Q2 2022 Spirit Airlines Inc Earnings Call
Spirit stockholders approval of the transaction and a ticking fee of 10 per month, starting in January 2023 up to a maximum amount of $34 15 per share.
As you know, we previously signed a merger agreement with Frontier Airlines, which we terminated on July 27th.
Thanks to our board's robust and diligent process. Shortly following that termination we were able to enter into a very favorable deal with jetblue that deliver significant immediate value to our stockholders.
<unk> agreement with Jetblue provides meaningful protection for our stockholders against an adverse regulatory outcome and a significant cash premium upon closing the deal.
Until then though it's business as usual so with that let's move on to our second quarter results.
For the second quarter 2022, we reported an adjusted net loss of $32 2 million or loss of <unk> 30 per share our adjusted pre tax margin was negative two 8%, which exceeded the better end of our guidance demand was strong and our revenue production was robust with total revenue, increasing 34, 9% compared to the second quarter of 2000.
19 on nine 9% more capacity.
Our operational improvements drove a much more reliable airline and therefore more predictable costs, excluding fuel as we've discussed before we are still operating at suboptimal productivity levels with total fleet utilization around two hours per airplane less than our 2019 levels with.
We built an efficiency based franchise that maximizes earnings with optimized utilization of assets and labor.
Carrying costs of underutilized assets human capital and lack of capacity reduction production are delaying our return to run rate profitability levels.
However, once we reach a more traditional utilization level, we're confident in our ability to deliver normal operating margins. The expected timeline to achieve that goal will in part depend on the infrastructure that supports the aviation industry, most notably the ability to fully deploy our schedule to and from Florida.
Operationally by June we had our first glimpse as to how the changes we've made to date are improving operational reliability. These changes include adding new crew bases changing how we flow aircraft and how we approach crew scheduling we finished the quarter on a strong note with a 98, 8% completion factor for June July .
Completion factor rose to 99, 7%, including 15 days with 100% completion and excellent results from the investments made.
And now I'll hand, it over to Matt and Scott to share some additional details about our second quarter performance as well as some color around our third quarter outlook.
Over to you.
Thanks Ted.
Also want to thank the spirit team travel demand has been strong load factors and passenger counts are back to pre COVID-19 levels in most locations and we've seen packed airports with lots of guests excited to resume their summer travel plans.
I, thank our team for maintaining their dedication and professionalism during these busy times and for providing high value travel experience for our guests.
Turning now to our second quarter 2022 revenue performance for the second quarter, our revenue was $1 $3 7 billion up.
Up 34, 9% compared to the second quarter 2019.
Total RASM for the quarter was 11 54.
22, 8% versus 2019 this is quite over marketable achievement, considering we saw capacity increased by nearly 10% while also lengthening stage by 2%. Additionally.
Additionally, this is the first quarter since prior to the pandemic, where we achieved double digit absolute total unit revenue results in all three months of the quarter.
On a per segment basis again compared to the second quarter 2019 total revenue per passenger increased 24, 3% to $140 and 61.
Passenger revenue per segment increased 25, 7% to over $72 and non ticket per segment increased 22, 8% to a record $68 20.
This is another new record for non ticket per segment production and was five 7% higher than the prior quarterly record of $64 53.
That we just achieved in the first quarter 2022.
Bag and seat revenue continued to improve from an already record level and we also are continuing to recognize impressive per segment revenue increases from our bundled services offerings.
One more note about Q2 before we talk about guidance for Q3.
We saw year over three year improvement in <unk> every month in Q2, including a peak result of 30% RASM growth in June 2022 versus June 2019, driven by large increases in both fair and non ticket metrics.
Our strategy is to continue to drive increases in both metrics and we are pleased to see that we are not trading between the two revenue buckets.
Now moving to third quarter 2022, total unit revenue guidance. The first half of the quarter has already seen flown PRASM achieve better than 20% growth versus 2019, and as we head into the back half of the third quarter demand continues to remain strong.
On an absolute basis, we are seeing what we hope to see which is normal average ferrous seasonality for the off peak period relative to peak summer results and this is good news as it sets us up to see strong unit revenue growth results versus 2019.
Given these inputs, we estimate our third quarter revenue will range between $1 33 to $1 $3 7 billion.
With <unk> up 18% to 21% versus third quarter 2019.
