SNCY - NASDAQ

Welcome to the Sun Country Airlines Fourth Quarter and Full Year 2022 Earnings Call. My name is Chris, and I will be your operator for today's call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. And I will now turn the call over to Chris Allen, Director of Investor Relations. Mr. Allen, you may begin.

Thank you. I'm joined today by Jude Bricker, our Chief Executive Officer, and Dave Davis, President and Chief Financial Officer, and a group of others help answer questions. Before we begin, I'd like to remind everyone that, during this call, the company may make certain statements that constitute forward-looking statements. Our remarks today may include forward-looking statements which are based on management's current beliefs, expectations and assumptions and are subject to risks and uncertainties. Actual results may differ materially. We encourage you to review the risk factors and cautionary statements outlined in our earnings release on our most recent SEC filings. We assume no obligation to update any forward-looking statements. You can find our fourth quarter and full-year earnings press release on the Investor Relations portion of our website at ir.suncountry.com. With that said, I'd like to now turn the call over to Jude.

Thanks, Chris. Good morning to everybody. To review our multi-segment business is unique in the airline industry. Due to the predictability of our charter and cargo businesses, we were able to deliver the most flexible scheduled service capacity in the industry. The combination of our schedule, flexibility and low cost model allow us to respond to both predictable leisure demand fluctuations and exogenous industry shocks. We believe due to these structural advantages, we'll be able to reliably deliver industry-leading profitability throughout all cycles. And execution of our multi-segment business is critical that we're able to deliver industry leading operational performance. I'm especially proud that, in 2022, Sun Country delivered the industry's best completion factor. During the challenging December period, we delivered 99.6 completion factor, also best in the industry. So proud of our whole team that continues to come through for our customers every day. We continue to see strong demand for all segments of our business. And scheduled service, currently selling through August, we're seeing consistently strong yields even compared to an already strong 2022. The first quarter notably, year-over-year TRASM improvement implicit in our guide is mostly a result of a strong recovery in international demand as compared to Omicron impacted first quarter 2022. This outperformance is overcoming West Florida demand which is still recovering from Hurricane Ian. All indications are that unit revenues will continue to remain strong through the summer, including observable bookings, overall industry capacity across our network, loyalty spend, contracted distribution agreements and local economy metrics. In scheduled service, through the next year, we expect to continue to build out our MSP operation to its natural share. To that end, we've decided to postpone the restart of our summer Hawaiian operations until 2024. Keep in mind that, in the first quarter, which is typically our strongest of the year – keep in mind that the first quarter is typically our strongest of the year on constant deal and normalized demand. I expect charters to put up big growth numbers in 2023. Mostly we're focused on long term contracted charter revenue. We've expanded our casino operation to five aircraft and added a second aircraft to our VIP operation. I expect to have eight aircraft committed to contracted charter flying by the end of 2023. Counting our 12 cargo aircraft, that brings our contracted fleet to 20 aircraft of the 55 we have in service. All these aircraft fly at consistent operational levels with pass through economics. This operating base allows us maximum flexibility with our scheduled business. I expect our sports business to grow this year as well, focused on collegiate sports and Major League Soccer. Charter demand remains strong and we believe it's generally underserved by the industry. Our cargo business will improve this year due to contracted escalation, but we expect volumes to be consistent year-over-year as we focus on building out our scheduled and charter businesses. On the fleet, we'll continue to be opportunistic buyers. I expect most of our 2023 growth to come through utilization increases, which remain well below 2019 levels. This will allow us to deploy capital for debt repayments through amortization, consider share buybacks and some prudent infrastructure investment, like our new training centers that opened in 4Q and technology to support our operations. I'm confident that we will continue to find the growth aircraft that we need as we need them. And with that, I'll turn it over to Dave.

