Q2 2022 Onespaworld Holdings Ltd Earnings Call
Okay.
Good day and welcome to the one spot World second quarter 2022 earnings call. All participants will be in listen only mode should you need assistance. Please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions.
To ask a question you May Press Star then one on your Touchtone phone to withdraw your question. Please press Star then two please note. This event is being recorded I would now like to turn the conference over to Allison Malkin partner at ICR. Please go ahead.
Thank you good morning, and welcome to the one style well second quarter fiscal 2022 earnings call and webcast before we begin I'd like to remind you that certain statements and information made available on today's call and webcast may be deemed to constitute forward looking statements.
These forward looking statements reflect our judgment and analysis only as of today and actual results may differ materially from current expectations based on a number of factors affecting our business. Accordingly, you should not place undue reliance on these forward looking statements.
For a more thorough discussion of the risks and uncertainties associated with the forward looking statements to be made in this conference call and webcast. We refer you to the disclaimer regarding forward looking statements that is included in our second quarter 2022 earnings release, which was furnished.
To the SEC today on form 8-K.
We undertake no obligation to update or alter any forward looking statements, whether as a result of new information future events or otherwise. In addition, the company may refer to certain adjusted non-GAAP metrics on this call and explanation of these metrics can be.
In our earnings release issued earlier today.
Joining me today are Leonard <unk> Executive Chairman, Chief Executive Officer, and President and Stephen Lazarus, Chief Financial Officer, and Chief Operating Officer, Leonard will begin with a review of our second quarter performance and provide an update on our operations and key priorities density.
Then we will provide more detail on the financials and our liquidity I would now like to turn the call over to Leonard.
Thank you Alison good morning, and welcome to <unk> second quarter 2022 results conference call.
I'm pleased to speak to you today and share the significant milestones achieved in the second quarter. The period that marks the one year anniversary of our return to service.
We could not be prouder of our team and their unwavering commitment to our business our cruise line and destination resort partners their guests and all of our stakeholders.
Indeed, our team completed a momentous task.
As at the end of June and a period of one year, we have successfully returned.
<unk> hundred 67 health and wellness centers to service it see training.
1498 staff, placing 4352 staff onboard cruise ships.
And booking more than 9000 flights for personnel that we have trained stopped and returned to service.
As a result, the quarter saw us generate more than 90% of 2019 revenue.
Which represents the most recent period of normal operations.
We accomplished this even as all of our health and wellness centers have yet to open and load factors on cruise ships remain below pre pandemic levels.
The successful execution of a return to service was further demonstrated.
Higher achievement of positive cash flow in Q2 commemorating the first since the onset of the pandemic.
We believe this accomplishment is a strong testament to our unique capabilities and our teams and partners relentless efforts to elevate and innovate our product and service levels.
In an extraordinary time, leading to expansion in our revenue generation capabilities across our health and wellness centers at sea and on land, which we expect to continue in the future.
I'm gratified by all that we have accomplished over the last year and believe we are well positioned to comfortably absorb the additional cruise ships introduced in returning to service during the remainder of 2022.
We are very pleased with our second quarter performance, which included increases across all key financial metrics, including a robust revenue recovery.
Coverage that present represented our sixth consecutive quarter of sequential revenue growth significant growth in adjusted EBITDA positive adjusted net income and as I mentioned, our first period of positive operating cash flow since the beginning of the pandemic.
Operationally, we saw continued growth across key operating metrics, while maintaining a flawless returned to service.
As we look ahead, we continue to expect our performance trends to accelerate and generate revenue growth with continuing positive operating cash flow performance and annual performance that includes positive adjusted EBITDA and positive adjusted net income.
Turning now to the highlights of the quarter.
Total revenues were $127 $4 million up from $9 $2 million in the second quarter of 2021 and improving significantly from the first quarter 2022.
This growth reflects contributions from health and wellness centers that reopened on 167 ships that resumed operation and the contribution from 48 destination resort spas.
<unk> EBITDA was positive nine $1 million with positive contribution from our health and wellness centers onboard cruise ships and in a destination resort spas and thirdly, we ended the quarter with total liquidity of $47 million, including seven eight.
Dollars Unlevered after tax free cash flow.
We had many accomplishments for the quarter, most notably a flawless returned to service continued.
The second quarter saw US commenced service on board two new ship boats and 38 ships returned to service by our cruise line partners.
At quarter end, we had health and wellness centers on board of 172 ships of which 167 had resumed voyages as of quarter end.
This compares to a 127 ships that resumed voyages at the end of the first quarter of 2022 and versus 14 ships that resumed voyages by the end of Q2 2021.
We expect to be operating on 173 ships by the end of the third quarter and 177 ships by the end of the year.
During the remainder of 2022 we anticipate operating health and wellness centers on three additional new ship builds that will be introduced into service by our cruise line partners.
We continue to see record demand by cruise ship guests for our services.
While load factors onboard cruise ships remain below historical in 2019 levels we.