And we expect to achieve these results on approximately 14% more capacity than we produced in third quarter 2019, while also growing stage by around one 5%.
Regarding the network changes Ted referenced while we are seeing good revenue results from the network changes. We've made we're still constrained on the number of flights we can operate to the Jacksonville Air traffic control Center.
To put this in context.
So our order to the Continental U S accounts for about 40% of our network.
If this constraint did not exist, Florida to the Continental U S would likely be closer to 50% of our network.
Additionally, and importantly to help maintain operational reliability and recoverability.
We'll continue to take a pragmatic approach towards capacity deployment from now through the first half of 2023.
Given that we now estimate fourth quarter capacity will increase approximately 25% versus 2019.
For full year 2023, even with capacity moderated in the first half of next year, we're still targeting our previously stated range of 62 to 65 billion available seat miles.
However, if the industry infrastructure doesn't improve enough to support a higher growth rate as the year progresses, we will likely be towards the lower end of the range for the full year.
In closing we are pleased with our second quarter revenue results. We are excited about the continued prospects of non ticket production development load factors and yields continue to be strong as we grow capacity and stage length.
And the third quarter continues to build nicely, even as we head into the off peak period.
This is a total team and company effort and the revenue results really do speak for themselves and now Youre Scott.
Matt I'll provide a few additional details about our second quarter results and share when we are planning to get back to full utilization.
Good cost management and benefits from improved reliability resulted in better than expected non fuel costs for the second quarter mitigating the majority of the impact from higher than expected fuel prices.
On a unit cost basis, lower utilization remains a headwind.
Utilization for the quarter was about 15% lower than our desired levels.
We built a business that is capable of producing a much higher level of capacity.
To help put this in perspective since the start of the pandemic in the spring of 2020, we've added about 20% more aircrafts, 30% more pilots and 17% more flight attendants, yet are only producing eight 5% more capacity.
The industry infrastructure is still unstable and we're not yet comfortable that it can reliably support higher levels of utilization.
Our industry infrastructure, and primarily referring to the labor challenges across various support functions of the industry, including suppliers business partners and the ATC and TSA and issue impacting all U S Airlines.
We're seeing progress, it's just not happening as rapidly as we had anticipated.
In addition, higher crew attrition is also limiting our ability to ramp up utilization as fast as we would like we.
We will continue to balance our desire to get back to full utilization with our commitment to run a reliable operation.
From a liquidity perspective, we remain in a strong position.
We ended the second quarter with $1 5 billion in liquidity, which includes unrestricted cash and cash equivalents short term investments and our $240 million of available capacity from our revolving credit facility.
Year to date through June 30, we made debt payments, including principal interest and fees of $135 million and had capital expenditures, including net purchase deposits of around $114 million.
For the full year 2022, we estimate our capital expenditures again, including net purchase deposits will be approximately $270 million.
Regarding the fleet during the second quarter, we took delivery of four <unk> hundred 20, Neo aircraft ending the quarter with 180 aircrafts.
We expect to take an additional 17 aircrafts throughout the remainder of the year ending the year with 197 aircrafts.
Our 2022 deliveries are fully financed and we are in the process of finalizing documents for the sale leaseback financing for our 2023 deliveries from Airbus.
Looking ahead to the third quarter of 2022.
We estimate our pretax margin will range between negative 1% to positive 1%.
This assumes total operating expenses of $1 three two to $1 $33 billion.
Or our CASM ex fuel of six 9% to seven.
And the fuel price per gallon assumption of $3 55 to.
<unk> to $3 60.
When our capacity constraints ease and we are back to optimal utilization levels, we anticipate a baseline run rate CASM ex fuel and the low 6% range.
It does not take into account any new labor deals with our unionized work groups.
As we begin to frame our 2023 plan, we're assuming we can achieve normalized utilization levels by mid year, 2023, and that fuel price per gallon will be about $3 40.
Together with a reasonably strong demand backdrop. This should produce a mid single digit op margin for 2023.
Before I turn it back to Ted I don't want to thank the spirit team for their incredible efforts during what has been an ever changing environment over the past couple of years kudos to the entire team.
With that I'll hand, it back to Ted Thanks, Scott.
Last quarter I outlined our objectives for the next year or two here. They are again, along with an update number one network reliability enhancements and growth.
In June we delivered very strong operational results and we had one of our best operational July is on record three new crew basis crude services automation and optimize buffer in and out of Florida or the big wins.