Thanks, Jude. We're pleased to report strong Q4 results, which I'll detail in a minute, near the upper end of our guidance range for both revenue and operating margin. Adjusted pretax income for the quarter was $10.3 million, a 39% improvement over Q4 of 2021, despite an increase in fuel prices of nearly 44% and the impact of the new pilot agreement that we signed near the end of 2021. Although we are now comparing our results to prior year, it's important to note that our Q4 adjusted pretax income is nearly 26% higher than it was in Q4 of 2019. Additionally, we grew Q4 2022 year-over-year capacity on both a system block hour and ASM basis by 10% and 14%, respectively. Q4 system block hours were 37% higher than they were in Q4 of 2019. Let me start with a discussion of revenue and capacity. As Jude noted, the revenue environment remains very strong. Q4 of 2022 total operating revenue of $227.2 million was 31.6% higher than the year-ago quarter. The scheduled service business is particularly strong as TRASM grew 27% versus last year and an almost 14% growth in scheduled service ASMs. Ticket plus ancillary revenue grew 45% year-over-year as we saw an increase in total fare to $177.36, combined with an increase in load factor from 76.6% last year to 84.4% in Q4 of 2022. This strengthened unit revenue shows no signs of abating as we move into the first quarter. The story is the same for the full-year 2022 with scheduled service TRASM growing almost 37% on an increase in scheduled ASMs of 16%. Both total fare of $175.29 and load factor of 83.5% were the highest full year result since 2018 when we began our conversion to a single class configuration. We finished 2022 with full year revenue of $894.4 million, a 44% increase over 2021 and a record for Sun Country. Charter revenue grew in the fourth quarter by 11% as we saw another quarter of strong growth in flying under long term contracts, referred to as program charter, and steady improvement in our ad hoc business. Ad hoc charter revenue doubled versus Q3 of 2022 and is showing steady progress as we continue to add pilots to pursue these opportunities. We've made a concerted effort to grow the amount of our charter business under long term contracts, and we've been very successful so far. For the full year, program charter revenue was $121.7 million, nearly 2.5 times higher than it was in 2021, and we feel there remains room to grow. We added the equivalent of a third aircraft serving our Caesars contract in the fourth quarter of 2022. Full year revenue for the ad hoc charter business is still about 60% below its peak in 2019, but as we continue to add pilot resources, we expect to see steady growth in this segment. Cargo revenue grew 5% in the fourth quarter on a small decline in capacity. For the full year, cargo revenue declined 1% on a 4% decrease in cargo block hours. During the first half of the year, we had numerous Amazon aircraft in heavy maintenance, which drove the block hour decrease. Our cargo flying remains a consistent source of revenue in all environments, and we do not expect this to change in the future. Let me turn now to costs. Our fourth quarter adjusted CASM increased 7% versus last year. For the full year, adjusted CASM increased 9% year-over-year. Similar to what we have been saying all year, the main drivers of this cost increase have been twofold. First, we have been smaller than we had initially planned to be due to labor and aircraft constraints. Second, 2022 results reflect the cost of the new pilot agreement we signed at the end of 2021. This is an important point, as the results of many of our competitors have yet to fully incorporate the cost of recently completed or upcoming new pilot contracts. Two additional aircrafts are expected to enter service in Q1 of 2023. As we grow into our expanded fleet throughout 2023, we expect to see a deceleration in unit cost increases. Let me say a few words now about our strong balance sheet. We finished 2022 with $289.4 million in total liquidity, including $264.7 million in unrestricted cash and short term investments. Our year-end net debt to adjusted EBITDA was 2.7. During January of 2023, we completed the $25 million ASR portion of our share buyback program, repurchasing approximately 1.4 million shares at an average price of $18.23. We still have $25 million in Board approved share repurchase authority and will execute any buybacks under the program opportunistically, considering the liquidity needs of the business. Let me switch now to Q1 2023 guidance. As I said previously, we're seeing very strong demand, with approximately 80% of our planned Q1 passenger revenue already booked, and we expect the strength to continue throughout the quarter. Total Q1 2023 revenue is expected to be between $280 million and $290 million, which would be 24% to 28% higher than Q1 of 2022. We expect total block hour growth of 3.5% to 6.5%. We're expecting an operating margin of between 15% and 20%, assuming a fuel price of $3.58 per gallon. Just a quick reminder. Q1 is historically our strongest quarter of the year, and we expect to see seasonal trends similar to previous years. The fundamentals of our unique diversified business remain strong and our model is highly resilient to changes in macroeconomic conditions. Our focus remains on profitable growth. With that, I'll open it for questions.

[Operator Instructions]. Our first question will come from Ravi Shanker of Morgan Stanley.

Great to hear the strong commentary for 1Q. If you can just kind of give us a little more detail there. How far out the booking curve can you see? Can you see past spring break, maybe into early summer as well? Does it feel like even the tail end of that booking curve kind of continues to remain strong, just trying to get a better sense of what the rest of the year might look like?

