Hello, everyone. Welcome to Wheels Up’s 4Q 2022 Earnings Conference Call. My name is Charlie and I'll be coordinating the call today. All lines have been placed on listen-only mode to prevent any background noise. You will have the opportunity to ask a question at the end of the presentation.

[Operator Instructions] I will now hand it over to your host, Keith Ferguson, Wheels Up, to begin. Keith, please go ahead..

Thank you. This morning, we announced our fourth quarter financial results. The earnings release with its supporting tables, as well as a copy of today’s presentation, can be found on our website at wheelsup.com/investors. Please refer to the slide with our disclaimer.

Today’s presentation contains forward-looking statements based on our current forecast and expectations of future events. These statements should be considered estimates only and actual results may differ materially. During today’s call, we will refer to non-GAAP financial measures, as outlined by SEC guidelines.

Unless otherwise noted, all income statement related financial measures will be non-GAAP other than revenue. Reconciliations of GAAP to non-GAAP financial measures and definitions of non-GAAP financial measures are found within the financial tables of our earnings release and appendix of today’s presentation.

And with that, I’d like to turn the call over to Wheels Up’s Chairman and Chief Executive Officer, Kenny Dichter..

one, an update on our business performance for the fourth quarter of 2022; two, our objectives for 2023; three, a progress update on our path to EBITDA profitability in 2024; four, our strong cash position at the end of the year. With that, let me provide some highlights from our quarter.

We reported revenue of $408 million a record for the fourth quarter that was up nearly 20% year-over-year, meeting our guidance of approximately 15% year-over-year growth. Revenue was a record $1.6 billion for the year, up over 30%. Active members grew 5% compared to a year ago.

Retention metrics across our membership tiers have remained consistent at high levels. However, we are seeing some headwinds in new membership sales due to the macroeconomic environment, as well as a conscious effort to focus our global sales and marketing towards the most efficient and profitable flight opportunities.

Our live flight legs decreased 5% year-over-year, while demand and pricing remained very strong relative to historical norms, we have seen some moderation in flying, which we believe reflects current conditions.

Prepaid blocks, a great indicator of our members' commitment to future flying with us were just over $1 billion for the year, a record for the company. Overall, we are very thankful for our strong foundation of loyal members and customers who continue to spend at healthy levels with us.

It is critical that we continue to focus on delivering world-class service, as we look for new ways to expand our platform. We have demonstrated our ability to consistently grow our business and brand globally. Today, we are focused on leveraging that strong foundation to generate profitable growth for our shareholders.

Last week, like many companies, we communicated a difficult but necessary decision regarding cost takeouts that included headcount reductions in several areas of the business, excluding pilots, front line maintenance and other customer-facing roles.

I want to be clear that as we manage down our cost structure, we are not wavering on our commitment to delivering an extraordinary experience and unparalleled service for our members and customers, with the world-class team featuring some of the best trained pilots and aircraft maintenance personnel in our industry.

We also see an opportunity to integrate our Wheels Up and Air partner sales teams to take a truly global approach, through our sales and commercial work and introduce a wider range of current and potential customers to the full breadth of our product solutions, target the higher-margin charter segment of our portfolio and extend our reach among corporate and enterprise clients.

We have tapped Mark Briffa, came to us as the CEO of Air Partners to lead this new global sales and commercial effort. We remain steadfast on our journey to utilize technology to shape demand and drive greater density on our network. A recent example is the pricing offer for our King Air 350i fleet, targeted to specific regions, dates and times.

This demonstrates our ability to use dynamic pricing, to drive efficient utilization on our fixed assets. These actions are consistent with our previously communicated at the profitability plan. To ensure management alignment, we are increasing the weighting of our incentive program to favor adjusted EBITDA versus revenue growth.

I also want to highlight our cash balance of nearly $600 million. We are honored that our members and customers continue to recognize the value of our service by committing significant prepaid block purchases, which is a huge vote of confidence.

In summary, Wheels up has built a strong foundation with great people, a well-respected brand and a substantial base of loyal, high-value members and customers. We have proven that we can grow. Our focus today is building a scaled and profitable business.

As always, I'm extremely thankful for our loyal members and customers for continuing to put their trust in us. I would also like to recognize and thank our entire dedicated and hardworking global team for their tremendous effort and commitment to Wheels Up. Now, I'll turn it over to Todd, who will provide more details..