Network growth achievements were capped with fantastic news of the Dot's decision to grant spirit, all 16 available takeoff and landing allocations at Newark Airport, which when fully utilized gives us up to 45 departures from the New York Metropolitan area.
Two returned to peak utilization and profitability for utilization of our expectation was to deliver this by year end 2022, but after experiencing how the ATC has operated this summer coupled with our new crew planning strategies. It seems more prudent to target the summer of 2023 full.
Full restoration of profit margins will as we indicated return once this target is achieved.
Three record non ticket performance current quarter non ticket of $68 is another all time record and as we continue to refine our pricing and product mix. We expect this number will continue to climb overtime.
And for widening the unit cost gap, we have maintained a wide gap to the industry, which we believe will widen over time, however, until we get back to full utilization and optimize our network. This is a work in progress.
There is much to do throughout 2023, with a distraction and uncertainty of the past six months behind US now I am excited to see this group of talented and motivated aviation professionals show the industry with a fantastic company we have become.
With that back to Dan. Thank you, Ken we are now ready to take questions from the analysts we ask that you limit yourself to one question with one related follow up.
Erica we are ready to begin.
Yeah.
At this time I'd like to remind everyone in order to ask a question Press Star then the number one on your telephone keypad, we'll pause for just a moment to compile the Q&A roster.
Your first question comes from.
Duane.
<unk> work with Evercore ISI.
This is jay coming on for Duane.
Could you mark to market, how caught up on pilot hiring and training you are and then given your flight plan through the end of 2023, how many more pilots going you need.
Hey, good morning, this is Ted.
I think as Scott indicated we.
We've been actively hiring pilots and adding them to our.
Our baseline if you look back at the pre pandemic levels, we have about 30% of our pilots today.
Then we had at the time, however, attrition is significantly higher than it was then too so we're going through a little bit of that right now.
We are we've been ramping up our schoolhouse over the past six months six or eight months.
The point, where we're nearly doubling the size of that schoolhouse and still very successful in.
And getting the necessary pilots, we need to fill each individual class.
And have a good backlog of resumes in place for additional pilots. So we're on target to.
Two to hit what we need from a staffing perspective that includes pilots and flight attendants and technicians across the board as well as supporting our business partners at all the airports to make sure that we have appropriate staffing at all the airports, we're on target to get back to full utilization as we indicated in the middle part of next year.
Okay. Thank you that's helpful.
Then just as a follow up do you have any estimate on how much it would cost and how long it would take to reconfigure your claims to the jets jetblue configuration.
No. We don't I think that's probably a better question for for Jetblue.
Okay. Thank you.
Okay.
Your next question comes from the line of Michael Lindenberg with Deutsche Bank.
Hi, Yes. This is actually Shannon Doherty on for Mike. Thank you for taking my question. So the first one can you guys dig a bit deeper into the offers that you made on the cost management side and the June quarter.
Yes. This is Scott I think the majority of the benefit comes from efficient production are running a good airline as we've mentioned before has ripple effects through the P&L and in that production of ASM is on the unit cost side.
And so we're continuing to build back the airlines so building the infrastructure.
For us too.
We continue to hire and train pilots to to make sure. We have the real estate in place to run a fully utilized airline we're going to be headwinds, but on the unit cost side, it's primarily going to be.
Production of <unk>.
Got it and my second question aside from the overall industry infrastructure issues that we're facing what would you guys say is the biggest risk here returning to sustained and meaningful profitability and should we expect to see this happen by summer 2023, Thanks for my questions.
Sure. So as we've stated in our comments I just answered some questions obviously the bigger.
Inputs to returned profitability are.
Full utilization of the assets and the inputs to getting their require labor.
And infrastructure support.
From our team members are our business partners as well as the various government and nongovernment entities that support the airline business and so I would view those as the the primary things that would drive one way or the other what I can tell you is those things that we control.
Which is.
Our staffing our hiring or training.
Are on track and on target in some respects ahead.
And we feel good about our ability to to get there.
There are some things beyond our control as well that that have inputs, but we have received comfort from.
Various support entities business partners as well as the.
The FAA that they are also making the necessary adjustments to get us already.
To have much bigger airline business as we head into 2023, So I would say those are the inputs. The puts and takes obviously input cost matter a lot to this business fuel has moved dramatically.