We were very pleased to see continued high demand for our services.
Key operating metrics during the second quarter of 2022 compared favorably with our second quarter 2019 performance.
The most recent comparable period of normalized operations.
Average guest spend average service spend per guest and revenue pissed off to per day were all up double digits compared to Q2 of 2019.
In addition, pre booking percent of service revenue and guess penetration also compared favorably to the second quarter of 2019.
These improved operating metrics were driven by the continued innovation in our offering and focus on staff training.
In short we have emerged from the pandemic are more productive and efficient organization. Despite increased health and protection costs and we are eager for the load factors to return to a more normalized level to showcase our even more attractive asset light business model.
With that in mind I will now update you on some of the intensification initiatives, we implemented last quarter to increased guest spending utilization, which contribute to the growth in our key operating metrics.
Firstly these included improving retail conversion was expanded offerings from brand partners, including elements as active Buddy trio, increasing guest utilization through cross promotion and Rebooking tracking mechanisms and enhanced in person staff trainings.
Growing guest spend with new add on packages and offerings, including healing enhancements and added onto acupuncture services, which increased average customer spend by 27% when selected.
We also launched IV therapy on select N C L ships with modified pricing.
Increasing penetration with expanded services and offerings targeting a wider audience, we introduced grown alchemists, which attracts new guest in areas underserved by our key brand Elemis and modified Camillus Capella sales approach to include Stylus and physicians.
Well most of the cruise lines are not yet at pre pandemic load factors, we are accelerating our staffing efforts to be above aggregate load factors as we are experiencing robust demand for our services on board.
Our London Wellness Academy continues to experience very strong demand from applicants.
The London Wellness Academy website generated a record number of applicants are up 160% from Q2 of 2019.
Since the London Wellness Academy reopened in October of 'twenty, one we.
We have trained nearly 1500 health and wellness personnel at our other global training facilities.
This is a further confirmation of one spa world leadership in training and certification.
By the end of the second quarter, we had 2000 and 778 cruise ship personnel on vessels for actual unexpected voyages and we expect 3024 employees to be on vessels by the end of September 2022.
Overall, we believe our second quarter performance continues to demonstrate the strength and resilience of our dedicated team and operating model. We began the third quarter with even more confidence that actions have made one spa world better positioned than ever before with a strong business model collaborative cruise line in <unk>.
Destination resort partnerships and an extraordinary team, we look forward to advancing our operational and financial financial performance throughout the balance of 2022 and beyond to increase value for all one spa world stakeholders with that I will turn the call over to Stephen who will commence.
On our second quarter results and liquidity position Steve.
Steven.
Yeah.
Thank you Lynette good morning, everyone.
I am equally pleased with our second quarter performance. The second quarter saw the focused execution of our return to service drive significant growth in sales and positive operating performance.
The strength in balance sheet.
All of which positions us well as we begin the second half of the.
I will now share some of the highlights of the second quarter.
Total revenues were $127 $4 million as compared to $9 2 million in the second quarter of 2021.
Revenues generated in the three months ended June 30th 2022 were derived primarily from our 167 health and wellness centers onboard ships hybrid in June voyages.
And our health and wellness centers at 48 open and operating destination resort spas.
This compares to the second quarter of 2021 where revenues were primarily related to 14 cruise ships and 42 destination resort spas basketball hoop and e-commerce product sales through all time to Spa Dot Com website.
Cost of services were $87 million compared to $9 $6 million in the second quarter of 2021.
Increase was primarily attributable to costs associated with increased service revenues of $96 million in the quarter from our operating health and wellness centers at sea and on land and increased costs related to the resumption of operations at our health and wellness centers itchy and not let it.
Compared with service revenue of $7 $6 million in the 2021 and second quarter and increased costs related to the resumption of operations at our health and wellness centers achieved during the quarter.
Cost of products were $23 $3 million compared to $1.5 million in the second quarter of 2021 increase.
Increase was primarily attributable to costs associated with increased product revenues were $22 $3 million in the quarter from our operating health and wellness centers at sea and on land compared to product revenue of $1.5 million in the second quarter of 'twenty or 'twenty one.
Net income was $55 9 million compared to 23 million in the second quarter of 2021.
The improvement in the second quarter of 'twenty. Two was primarily a result of the $18 million change in income from operations. The rock from 167 health and wellness centers onboard ships had been resumed wages and the change in the fair value of warrant liabilities the changing.
The fair value of the outstanding warrants during the three months ended June 30th 22 was a gain of $58 5 million compared to a gain of $27 million. During the three months ended June 30th 2021.
The change in fair value of the warrant liabilities.
As a result of changes in market prices deriving the value of financial instruments.
Adjusted EBITDA was $9 $1 million compared to an adjusted EBITDA loss of $9 7 million in the second quarter of 'twenty or 'twenty one.
This represents the third quarterly period that the company recorded positive adjusted EBITDA.