The main thing that's impacting the first quarter relative to the first quarter of last year is going to be the recovery in international demand. We have a sizable international network, traditionally, during the first quarter. Last year was affected heavily by Omicron. So we're seeing strong demand across the Caribbean, Mexican market, Central America markets that's sort of unprecedented from my experience, looking at traffic down there. We have really good insight. As Dave mentioned, we're over 80% sold for the first quarter. So, there's not a lot of variance there. Most of the variance in our first quarter revenue will come from how much charters were able to sell into the March period. Looking past the first quarter, April is pretty well clear at this point. And it continues the same trend of fairly dramatic year-over-year revenue improvements. The summer, we have a little less insight on just because the summer relative to the first quarter tends to book more close in. And we shift our network to more domestic markets and shorter haul markets, but also tend to book more close in. But if all we're looking at is unit revenue and fares and ancillary production, things like that, for the bookings that we can see, which again for the summer period is well below 20% of our volume, it's very, very strong. I don't see anything that would indicate – I can't find any weakness across the network. I was concerned about Ian's impact because Fort Myers is a big part of our network in March in particular and that area of the country is mostly recovered. It's still lagging the strength in other areas, but there's really no weakness that I can find anywhere across our scheduled service network.

That's a pretty definitive statement. Maybe as a follow up to that, kind of sounds like the biggest impediment to kind of growing into that strength is going to be capacity. Can you just comment on what the pilot availability situation is like? And what do you expect in terms of maybe any headwinds there kind of easing in the next 12 months?

Our pilot situation continues to get better. As we've detailed and talked through a number of times, we've had some particular issues in our training pipeline. We continue to have no issues with sort of recruiting pilots to come to the company. So that continues to hold. We're making steady progress, like identifiable improvement in pilots that are going to the line here, especially over the last two or three months. We expect that positive momentum to continue in the back half of the year. I think I mentioned 3.5% to 6.5% block hour growth for the first quarter. I think we're looking now at block hour growth for the year of around 10%. So we'll be accelerating as we move into the summer months, and then into the back half of the year.

Which is particularly positive because we'll be putting up double-digit growth rates by June, which is – so we'll be able to catch most of – the growth rate will align with where the peak opportunities are.

Our next question will come from the line of Duane Pfennigwerth of Evercore.

Just to follow up on the last question. And I know we had an interesting couple of years to say the least. And prior to that, you had significantly restructured this business. But that 80% book for 1Q, do you have any feel for how that compares to kind of normal, if there is such a thing as normal?

Just on an estimation of about 5 points relative to history. We're booking ahead. And a lot of that is just us aligning our algorithms to the demand environment. We need to load higher fares from the beginning. Recall that pricing is a heuristic algorithm. So, bookings determine fares. And a lot of that depends on our expectation going into the selling period and we're aligning to the new environment. So, we're probably ahead by about 5 points.

On CapEx, can you just remind us how are you thinking about 2023 and 2024 maybe versus the year just ended? Where do those plans stand today? And are you seeing any signs that the used 737 market is loosening up as MAX deliveries finally take the appropriate pace here?

Without going into precise numbers, let me give you some color on CapEx. So, we added between seven and eight aircraft last year, or I should say in 2022. This year, we are not going to add as many planes. Jude mentioned the fact that we're going to get growth mostly through utilization, but I would expect us to add probably one or two aircraft into the fleet this year. So that CapEx will be down significantly. We're already lining up deliveries right now for 2024 and even into 2025. So we expect to resume growth in 2024, probably seven to nine aircraft, and the same in 2025. So we're going to take a little bit of a pause here, which will bring CapEx down in 2023.

On the market, I'm pretty comfortable not being a buyer right at the moment. The opposite has happened, Duane. It's actually a pretty strong market for 737-800 values, as airlines across the world extend leases to accommodate delays in their MAX order stream. There's also sort of a broad rebound in demand across the globe. We're still seeing some spot bankruptcies like Flyr in Norway last week – or this week. But these planes get absorbed really quickly. So we're not going to get, in my view, a lot of price relief. But I'm confident we'll get the planes we need.

Our next question will come from Catherine O'Brien of Goldman Sachs.