Thanks, Kenny. Our foundation of loyal members and our well recognized and admired brands, provide a key point of competitive differentiation for Wheels Up. As Kenny mentioned earlier, our focus is now on how we can continue to serve our customers and deliver exceptional experiences at scale, but do so profitably.

Our headcount reduction announcement last week was the culmination of a thorough and difficult review over the past several months to scrutinize and prioritize our spending profile across technology, sales and corporate overhead.

The expected $30 million of annualized savings from this effort is a meaningful step forward, and we are continuing to work to further streamline our cost profile, and accelerate the pace of operational improvement.

As I walked through my prepared remarks, I will touch on our fourth quarter highlights, along with an update on our operating initiatives and how you should model the company going forward. Kenny touched on our total revenue performance. So let me run through the components. Membership revenue was up 13% year-over-year.

That growth rate has moderated in recent quarters, reflecting some macro headwinds and a recent shift to more connect members, as we are increasing the mix of on-demand charter flying to balance out our network.

We have also focused our sales and marketing spending to target more profitable revenue that leverages network density in specific regions and at specific times. Flight revenue was up 9% year-over-year and higher than expected.

The increase was due to a 14% year-over-year increase in flight revenue per live leg, offset by a 5% decline in live flight legs. Without Air Partner, which reports on a net revenue basis, flight revenue per live flight leg was up 19% year-over-year.

Aircraft management revenue was $62 million in the quarter, continuing to hover in the $60 million per quarter range, reflecting steady management fees and regular uses of the aircraft by their owners. Other revenue was $50 million, up significantly year-over-year due to the addition of Air Partner and an increase in aircraft sales.

Our adjusted contribution margin was 4.7% for the fourth quarter, down slightly sequentially, but at the high end of our guidance of 4.25% to 4.75%.

Excluding Air Partner and aircraft sales, our core Wheels Up adjusted contribution margin was up sequentially, reflecting continued progress on our profitability initiatives, including higher utility and margins for our 3P flying. Turning to operating expenses.

For the quarter, sales and marketing expenses were 6.4% of revenue, down sequentially in dollars and as a percentage of revenue, primarily due to lower commissions related to aircraft sales.

Technology and development expenses were 3.2% of revenue in the quarter, with total dollars down 18% sequentially as we completed several IT projects from outside vendors but up 42% year-over-year as we continue to invest in technology to support our marketplace and efficiency efforts.

General and administrative expenses were 5.9% of revenue and flat sequentially in dollar terms, as cost-cutting initiatives were offset by an increase in bad debt reserves.

Overall, OpEx was down $5 million sequentially in the quarter, in line with our guidance and consistent with our cost reduction efforts that support our path to positive adjusted EBITDA in 2024. Adjusted EBITDA was negative $43.7 million for the quarter, coming within our negative $40 million to $45 million guidance range.

Excluded from that amount are one-time non-cash charges associated with the impairment of goodwill, primarily as a result of an increasing discount rate as well as certain historical receivables. Capital expenditures were $12.7 million in the quarter, including capitalized software of $9.2 million.

For the year, capital expenditures were $111 million, coming in below our prior guidance. Excluding the purchase of tech strong aircraft that were previously leased, capitalized software was roughly half of our normal capital spending, reflective of our continuing technology investment.

We ended the quarter with $586 million of cash and cash equivalents on our balance sheet, up from $285 million in the third quarter reflective of the October debt financing and higher prepaid block sales.

On the first call after I joined last summer, we as a management team, put a stake in the ground and committed the company to a goal of achieving positive adjusted EBITDA in 2024. On each earnings call since then, I have provided additional context to show the progress we are making.

For today, I will provide more details that will highlight how we are on the right path for the long-term success of the company. As we have previously stated, there are three key components to achieving positive adjusted EBITDA in 2024; cost reductions, pricing initiatives and program changes and operational efficiency.

I will start with our cost reduction efforts, which primarily relates to our OpEx. As we said previously, we expect to manage our OpEx down to the low double-digit level as a percent of revenue in 2024 versus a peak of just over 16% in the third quarter of 2022.

Last week's plan to reduce headcount costs by $30 million annually is one part of our plan to streamline our business. As I touched on earlier, we are prioritizing our sales and marketing efforts to drive specific demand that augments our network density where incremental margins are highest.

We will continue to strategically invest in our brand but have significantly scaled back the spend that some of our hallmark events that we have sponsored in the past. Turning to technology and development.

