)	%
Interest income	3,821		77		3,744		n/m
Interest expense	(8,119)		—		(8,119)		n/m
Other expense, net	145		(30)		175		n/m
Total other income (expense)	(4,028)		3,678		(7,706)		(209.5)	%

Loss before income taxes	(100,678)		(89,040)		(11,638)		13.1	%

Income tax expense	(188)		—		(188)		n/m

Net loss	(100,866)		(89,040)		(11,826)		13.3	%
Less: Net loss attributable to non-controlling interests	—		(387)		387		(100.0)	%
Net loss attributable to Wheels Up Experience Inc.	$	(100,866)	$	(88,653)	$	(12,213)	13.8	%

__________________

n/m - Not meaningful

Revenue

Revenue increased by 8.0%, or $26.2 million, for the three months ended March 31, 2023, compared to the three months ended March 31, 2022, as follows (in thousands, except percentages).


	Three Months Ended March 31,				Change in
	2023		2022		$		%
Membership	$	21,680	$	20,647	$	1,033	5.0	%
Flight	231,762		236,363		(4,601)		(1.9)	%
Aircraft management	63,694		60,506		3,188		5.3	%
Other	34,676		8,119		26,557		327.1	%
Total	$	351,812	$	325,635	$	26,177	8.0	%

Membership revenue increased 5.0% year-over-year. The 1% decrease in Active Members year-over-year was offset by a higher mix of Core members combined with lower incentives on memberships.

The decrease in Flight revenue was primarily driven by a 13% decrease in Live Flight Legs year-over-year, which resulted in a $30.0 million reduction to revenue during the period, partially offset by a 12% increase in flight revenue per Live Flight Leg, which drove $25.4 million of year-over-year revenue increase. The decrease in Flight revenue for the three months ended March 31, 2023 was partially offset by $10.7 million of fuel surcharge revenue, which we began collecting effective April 1, 2022 and modified to a fuel surcharge indexed to fuel prices effective June 1, 2022, as well as $8.5 million of flight revenue attributable to Air Partner plc (“Air Partner”), which we acquired on April 1, 2022.

The increase in Aircraft management revenue was primarily attributable to an increase in our recovery of owner and rechargeable costs related to operating aircraft under management, both of which stemmed from an increase in operating costs.

The increase in Other revenue was primarily attributable to a $9.6 million increase in sales of aircraft inventory and a $14.3 million increase attributable to Air Partner for the three months ended March 31, 2023.

Cost of Revenue

Cost of revenue increased by $21.0 million, or 6%, for the three months ended March 31, 2023 compared to the three months ended March 31, 2022. The increase in cost of revenue is primarily attributable sales of aircraft inventory, cost of revenue attributable to Air Partner and one-time expenses associated with certificate consolidation and set-up of our Atlanta Member Operations Center. The increase was partially offset by a decrease in equity-based compensation expense associated with historical awards which vested prior to or within the current period.

Adjusted Contribution Margin decreased 260 basis points for the three months ended March 31, 2023 compared to the three months ended March 31, 2022, which was primarily attributable to fixed costs while we experienced lower live flight legs combined with cost pressures impacting us and the industry, partially offset by increased whole aircraft sales during the period. Specifically, reduced maintenance availability, which can result in lower utility or higher procurement costs, increased crew travel costs and wage inflation each contributed to the decline in Adjusted Contribution Margin. See “Non-GAAP Financial Measures” above for a definition of Adjusted Contribution Margin, information regarding our use of Adjusted Contribution Margin and a reconciliation of gross margin to Adjusted Contribution Margin.

Other Operating Expenses

Technology and Development

Technology and development expenses increased by $4.7 million, or 41.8%, for the three months ended March 31, 2023 compared to the three months ended March 31, 2022, primarily attributable to a $6.3 million increase in employee compensation and allocable costs, including $2.3 million of one-time charges associated with the

Restructuring Plan. The increase was also attributable to a $1.3 million increase in enterprise software expense and $1.0 million of expenses attributable to Air Partner. The increase was partially offset by a $1.3 million decrease in IT equipment spend.

Sales and Marketing

Sales and marketing expenses increased by $2.6 million, or 11.0%, for the three months ended March 31, 2023 compared to the three months ended March 31, 2022, primarily attributable to $7.2 million of expenses attributable to Air Partner, of which $1.2 million were one-time charges incurred associated with the Restructuring Plan, as well as $0.9 million of other one-time charges associated with the Restructuring Plan charges. The increase was partially offset by a $2.0 million decrease in equity-based compensation associated with historical awards which vested prior to or within the current period, a $1.1 million decrease in events spending, a $1.7 million decrease in employee compensation and allocable costs, due in part to the effect of the Restructuring Plan, and a $0.5 million decrease in advertising spend.