I know units costs have been lumpy. But if we just solved for unit costs in 1Q based on revenue and operating margin and maybe taking scheduled data for ASM, we get to CASMx growth in the high teens year-over-year. I guess, first, correct me if I'm wrong. But then you alluded to like a lot more block hours coming online. You're doing that via higher utilization, which I'm guessing is pretty accretive on the CASMx side. I don't know if there's maybe like some efficiencies we're getting as we move through the pilot contract. But we'll just find it helpful if you guys could talk about the level of deceleration on CASMx we should expect from maybe that high teens in the first quarter.

First of all, I'm not sure what the math is there, we can go through it. But that number is too high. It's not going to be sort of close to the high teens from a CASM basis for the first quarter. I would expect probably a number high single digits, very low double digits. And then as we continue growing here through the first quarter into the back half of the year, that should moderate significantly as we get to the back half of the year. So I talked a bit about CASM year-over-year. We should see any increases that we see in 2023 will be significantly lower than what we saw from 2021 to 2022.

One other bit of color is that, just recall, we did our pilot contract a year ago, the rest of the industry is rolling through pilot agreements now. And so, our cost trends will look really good relative to the industry based on that fact.

Yes, for sure. Maybe just as my follow-up, we continue to see really strong growth on the ancillary side for you guys. Can you just walk us through where the future opportunities lie there? Is that going to be optimizing for yields? Are there any step function changes, kind of like the offering?

First of all, I would continue to guide you to look at total revenue per passenger. Most ancillary initiatives that increase ancillary unit revenues have an effect on the airfare, but increased total revenue per passenger. So, just always keep looking at it like that, particularly bag fees and seat assignment revenue and convenience fees and things like that that most airlines are pushing really heavily on raising right now. What we're focused on in contrast is on new products. We launched our bundle solution in the back half of last year, which is performing as expected. We're also, like most airlines, getting a lot of uplift through our loyalty program, which is setting records in every quarter, certainly in the last quarter, was consistent with that. And then, what's exciting for me in particular is our third party products, which is us selling hotels and cars and travel insurance to our customers. And that is purely accretive. Every bit of revenue that's incremental doesn't affect the airfare for those products. And so, we're really excited to see that. And those on a unit basis are increasing by triple digits as we roll out our car solution for the first time really, which is really, really exciting. So, we're going to continue to have tailwinds on unit ancillary revenues. And for us, in particular, I think that's going to drive continued tailwind on total revenue per passenger because of the kind of products that we're seeing growth in.

Our next question will come from Helane Becker of Cowen.

On CapEx, what's maintenance CapEx?

You mean like a total absolute dollar amount of maintenance CapEx?

Yeah.

Probably for the year, depending on exactly what we call maintenance CapEx, we include some of our engine purchases in there, probably on the order of $40 million to $50 million.

And that'll be financed through cash, I guess?

That would be financed through cash, yeah.

Just my other question, as you think about aircraft, are you just looking at that 800 NGs or 737-700s make any sense for you? What's like your optimal size that you would be looking for?

We think that 900 would work as well. So, 800s and 900s.

Our next question will come from Michael Linenberg of Deutsche Bank.

Good numbers and outlook. Just on the aircraft, I want to clarify. Jude, I thought you said you're taking two airplanes in the March quarter. And then Dave said, we'll be taking one to two this year. Is that one to two that are incremental to the two because maybe those two showed up last year and they're being put in service? I want a clarification around that.

Yeah, it's what you just said. So the two that are coming in in the first quarter were purchased last year and going through induction. They'll be entering service. And then, the one to two that I mentioned are incremental to those two.

These airplanes, they're all being cash financed or debt financed. Right? You've moved away from leases, right?

Yeah. We haven't done any operating leases. And we don't intend to do any operating leases. It will be either debt financings, pay cash for them or enter into finance leases, which gives us basically a purchase option. So, yeah, that's how we finance all of them.

Just from a modeling perspective, you're down to like just over $1 million of rentals. Does that does that go to zero sometime this year? Or is it next year? Or is there always going to be a little residual there?

We have a couple more aircraft that are on operating leases. I think probably 2026?

2024.

2024 for both of them. Yeah. So after that, I guess our rentals will go to zero. Yeah.

There might be some engine leases from time to time.

A few miscellaneous things like that, but that line should drive to zero.