While we are still investing in our marketplace, we have prioritized our investment on delivering new features that we believe are margin-enhancing by directly improving and automating key processes that are highly manual today. Let me give you two quick examples of what we have already accomplished.

The first is that we increased the level of automation in our billing function that enhances accuracy and timeliness of customer invoices and increases the productivity of our back-office teams.

The second is that we have now deployed enhanced cross fleet and cross certificate, scheduling optimization capability that helps us better match our demand to our available capacity to improve our scheduling efficiency, customer service and contribution margin.

Going forward, we have a lot of opportunities to digitize more aspects of our business to reduce manual back-office processes.

Those efforts are focused on continuing to improve the scheduling and operations of our fleet and enhancing the Wheels Up mobile app and other booking channels to sharpen our ability to target profitable demand through dynamic pricing in specific regions, days and times.

Rounding out OpEx, we know we need to be much leaner on our general and administrative expenses, and we expect to see significant progress on those expenses in the second quarter and over the balance of the year, as we recognize the impact of our recently announced cost reductions.

To put it all in perspective, we expect a modest sequential decline in OpEx in the first quarter with a more meaningful step down in the second quarter as the next big leg of our cost-saving measures I've touched on take hold. More important, we expect to end this year with OpEx down to the low teens as a percent of revenue.

That equates to over $50 million of expected annualized savings, a 20% reduction versus the third quarter of 2022, which was a high mark for us. We believe the progress we will show this year will put us well on track of our goal for low double-digit OpEx as a percent of revenue in 2024.

The next two components of our path to a positive adjusted EBITDA pertain to our adjusted contribution margin. Pricing initiatives and program changes are tools that we are increasingly using to improve our asset utilization. Our goal is to be more selective on our growth going forward. We know that where we have density, we have a cost advantage.

As I touched on, we are focusing our business to dynamically price targeted flying in specific regions on off-peak days and times where we have capacity and network density. One example is a special offer for travel on our keen airs east of the Mississippi.

That targeting -- targeted flying comes with lower repositioning and higher fixed cost leverage and incremental margins along with better flexibility and service for our customers.

Early customer feedback has been encouraging, leading to improving utilization and efficiency on keen airs and we see opportunities for similar offers and program changes with all of our cabin classes.

Meanwhile, we have taken steps to reduce some of the less desirable regions from our guaranteed programs where many flights are associated with costly repositioning legs, which can result in much lower margins. Previously enacted pricing increases will continue to flow through our book of revenue.

However, looking over the course of the year, we expect flight revenue per live flight leg growth will moderate, primarily due to a higher mix of off-peak dynamically priced line.

However, we expect the changing mix of revenue will be accretive to adjusted contribution margin as we better leverage our fixed costs and drive efficiency across our network. Let me now turn to our initiatives that will drive operational efficiencies.

We are establishing specific fleet performance teams who have dedicated P&L and are empowered to make decisions on a more granular level that optimizes the performance of each aircraft type.

We now more closely track key metrics such as pilot staffing, maintenance availability, spare part levels and demand allocation on a fleet-by-fleet basis with a focus on differentiating strategies to drive the best results possible. We are continuing to overhaul our internal and external maintenance operations to improve aircraft availability.

We have further strengthened our preventative maintenance program, so that our aircraft will have greater operational readiness, especially during peak times. And we are adding additional internal labor capacity, while consolidating and restructuring agreements with third-party providers to reduce cost and aircraft out of service times.

We anticipate these and other improvements will increase our fleet availability by nearly 10% in 2023. A well-functioning maintenance operation support tire utility of our aircraft and significantly reduces the need for expensive recovery flights, which can negatively impact member experiences and our financials.

We are taking a hard look at our fixed cost. As we increase network density, we will reduce repositioning legs, which effectively frees up capacity. That presents us with the option to reduce our fixed asset base, which in turn will lower our fixed costs and drive higher utilization on our remaining fleet.

Our asset-right fleet allows us to augment the capacity of our 1P controlled fleet with third-party providers. When there was a capacity shortfall in the industry, we had signed a number of fixed price agreements to guarantee a minimum level of 3P capacity during 2022. Our customers appreciated that effort and continue to reward us with their loyalty.

However, today in a more balanced market, we are adjusting and renewing contracts at reduced rates with shorter commitment, which improves margins. We are also working diligently to reduce the complexity in our business.

At mid-year, our new state-of-the-art member operations center will consolidate multiple facilities from around the country in Atlanta, one of the world's largest aviation hubs and the location of our partners at Delta.