Since the beginning of the pandemic and throughout the course of the pandemic I think Scott mentioned that we're looking at somewhere in the neighborhood of $3 40, or $3 50, a gallon next year, which is historically amongst the highest fuel prices we've ever seen in this business. So that will have a an input into kind of short term profitability, but the long term view is still that capacity we will.
Necessarily adjust to those input costs and we will we will have the appropriate level of production to drive the margins, we want to get so feel like we're making the necessary changes to our network and doing the things we need to do to get ourselves back we're not there yet.
And we are collectively I think frustrated with the progress to date.
But still feeling optimistic about our targets for next year.
Great. Thank you.
Your next question comes from the line of Scott Group with Wolfe Research.
Hey, Thanks, Good morning, guys. So how does the jetblue merger and the regulatory uncertainty impact your capacity plans in terms of how much and then also where and then if you get to the low end of that ASM guidance for next year, that's about 27% capacity growth.
What would you think CASM X does and with that much capacity growth.
Good morning, Scott This Ted I'll take the first half Scott can jump in after that so as to what does the process. The merger process with Jetblue will have an impact the answer is none.
Our active competitors today and that will remain true until.
There is final approval on the deal from the regulatory authorities, which which is down the road quite a bit. So we're we're continuing to deploy the same way we would without a deal.
And our expectation is that Jetblue is doing the same so.
So no impact there Scott how would you.
The capacity guide of 62 to 65 billion ASM.
We talked about a sort of CASM Max view in the low sixes I think even with the low end of that guide or around 62, we would still be in the low sixes range.
So I think Thats, where we would target at this point.
Okay and then as you think about next year I think you talked about mid single digit operating margins I guess two questions.
What are you assuming in terms of unit revenue and then.
With all the capacity growth are you comfortable or confident that you can take on all of these new planes and also get the utilization back to where you want is it's difficult to get both.
In the same year.
So theres a lot there I'll give some thoughts I'd like Mack, Matt as well to jump in on on unit revenue. We are confident that with our delivery schedule that we've got the right trajectory to get ourselves back to full utilization as I indicated before it doesn't come without effort and we're in the midst of that.
Right now, we're doing quite a bit of hiring and training for crew as we indicated with some of our numbers.
That will continue.
And so.
There is there is a lot of work to do but but as I said before I think we're confident in our ability to execute to it I can tell you one thought before I turn it over to Matt as it relates to unit revenue production, we're assuming that the demand environment that we see today continues.
But if we had a lot more flying today I'm not sure of the unit revenue number would be anything different in fact, it might be higher.
Cause of the way, we've throttled the network and where we throttled. It so theyre still order you LCC spirit opportunities in our network. We just havent hit him. So Matt what would you dig in further on that yes, that's right and so Scott what do we think about the network and some of the network changes. We've made this summer we are expecting them to roll through the fall.
Paul into probably into spring break next year as well so we will have a little bit of.
Of a network.
Impact there to revenue, but the way, we view that as that opportunity come in for the future that we're not capturing today. So your question's a good one about about capacity and deployment, but as Ted mentioned right now anyway, we feel like more capacity would have actually led to the same unit revenue, possibly even better unit revenues.
Because we'd be flying more to where we really would like the network to be lining up right now one more thing to note on that though as we look for other places in the network to continue to grow. These are all opportunities that we knew we'd be going after here as we moved into the future. So maybe a couple of being pulled forward a little bit early.
<unk>.
No not not that big a deal from our perspective, we were going to be there anyway, but the bigger thing is where we see where we already are strong and want to continue to grow but we're just going to continue to be smart and thoughtful about how much we grow in any given month or period in some of those stations. So just making sure that that we're setting ourselves up for success.
And making sure we set the operation up for success ultimately that will help revenue production as well.
Okay.
Thank you guys appreciate it.
Yes.
Okay.
Your next question comes from Andy.
Andrew <unk> with Bank of America.
Good morning, everyone.
Ted Matt can.
Can you speak a bit more about what youre seeing in demand as we head into the fall here.
Doesn't seem like the real pent up demand from earlier early in the summer is gone and the industry seems to be normalizing a bit here maybe.
Talk a little bit more about what youre seeing.
And I guess kind of follow up to that question. Some other airlines earlier in earning season spoke about seeing maybe some peak pricing around leisure fares. Just curious if you feel like Youre seeing the same thing. Thank you.