Lastly, Jude, you have made some interesting comments about how things have sort of shifted and changed through COVID and a few comments maybe a month – well, this is actually several months ago, about how demand was shifting through the week. And was it less business travel or more leisure? I think you made a comment about the fact that the fares were so high during peak period that it was pushing more demand into like Tuesday, Wednesday and helping out with sort of volatility on demand and pricing through the week. Any additional thoughts around that? It's always interesting. As it relates maybe to your March quarter demand, I'm all ears.

I think there's been a lot of commentary about leisure and travel patterns being kind of pushed into a more flexible customer base where you can travel on Tuesdays, you can travel in offseason. And my commentary was mostly that I see the same uplift in off-peak periods, but I don't have any reason – I can't go as far as Scott Kirby, for example, to draw a causal relationship. And I think we should be careful about it. So what we're seeing is dollar improvement, roughly the same across all periods. But on a percentage basis then, it's a bigger percentage increase in off-peak. So I think there is an opportunity for us to expand utilization into off-peak periods, but I'm very careful about adjusting that entire strategy towards taking advantage of these opportunities because I think a big reason off-peak has been expanding the way it has is because fares are so high. And so, you get that value shoppers that are adjusting their schedules to find lower fares. And I don't know if that's really a permanent shift in behavior.

But it sounds like you'll take advantage of it when you can, right?

Yeah. So, if you look at monthly, year over year percentage growth, we'll show the highest percentage growth in September in 2023. That's our weakest month. And that's a function of us just having more opportunity in those months because fares are generally higher.

The next question will come from Scott Group of Wolfe Research.

So pretty much everyone else has given us some thoughts on full year. I'm wondering if you could do the same. I understand Q1 will seasonally be the best margin quarter. But do you feel good about double-digit operating margins this year? Can we get back to the 12%, 12.5% we did in 2019? Just any thoughts?

Yeah, we've obviously not given full year guidance yet. But we feel very good about the entire year. Our 2023 plan is very strong. I don't want to give specific operating income information, but we'll be largely back on track in 2023, is our plan, to historical margin levels.

As other airlines get their labor deals done, do you worry that as rates reset higher that maybe some attrition issues start to emerge again?

I think it's a concern. Maybe less attrition issues and more like availability issues. But there's been a number of new deals. We haven't really had any problems so far attracting folks. So we're not overly concerned about that. And actually, our attrition figures continue to underperform what we forecast them to be. So, attrition is actually lower than we've been planning. So, intuitively, you would say yes, that as others increase wages, there's going to be some competitive pressure. We haven't seen any impact of that so far.

To the extent it emerges at some point, are there mechanisms in place where you can make adjustments if needed? Would you think about that?

We just signed a new deal at the end of 2021. We'd make spot tweaking here and there, if we needed to, to solve particular issues, but we don't contemplate any wholesale changes.

And also, the contract that we have has rate escalators embedded in and rate changes as well. So, our pilots will get raises irrespective of amendments to the contract.

[Operator Instructions]. The next question will come from Brandon Oglenski of Barclays.

You guys, I'm not looking for a specific guidance, but coming out of the IPO, we understood the business mix here. You guys do have a unique model relative to your competitors, with the Amazon fine and the charter fine. Hypothetically, you guys should probably be generating margins towards the top end of the group. I guess what is the impediment as you look forward in 23? Or do you think getting the pilot deal done last year was the biggest issue?

Yeah, I would call two things to your attention. One is that Amazon has low margins right at the moment because we increased pilot pay rates faster than the escalation in the contract. So those margins were compressed. That'll be a temporary issue. And it will be better this year. And it'll be even better in 2024, et cetera.

There's escalators built into the Amazon contract.

Exactly. The second thing is, right now, the highest margin opportunities are constrained mostly today by pilots. And as we've talked about, as we bring our staffing up, then we'll be able to add particularly during those periods of time. So, that was what impacted us most strongly during the summer 2022, which we talked about, as we're kind of under allocated into the markets that saw the biggest rises, namely, big city connectivity, Minneapolis and our network. We're under allocated there because we didn't have a crew. That'll be different this summer. And I think margins will continue to expand as we move forward into 2024.

I think it sort of more broadly – in answer to your question, the thesis that we had in place when we went public remains, and we think we can generate either the top or one of the – very near the top in industry margins on a go-forward basis. And our 2023 plan reflects that. As Jude said, some temporary things out there. Growth, as we can continue to hit our growth targets, there's plenty of opportunities out there. We don't think we're at sort of marginal fair levels yet. And there's plenty of growth opportunity for us. We actually think the 2023 growth plan is achievable, and actually somewhat modest. And if we hit those numbers, we will be, we believe, near the near the top of the industry again.