That will improve our customer service through better automation, increase the productivity of our employees and accelerate our response times for unanticipated travel interruptions, which will reduce our recovery expense.

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.

We recently completed an important milestone with the Alante certificate by consolidating those operations and all of our CJ3 Aircraft onto one certificate.

That move along with further certificate and operational harmonization actions we are taking will contribute meaningfully to the improvement we were expecting in our adjusted contribution margins and our service delivery. In summary, we expect to end this year with a high single-digit adjusted contribution margin.

We already have good visibility to achieving that as recent actions we have taken represent almost half of that expected improvement, which will start to be realized in the second quarter. We will provide an update on additional actions when we report our first quarter results in a couple of months.

We believe all of these actions will set us well on our path to achieve mid-teens adjusted contribution margin in 2024. So with that, let me turn to our guidance. Due to the macroeconomic uncertainties and our own more targeted focus, we expect first quarter revenue will increase mid single-digits year-over-year.

January is historically a more volatile month due to the variation in personal and family travel over the holiday period, and the macroeconomic environment made this even more challenging, resulting in a slower start than we anticipated.

However, we saw a steady improvement in the back half of February and March booking activity is up significantly versus prior months, which gives us confidence heading into Q2.

For the year, we expect sequential growth over the course of the year with revenue expected to come in at a range of $1.55 billion to $1.6 billion, reflecting macro uncertainties and our focus on profitable revenue that leverages the density of our network. We expect first quarter adjusted contribution margin will fall in the 3.5% to 4% range.

That is down from what we reported in the fourth quarter, partially driven by the seasonal drop in revenue, which masks significant progress we have made to reduce our fixed cost and improve our operating efficiencies.

To underscore that point, with seasonally stronger revenue in the second quarter, we expect adjusted contribution margin will come in at the highest level the company has posted in almost two years.

With continued sequential revenue growth, we expect to exit the year with high single-digit adjusted contribution margins, averaging 6.5% to 7.5% for the year.

As I mentioned earlier, we expect OpEx dollars will be roughly flat sequentially in the first quarter, with a step down in the second quarter from a full three months of our recent cost initiatives. We expect OpEx will end the year at low-teens as a percent of revenue, which is significant progress from the high watermark in 3Q 2022.

We expect first quarter adjusted EBITDA loss to be in the range of $45 million to $50 million, reflective of the sequential decline in revenue. Going through the metrics, I just laid out, we expected – we expect an adjusted EBITDA loss of $110 million to $130 million for the full year.

We expect to report a GAAP net loss of between $95 million and $105 million for the first quarter, and we expect our GAAP net loss for the year to come in the range of $300 million to $320 million.

We expect capital spending for 2023 will be in line with what we have outlined as normal capital spending in the mid-single-digit range of revenue going forward. As detailed on this call, we are making the hard decisions required to position the company for long-term success. It is very important to me that we deliver on our commitment.

I'm proud of the company's ability to demonstrate it can hit its targets over the last several quarters. While we still have work to do, I am confident in the goals we laid out for this year, and I hope it gives you confidence that we have a credible plan to achieve positive adjusted EBITDA in 2024.

With that, let me turn it back to Kenny for some concluding remarks, before we open the call for Q&A..

Thank you, Todd, and thanks to all of you who have joined us today. Our base of $1.6 billion of annual revenue is a huge advantage for us. We have proven we can grow. Today, we are focused on proving to you that we can leverage our incredible foundation into a strong and sustainable business.

The actions we highlighted today give us confidence that we will achieve positive EBITDA in 2024. It is up to us to execute. I look forward to sharing our progress. With that, let's take some questions..

Thank you. [Operator Instructions] Our first question comes from Ellen Page of Jefferies. Ellen, your line is open. Please go ahead. Ellen, your line is open. Please proceed with your question. .

Sorry, can you hear me?.

Yes, we can hear you..

Okay. Thanks for the question. Good morning. So you initiated 2023 guidance, implying revenue down maybe low single digits organically, including some strategic shifts.

But can you parse out how much of that is related to like the number of members versus peers like per member going forward?.

Yeah. Hi, Ellen, it's Todd. Yeah, let me take that. I mean, I would say, we expected our member growth to largely track our overall flight revenue, I think as we look at the outlook for 2023, and we think about where we're positioned, we feel good about the foundation that we built over almost $1.6 billion in 2022.