Sure Andrew So as we move forward.
From <unk>.
Summer two to September and until October .
We're seeing what we would call normal seasonality, which as I said in my scripted remarks, we view as very good news.
No.
For us the question was going to be where the summer was the summer demand unusual.
To the extent that it would it would just fall off a cliff after we had labor day and beyond and we're not seeing that.
Right now so.
In fact, we're continuing to be to be pretty impressed with the volumes.
That are coming through.
We're happy with the way that we our revenue management plan set up.
And we'll continue to see to see the volume flow through there now what I would say is.
We definitely saw a little bit of pricing movement coming out of the summer into the fall.
But what's different this year compared to prior years is that we're continuing to see a longer advanced purchase restrictions on fares that are published in the marketplace. So some of the levels are a little bit lower.
We saw over the summer, but we're continuing to see pretty good.
For lack of a better term yields fences on the fair rules in place so that should be good news moving through the off peak periods and then as we head towards towards the peak are part of.
Q4, as well so that's the way that we're seeing things right now obviously that can change, but as of right now, we're pretty confident and feel pretty good about about the setup.
Great. That's helpful I'll keep it to one thank you.
Alright. Thanks.
Your next question comes from the line of Chris <unk> with Susquehanna.
Good morning, everyone. Thanks for taking my questions.
I just wanted to dig into this.
Matt your comments on nor.
Normal average fair seasonality.
How much of your your inventory for <unk> and <unk> is currently sold and how does that compare to <unk>.
Pre pandemic levels.
Hey, Chris Thanks for the question. So we're not going to get into the exact details of how much is already booked versus what we expect to come I would tell you that.
Sort of echoing what I just said on Andrew's question is as we move out of the summer into the fall the pricing is a little bit lower but that would be normal as we move from the summer into the fall and what I mean about how it's acting normal is we're still seeing and we expect to see you.
Revenue improvements in every month.
Here in the quarter and moving into the fall and it's staying at relatively consistent unit revenue growth numbers in each month. So is it different by month, yes are we expecting it to be a little bit different by month, yes.
The peak or periods definitely we expect will continue to outperform even better than the off peak periods, but the off peak periods or continuing to book well and I don't want anyone to over rotate on this and think that it's stronger than it is it's definitely seasonal but the good news for US is that we're continuing to see our leisure routes and our leisure network continue.
To take a.
Take volume that we would hope to see coming out of the summer into the fall hope that hope that helps okay. Thank you and a follow up here, Ted or Matt and just help us think about or at least how you view the stickiness of your your non ticket fair revenue.
Into.
A cyclical slowdown thank you.
Sure I'll take that one as well so as as we as we move cyclically through through the seasons through the year and into next year.
We are very happy with what we've seen where we continue to see book it gives us confidence that the stickiness.
Is there and will be there I think the question will be.
What what ultimately happens.
To ticket yields will likely have more of an impact than what happens on non ticket yields and as we just sort of iPhone se.
Confident that what we're seeing on the ticket side is holding its own relatively well. So if that holds that gives us a lot more ability to do things on the non ticket side as well it gives us more confidence on the non ticket side to continue to do more things and invest and invest and how we think about the products we offer.
And especially the way that we offer our bundled services offerings as it continues to develop how we think about depend.
Depending on the destination that guests are traveling to we may have different offerings in place now that we had in the past and all of that is because during COVID-19. We continue to invest properly and what we knew was going to be opportunity coming out of Covid and we're pleased with what we've seen and there is definitely more opportunity.
To come.
Okay. Thank you.
Welcome.
Your next question comes from the line of Savi <unk> with Raymond James.
Hey, good morning.
If I would mind just quickly.
The utilization question.
I just kind of curious it sounds like you are gaining confidence that the training capacity is going to be large enough to kind of address the current attrition levels. So that you can get there I think the other component of that let me know if that's correct and the other component of that is in buffers that you build and you need to kind of come off.
Yeah.
To reach that utilization. So can you talk about like what you'd need to see to kind of remove those buffers. What gives you the confidence that does conference can come off in mid 2020, or maybe you don't need the buffers to come off maybe you could get it all through training and just kind of curious if you could address that a bit more.
Sure Savi.
The training issue you are correct.
We have adjusted we started adjusting it in the latter part of last year as a result of the.
The attrition change attrition has kind of like stabilized at this point is still elevated.