General and Administrative

General and administrative expenses increased by $0.5 million, or 1.3%, for the three months ended March 31, 2023 compared to the three months ended March 31, 2022, primarily attributable to $5.5 million of expenses attributable to Air Partner, $5.4 million in one-time restructuring charges associated with the Restructuring Plan, a $2.7 million increase year-over-year, and $0.7 million in one-time costs related to the set-up of the Atlanta Member Operations Center. The increase was also attributable to a $1.8 million increase in acquisition and integration charges and a $0.9 million increase in professional fees. The increases were partially offset by a $5.7 million decrease in equity-based compensation associated with historical awards which vested prior to or within the current period, a $3.5 million decrease in acquisition-related consulting charges and a $1.9 million decrease in legal-related charges.

Depreciation and Amortization

Depreciation and amortization expenses were relatively flat for the three months ended March 31, 2023 compared to the three months ended March 31, 2022.

Interest Income

Interest income increased by $3.7 million, for the three months ended March 31, 2023 compared to the three months ended March 31, 2022. The increase was attributable to higher rates of interest earned on cash equivalents in money market funds.

Interest Expense

Interest expense was $8.1 million for the three months ended March 31, 2023 with no comparable amount in the three months ended March 31, 2022. The increase was attributable to the Equipment Notes (as defined below) issued in October 2022.

Other Expense, Net

Other expense, net was relatively flat for the three months ended March 31, 2023 compared to the three months ended March 31, 2022.

Liquidity and Capital Resources

Overview

Our principal sources of liquidity have historically consisted of financing activities, including proceeds from the Business Combination and debt financing transactions, and operating activities, primarily from the increase in

deferred revenue associated with the sale of Prepaid Blocks. As of March 31, 2023, we had $363.2 million of cash and cash equivalents, which were primarily invested in money market funds, and $36.6 million of restricted cash.

Long-Term Debt

From time to time, we obtain debt financing to, among other things, refinance or purchase aircraft or fund our strategic growth initiatives. In October 2022, Wheels Up Partners LLC, our indirect subsidiary ("WUP LLC"), entered into a Note Purchase Agreement, dated as of October 14, 2022 (“Note Purchase Agreement”), pursuant to which WUP LLC issued $270.0 million aggregate principal amount of the equipment notes (collectively, the “Equipment Notes”) using an EETC (enhanced equipment trust certificate) loan structure. 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. 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. 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 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.

As of March 31, 2023, approximately $263.2 million aggregate principal amount of Equipment Notes were outstanding and the carrying value of the aircraft that are subject to first-priority liens under the Equipment Notes was $323.4 million.

Cash Flows

The following table summarizes our cash flows for each of the three months ended March 31, 2023 and 2022 (in thousands):


	Three Months Ended March 31,
	2023		2022
Net cash used in operating activities	$	(202,482)	$	(121,216)
Net cash used in investing activities	$	(11,035)	$	(119,552)
Net cash provided by (used in) financing activities	$	(6,752)	$	(6,107)
Effect of exchange rate changes on cash, cash equivalents and restricted cash	$	(86)	$	—
Net increase (decrease) in cash, cash equivalents and restricted cash	$	(220,355)	$	(246,875)

Cash Flow from Operating Activities

The cash outflow from operating activities consisted of our net loss, net of non-cash items of $25.9 million and the balance from an increase in net operating assets and liabilities. During the three months ended March 31, 2023, we sold $99.9 million of Prepaid Blocks compared to $174.6 million during the three months ended March 31, 2022. The year-over-year decrease in Prepaid Block purchases was primarily attributable to normalization of supply versus demand for aviation services.

Cash Flow from Investing Activities

The cash outflow from investing activities was primarily attributable to $16.7 million for capital expenditures, including $8.0 million of software development costs. The cash outflow was partially offset by $5.7 million in proceeds from the sale of aircraft that were classified as held for sale.

Cash Flow from Financing Activities

The cash outflow from financing activities was attributable to the payment of principal on the Equipment Notes.

Contractual Obligations and Commitments

As of March 31, 2023, our principal commitments consisted of contractual cash obligations under the Equipment Notes, operating leases for certain controlled aircraft, corporate headquarters, and operational facilities, including aircraft hangars, and ordinary course arrangements involving our obligation to provide services for which we have already received deferred revenue. For further information on the Equipment Notes, see “—Long-Term Debt” above and Note 7, Long-Term Debt of the Notes to Condensed Consolidated Financial Statements included herein. For further information about our lease obligations, see Note 9, Leases of the Notes to Condensed Consolidated Financial Statements included herein. For further information about deferred revenue, see Note 2, Revenue of the Notes to Condensed Consolidated Financial Statements included herein.

Critical Accounting Policies and Estimates

For further information on our critical accounting policies and estimates, see “Management’s Discussion and Analysis of Financial Conditions and Results of Operations - Critical Accounting Policies and Estimates” included in our Annual Report on Form 10-K for the year ended December 31, 2022.

Recent Accounting Pronouncements

For further information on recent accounting pronouncements, see Note 1, Summary of Business and Significant Accounting Policies of the Notes to Condensed Consolidated Financial Statements included herein.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

In the ordinary course of operating our business, we are exposed to market risks. Market risk represents the risk of loss that may impact our financial position or results of operations due to adverse changes in financial market prices and rates. Our principal market risks have related to interest rates, aircraft fuel and foreign currency exchange. There has not been any material change to the information included in Part II, Item 7A of our Annual Report on Form 10-K for the year ended December 31, 2022.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) of the Exchange Act of 1934, as amended (the “Exchange Act”)), that are designed to provide reasonable assurance that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow for timely decisions regarding required disclosure. It should be noted that, because of inherent limitations, our disclosure controls and procedures, however well designed and operated, can provide only reasonable, and not absolute, assurance that the objectives of the disclosure controls and procedures are met.