That gives us the capability to deliver what we need to -- as we -- as you said and as we've guided a relatively flat profile for the total year. And I think that's a mix of a couple of things. One, the macro environment that we see as the backdrop as well as some of the increased selectivity that we're focused on.

And I think within that revenue profile, what we're trying to accomplish is a little bit of a shift in the mix, particularly driving more on-demand charter, which we think will be very helpful to us.

And ultimately, we have a goal to say, hey, how do we -- in an environment where that top line remains relatively flat, increased our margins in a meaningful way and deliver more leverage in the P&L..

Helpful. Thank you. And just looking at your EBITDA guidance of maybe negative 7% to negative 8% for the full year.

How do we think about the path from there to positivity in 2024? And maybe how do we think about the exit rate for 2023 to get there?.

Yeah. I mean, I think there was a couple of things that we mentioned a little bit in the prepared remarks. But I think, look, we expect, as we said previously, to make meaningful progress in 2023 relative to our objectives of getting to adjusted EBITDA profitability in 2024.

So if you think about what we're trying to achieve, as we exit the 2023 levels, we expect high single-digit adjusted contribution margin. And then we've also guided that our non-GAAP SG&A will be in the low-teens as a percentage of revenue.

And both of those, when combined with our total year guidance should help you frame out kind of the magnitude of progress that we're expecting.

And I think if we execute and deliver the things that we expect to and the things we've already have underway, we should be in a strong position coming out of 2023 to have an extremely credible path to deliver what we need to in 2024..

Okay. Thanks. That's helpful. I'll get back in the queue..

Thank you. Our next question comes from Michael Bellisario of Baird. Michael, your line is open. Please proceed with your question..

More, you mentioned slower new member sales and reduced flying.

But I guess, one, when did you see that start to slip? And then two any specific customer type or aircraft category that was an outlier into year end?.

Yeah. Thanks, Michael. We did see a little bit of slowing as we came through the end of the fourth quarter, although we still posted a strong number and revenue up 18%.

So -- but I would say as we gotten into the first part of this year, I would say January, traditionally a bit of a volatile time in terms of some of the flight schedules coming out of the holidays, a little slower than what we had initially expected.

But I'd say we've seen good improvement through the month of February and our booking levels heading into March now that we're in through the first week or so, look much stronger. And I think that's given us real confidence as we go into the remainder of the year that we're well positioned.

We're, again, fortunate to be starting with a strong foundation, a great brand, a really loyal member set. I think -- and I think as we talked a little bit in some of the comments, we're increasingly trying to use dynamic pricing as a way to kind of drive even more revenue, but the right kind of revenue, on the right days, in the right locations.

We mentioned this special offer that we have out at the moment on Kinnar [ph], east of the Mississippi, again, in a way that helps support the efficiency and the utility goals that we have that are aligned to the profitability targets of the business..

Thanks. And then just one the house-keeping item on guidance.

Any aircraft sales assumed in your 2023 revenue guide?.

Yes, yes. We'll assume that we'll continue to have some aircraft sales. But I think for the first quarter that will be a reasonably light component of our profile. But we'll continue to look opportunistically for where there's opportunities there, and we'll see some come through, but not a meaningful contributor in the first quarter..

Got it. And then just last one for me on expenses. You didn't touch on this too much in your prepared remarks, but have you seen any improvements in cost pressures or changes with the outlook for pilots' parts or maintenance as we flip the calendar into 2023..

Yes. I mean, look, we're not immune like everyone in the industry. We felt certainly some of those inflationary pressures. We've got that built into our profile.

And I think that's informed a lot of the actions that we're taking elsewhere, both in some of the price increases that are increasingly working its way through the book, but also some of the cost actions and the productivity efforts that we're driving towards.

So look, we recognize and expect that, that inflationary pressure is a reality, and we're working to make sure that we take the actions we need to.

I'd say one of the things that we are seeing a little bit of favorability on is some of the third-party pricing obviously, with a supply-constrained market in 2022, the margins there came under pressure a bit.

I think as supply is rebalanced a bit towards the end of the year and heading into certainly the first part of 2023, we're seeing a little bit more favorability there as we're securing some of that third-party supply in the market..

Thank you. That's all for me..

Thank you. [Operator instructions] Our next question comes from Marvin Fong of BTIG. Marvin, your line is open. Please go ahead..

Good morning. Thanks for taking my questions. Thanks to Todd for walking us through in pretty good detail. I had three questions. I just wanted to touch base again on the commentary about the booking uptick that you saw at the end of February and into the first week of March.