From what we like and what we want to see but we have adjusted to it.
So absent there being some some other sort of step change one way or the other we feel like we've made the necessary adjustments and we have seen enough history here over the last six or seven operating months than we have at least some idea.
So feel like we've made the necessary adjustments there.
The second half of your question I think it's a shrewd point, we have put in place.
A lot of buffer in the system to run well because.
Because we have the time.
But also to adjust to the practical realities of the operating system and North American aerospace so.
You've heard us talk about Florida, a lot Paul.
Pre pandemic and into the early parts of.
The part of last year, we were 50, 60% of our flying in Florida.
And so it does have an impact when things arent running well down here and there.
Being able to analyze those changes be it buffer or block performance or the way we crew schedule the way we base our crews.
The what we call the pairing mix, which means how long our crews away from base before they come back and refresh all of that are.
The analysis of all of it is underway and trying to isolate as best you can which of those things is having the greater impact in which isn't we've already made some conclusions about that by the way and have some early returns on the things that we can start to to your point either remove the buffer or layer in more flying as a result of the change and those experiments.
<unk> will start in the coming quarters.
Which is why we're being a little bit more prudent about the build back into next year.
And so nothing is perfect ever in this business, we still have to adapt quite a bit to changing environment, but I think I think taking this approach is going to put spirit in a better position for the long term.
And for that reason it gives us confidence that we can do it.
Because we're learning as we go.
That's helpful and then if I might follow up on the ancillary question clearly.
Ancillary has been stronger than I think even what you envision crane pre pandemic.
Curious.
You mentioned that Matt that you are.
I'm going to try and then.
Invested in things and you'll be ex merriman and different things.
Do you have a sense of how much more that you can push that ancillary.
Fair here.
Hey, Savi.
Youre right, we definitely thought that we would get to these ancillary numbers, but not this quickly coming out of Covid. So it's hard it's hard to know exactly where the top end of this is one thing that I think is worth also mentioning is that we have started to see we're not it's not all the way where we wanted to be yet.
But we're starting to see the take rates push up well on our loyalty program as well as our our credit card partner program.
And Thats moving well.
It actually was a little slower than we would have liked to have seen which you kind of just think COVID-19 had a big impact on that overall for us, but the good news with this is that the trajectory has now not only caught up but the slope of the line is steeper than where we had initially thought it would be so we're at the place we wanted to.
B with a better trajectory moving forward. So we're we're pleased about that we don't talk about it that often.
But I think that's that's something for example that will continue to add to our non ticket production that really isn't there and hasnt been where we wanted it to be the last few years.
Helpful. Thank you.
Sure.
Your next question comes from the line of Jamie Baker with Jpmorgan.
Hey, Good morning, guys. This is James on for Jeremy.
I guess principal town halls, and employee interactions since the Jetblue.
So I'm just wondering what's feedback has been keep opex.
Employees are bought up in almost any kind of feedback yet.
Sure. So look this is a pretty stout and resilient group that has been put through much like every airline over the past two years quite a bit but specifically for us a lot over the last six months to eight months and they were looking for an answer they were looking for a little bit of clarity and we were able to deliver that.
And I think now they've begun to turn their attention back to.
What's critical for us, which is continuing to build.
Really a really nice franchise and.
There are always going to be quite inks.
As you look forward.
Yeah.
Sorry, sorry.
Are you there.
Alright, alright.
That's where I thought you were considering.
One question.
Airbus came out with.
Thank you Rick.
The language ramp all the 820.
I'm just wondering if based on your revised schedule or is that really the Airbus too Chris.
Mr Chairman, you're in you're talking about will there.
Does that impact 2020 through scheduling at all.
It gets delayed.
Hey, James This is Scott, yes, we are in constant communication with Airbus around delivery dates and there have been some delays.
It doesn't impact our capacity deployment at this point, primarily because we're not.
Fully optimized at this point so we can manage through some temporary delays in terms of.
Or two not dramatic at this point.
But we continue to monitor and talked to all of our vendors, including Pratt and Airbus around the number of products that impact our ability our ability to deploy that capacity. So.
We are carefully watching it but at this point no no real impact.
Got it thanks for the questions.
At this time there are no further questions.
Great well, thanks for all for joining us today, and we will catch you said.
This concludes today's conference you may disconnect at this time.
Okay.
[music].