Maybe just a quick follow-up on the Amazon comment. Do you guys have built-in cost indexes there? So, like, if your pilot wages go up, then the Amazon contract will adjust? Or is that just the normal rate increase that you guys had negotiated previously?

It's normal. And pilot escalation has been lumpy. So, they eventually will align, but sometimes we're ahead, sometimes we're behind.

Exactly.

Our next question will come from Christopher Stathoulopoulos of Susquehanna.

Jude, the comment in your prepared remarks on the 20 aircraft that are contracted out of the active fleet of 55, do you have a target level for that piece of the fleet that you want to keep on contracted or charter? Or is that just going to move around in response to the market? And then, could you just remind us of the economics here? What utilization minimums are there, if any, and escalators that are built into those contracts?

I would look at it on a block hour basis and we would be optimized at around a quarter of our block hours allocated to fixed fee contracts. And that's because of the mins and maxes associated with our pilot contract. So, if those contracts service minimum hour obligations to our crews, then we're optimized for being peak to off-peak on our sched service. So, we want to keep it around 25. Now, those opportunities aren't reliably presented to us. And we can't just pluck them out whenever we want. So we're going to continue to take those opportunities as they come and build up that side of the business and try to keep scheduled service growing as we can. And that's basically the philosophy. So, about a quarter of our block hours. Now, each of these contracts are different. We were talking about economics. In the case of the Amazon contract, for example, there's a fixed component and then a variable component. So, margins expand as utilization goes down, actually. Most of our fixed fee contracts have something similar where there's a minimum hour obligation from the customer and then a variable component beyond that, and that variable component, in many cases, actually gets cheaper for them to incentivize more flying. All these businesses are going to produce really high margins, and the stability of that operation is really what we're after. Chris, I don't know what else I can tell you on those.

On a follow-up, you said utilization driven growth this year, could you just put a finer point there on the moving pieces, stage gauge, departures and then peak versus off-peak?

Our peak utilization numbers are going to be – the nature of the business is a very peaky business. Our peak utilization numbers will be 12, 13 hours a day. Our trough utilization numbers will be mid to high-single digits.

We do see it coming down a little bit in the summer as we take advantage of the growth opportunities that we talked about, our new markets out of Minneapolis, which I would say are all bookings expectations, feel good about those. So, there will be a little bit of seasonality in terms of the stage length where we do longer in the first quarter and then we shorten it up a little bit in the summer, but it all corresponds with what Dave was saying.

And for our next question, we have a follow-up from Duane Pfennigwerth of Evercore.

Maybe a small percentage of your business, but for large tour operators, Apple Leisure as an example, can you talk about, in this backdrop, how willing you are to sell blocks of inventory to an Apple Leisure and how that may be compares to the past and how you think about that business when the fare environment and the demand environment are so strong?

Keep in mind that we kind of do network strategies that are fairly different. We have Minneapolis origination, and that's been expanding into the upper Midwest. In those markets, in Minneapolis, in particular, we're creating a really strong brand, we're investing in the brand through marketing, we intend to originate the maximum amount of that capacity as possible through direct distribution. And we're not having any issue with that. And so, that's a strategy. And partnering with an Apple or any kind of tour operator in those markets isn't that exciting to us. In contrast, though, we're also augmenting our winter peak with summer opportunities, most notably out of Dallas, but also Houston and Central Texas and South Texas and many other markets in the future. Because summer is such a strong peak for most markets, with what we would say is a price driven consumer where we're going to be competitive during peak periods, still generating an average fare that's higher than the incumbents because we're only capitalizing on those very picky opportunities. In those markets, we are very open to block sales of our capacity with tour operators, OTAs, other distribution partners. And in my initial comments, I specifically called out contracted flying. That's kind of what I'm talking about. And we're negotiating those rates now or recently, and we're seeing a lot of demand from them. And we're more than happy to offload some of our capacity into those markets through those partners' channels.

Thank you. As I'm seeing no further questions in the queue, I would now like to turn the conference back to Jude Bricker for closing remarks.

Thanks for your time, everybody. We're really excited about where we're headed. It's good to kind of get some of the challenges of last year behind us and focus on growth and execution. Thanks for joining us on the call. We'll talk to you in about 90 days. Thanks, everybody.