As required by Rule 13a-15(b) under the Exchange Act, our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of the period covered by this Quarterly Report on Form 10-Q. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were not effective as of March 31, 2023, due to the on-going remediation efforts associated with the material weaknesses in internal control over financial reporting described in Item 9A of our Annual Report on Form 10-K for the year ended December 31, 2022 (the “Annual Report”) and the need for impacted controls to operate for a sufficient period of time and for management to conclude, through testing, that the controls are designed and operating effectively.

Notwithstanding the pending remediation efforts described below, based on additional analysis and other post-closing procedures performed, management believes that the financial statements included in this report present fairly, in all material respects, our financial position, results of operations and cash flows for the periods presented in conformity with U.S. GAAP.

Remediation Plans to Address Material Weaknesses

To date, we have implemented certain measures to address the controls and procedures deficiencies identified in Item 9A of the Annual Report. These measures include (i) adding key personnel, (ii) improving our internal controls around financial systems and processes and (iii) designing and operating user access and change management controls. We intend to take additional steps to remediate the deficiencies identified in Item 9A of the Annual Report and further evolve our internal controls and processes.

Since the date of the Annual Report, we have taken the following steps as part of our remediation plan:

•implemented preventative controls to better ensure segregation of duties; and

•improved system capabilities around posting of journal entries, enhancing journal entry review and approval controls.

Our remediation plan includes the following actions that management intends to undertake during the remainder of the fiscal year ending December 31, 2023:

•ensuring that the IT general controls specific to all key systems supporting financial reporting, including user access reviews, are consistently operating and evidenced; and

•formalizing our accounting policies and ensuring training of relevant personnel on the importance of internal controls and compliance with policies.

We are working aggressively and prioritizing the above actions to complete our remediation plan before the end of the second quarter of the fiscal year ending December 31, 2023, but no later than the end of the fiscal year. As we continue to evaluate and improve the applicable controls, management may take additional remedial measures or modify the remediation plan described above. We believe that these actions, when fully implemented, will remediate the deficiencies identified in Item 9A of the Annual Report. The deficiencies will not be considered remediated until

the applicable controls operate for a sufficient period of time and management has concluded, through testing, that these controls are designed and operating effectively.

Changes in Internal Control over Financial Reporting

Except for the items referred to above, there were no changes in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the quarter ended March 31, 2023 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

Inherent Limitation on the Effectiveness of Internal Control over Financial Reporting and Disclosure Controls and Procedures

Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of the controls. The design of any system of controls is also based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected or preventable.

PART II. OTHER INFORMATION

ITEM 1. 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, 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 consolidated financial condition, results of operations or cash flows.

ITEM 1A. RISK FACTORS

There have been no material changes to the significant risk factors and uncertainties known to the Company and disclosed in the Company’s Form 10-K for the fiscal year ended December 31, 2022.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report.



No.						Description of Exhibit
3.1						Certificate of Incorporation of Wheels Up Experience Inc. (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K, filed with the SEC on July 19, 2021).
3.2						Amended and Restated By-Laws of Wheels Up Experience Inc. (incorporated by reference to Exhibit 3.2 to the Registrant's Annual Report on Form 10-K, filed with the SEC on March 31, 2023).
10.1*†^						Offer Letter, dated July 19, 2022, by and between Mark Briffa and Air Partner Limited (including the Director ’s Service Agreement attached as Annex A thereto and Amendment No. 1 thereto).
31.1*						Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2*						Certification of the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1**						Certification of the Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2**						Certification of the Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS						XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
101.SCH						XBRL Taxonomy Extension Schema Document
101.CAL						XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF						XBRL Taxonomy Extension Definition Linkbase Document
101.LAB						XBRL Taxonomy Extension Label Linkbase Document
101.PRE						XBRL Taxonomy Extension Presentation Linkbase Document
104						Cover Page Interactive Data File - The cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document


*						Filed herewith
**						Furnished herewith
†						Identifies each management contract or compensatory plan or arrangement.
^						Certain private and confidential information have been omitted pursuant to Item 601(b)(10)(iv) of Regulation S-K. The Registrant agrees to furnish supplementally a copy of any omitted private or confidential information to the SEC upon request.

SIGNATURES

Pursuant to the requirements of Securities Exchange Act of 1934, the registrant has duly caused this Quarterly Report to be signed on its behalf by the undersigned, thereunto duly authorized.



	WHEELS UP EXPERIENCE INC.


Date: May 9, 2023		/s/ Kenneth Dichter
	Name:	Kenneth Dichter
	Title:	Chief Executive Officer
		(Principal Executive Officer)


		/s/ Todd Smith
Date: May 9, 2023	Name:	Todd Smith
	Title:	Chief Financial Officer
		(Principal Financial and Accounting Officer)