Could you maybe characterize that? I mean, were you guys or break that down between potentially any marketing that you guys are doing to drive demand, or do you believe that, that was more or less just a general improvement in customer demand?.

I would say it's a combination of both things. I mean I think we certainly saw some of the broader demand start to pick-up. I think super-mid and some of the TransCon flights, in particular, really strong.

And I think that's probably some of the seasonal things you would expect as people are making longer flight East Coast out West and things of that nature. So that's been strong. And then I think it's been a result of some of the actions that we're trying to drive.

One of the benefits that members have enjoyed when they join our program and put down prepaid blocks is, we give them cap rates protection on pricing, but they're also able to participate in the dynamic pricing on a regular basis.

And I think as we're looking at the environment in 2023, we think that represents a better opportunity for us to be a little bit more offensive about using that dynamic pricing to help shape demand and drive that demand, particularly in areas that work for us in terms of efficient trips and better utility shaping some of that demand off of the Friday and Sunday typical trips where there's more compression into other days of the week.

And to the extent that we can do that and do that effectively, then that certainly helps improve our contribution margins as we go through the year. And I think, in some ways, underpins our objective to say, hey, even in an environment where the top line is relatively flat, we think we can drive meaningful margin improvement through the year.

And I think, as I commented a little bit on in the prepared remarks, as we go into the second quarter where we have an outlook of a bit of a move up and sequential improvement certainly in revenue versus the first quarter profile, those actions and the things that we've done to reduce the cost base and other things should create real leverage for us that should push up the margins in a meaningful way, in Q2 and beyond as we go through this year..

Marvin, this is Kenny. Just real quick to supplement what Todd said, demand shaping and having folks fly in the pockets that we need them to fly geographically and from a day in time perspective, we've put a lot of emphasis on our business segment.

Our partnership with Delta is yielding us some great partners on the business flying, and that's really a Monday to Thursday deal. So I think that, that balancing is also going to help us going forward. And as we know, it's back to business as it relates to travel. So I think that's a favorable sort of bullet there..

Okay. Great. And then, on the adjusted contribution margins, I appreciate all the detail you provided about this year. Since 2024 sort of the make or break year in terms of reaching EBITDA profitability.

And I think you guys are maintaining the mid-teens target, if you're exiting 2023 in the high-singles, could you just kind of provide us a little more detail about how you're going to get from that high-single to the mid-teens in 2024?.

Yeah. I think a lot of that has to do with, as we described the path to profitability and the three pillars within that, which are cost pricing and program changes. And then the third bucket is that operational execution and efficiency.

I think that third bucket is really what's going to underpin that acceleration into 2024 and beyond, right? I mean, we've invested a lot in technology to improve our -- our scheduling capability and the efficiency.

We're doing a lot of work now in terms of the planned opening of our consolidated MOC in the middle of this year that may be even more significantly as we work through the consolidation of our certificates that we're currently working closely with the FAA on.

We think that, that gives us an incredible opportunity to reduce some duplicative infrastructure, but more importantly, operate in a much more efficient way, in terms of scheduling optimization and flexibility.

And I think if we do that combined with some of the plans we have regarding shaping that demand, increasing our concentration percentage of on-demand charter et cetera, we're set up to really realize that growth and improvement in margin as we go into 2024 and beyond..

Perfect. And then just maybe one housekeeping question. I think you mentioned an up-tick in bad debt expense.

I mean how significant was that in, would you -- are you sort of embedding more -- an up-tick in bad debt expense that goes on in your full year guidance?.

Yeah. The bad debt charge that we incurred in the fourth quarter was largely related to some historical cleanup.

As we went back to the books and doing our reviews and working on kind of the year-end position, we took a look at some of the outstanding AR we had -- and we cleaned up some historical aged items that we just felt was appropriate to put behind us.

We don't think that in any way is reflective of kind of an ongoing condition or any deterioration at all. I mean, we're fortunate to have a very strong and affluent customer base, and that's not an area that we have any concern on..

Okay. Perfect. Thanks a lot. That's all for me..

Thank you. [Operator Instructions] We currently have no further questions via the telephone lines. So I'll hand back over to Keith Ferguson and the team for any closing remarks..

Charlie, thank you. And I just want to thank everybody for joining us today. Thanks again..

Ladies and gentlemen, this concludes today's call. Thank you for joining. You may now disconnect your lines..