Since the onset of the COVID-19 pandemic.
We ended the quarter with total liquidity of $46 $9 million at quarter end $10 million remained available under our at the market ATM program.
Confidence in the sustainability of return to service and ongoing increased performance.
Has allowed for the subsequent cancellation of the active ATM program with.
Each had not been utilized since October 2021.
The current availability under our line of credit is $16 million, an increase of $3 million from $13 million available at June 30 of 2020 to refer it reflecting a $3 million pay down on the revolver in July with cash generated from operations the revolt.
Therefore, currently has $4 million outstanding and given our strength and cash generation, we expect to have no borrowings under this $20 million revolver at year end.
As it relates to our outlook for 2022 we continue to refrain from providing guidance pending the establishment of normalized operations of substantially all of our health and wellness centers onboard contracted cruise ships following the adverse impact of the COVID-19 pandemic on our business.
Notwithstanding the foregoing.
While we expect to incur a net loss in fiscal 2022 on a GAAP basis, we expect to achieve positive adjusted EBITDA and positive adjusted net income for the and expect to generate positive cash flow in each of the third and fourth quarters of the AR as well as for the full fiscal year 2022.
Overall, our strengthened balance sheet. The continued ramp of our operations and no material debt maturities until March of 'twenty 'twenty six.
That's well positioned to navigate the economic uncertainty and capitalize on opportunities to leverage a pre eminent position in the operations of health and wellness centers Itchy and destination resort spas. We look forward to further updating you on our continued progress at upcoming investor events and conferences.
During the quarter.
With that we'll open the call up to questions. Please operator.
We will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone, if you're using a speakerphone. Please pick up your handset before pressing the keys.
At any time. Your question has been addressed and you would like to withdraw. Your question. Please press Star then two at this time, we will pause momentarily to assemble our roster also please limit yourself to one question and one follow up re queue to ask additional questions.
Our first question comes from.
Stephen <unk> with Stifel. Please go ahead with your question.
Yeah, Hey, guys good morning.
So I wanted to ask kind of a hypothetical type question here.
Around the economy, and this might be tough to answer but.
No I understand what you guys are seeing right now wouldn't indicate any type of a slowdown in demand or spending from your from your customers.
But you know if we go back and think about the last recession. I think you guys saw revenues drop let's say upper single digits EBITDA was at a very similar position. So I guess the question is that we do encounter some kind of a change in spend patterns or demand is there anything you would call out that would make you believe.
This recession, which I know is tough to figure out what it can look like you know would have a greater or lesser impact your operations now versus back then hopefully that all makes sense.
That's a good question, Steve I'll try and answer that as best as I can.
Look I think where.
Where technique.
Technically in a recession.
Based upon the data we're getting however.
If you were to go which I was in Atlanta last week.
If you go round two shopping centers in Sydney when you see ships on board you know, it's a very different consumer who's buying at the Star Wars saving on it we're making.
Choices in purchasing goods et cetera than people, who are going on vacation and buying and experiences spending on that experience.
We are seeing is.
Continued high demand for our services.
And retail as well, which as you know certainly a big part of what we do.
But look they are they are retail outlets on board and I think if you listen to some of the cruise lines calls.
Think people spend differently and we certainly have seen that historically and continue to see unrelenting pent up demand for services and the offerings that we have on board.
So you know.
I think each recession has different characteristics of this one is still.
Determining what kind of recession. It is whether it's gonna be long deep who knows I don't know, but we're not seeing any signs thus far of any impact to that business and certainly nothing similar to saw in the first nine months.
To date that we saw in 2009.
Okay, that's great color and then.
Yeah, when I ask you about your current liquidity position. It seems like you guys are in a pretty good spot at this point.
Assuming your cruise line partners continue to roll out their entire fleet load factors go back to normal which looks like which is in fact, the case, but I guess moving forward as your free cash flow basically start to grow you know computers.
Could you just remind us what the priorities are at this point for that free cash flow generation and I would assume that the removal of the ATM program itself pretty solid indicator that you feel fine with your liquidity position.
But if in fact, the economy does go into some kind of slow down.
Yeah. So look I think we have a sort of an inflection point here and a good one Steve we're getting to the point now where we're going to continue to build steadily.
Positive cash flow through the year end.
As Stephen mentioned, we've already paid down some of our revolver $3 million, we will continue to utilize excess free cash flow for purposes of deleveraging cilia second lien is something that we will target and then we're going to look at the you know complete you know.
Capital structure of our balance sheet entering into next year.
Determine you know Alyssa priorities are what we kind of look at.
And all of them are mutually exclusive so we're going to continue to evaluate where we're at what we can do clean up the balance sheet clean up the capital structure and optimize the balance sheet to the extent that we can as we continue to build free cash flow.
Stephen I don't know if you have any further comments on it.
Yeah, the only other thing I would add Steve.
Steve is.
Returning cash to shareholders through dividend and or stock repurchases remains a consideration.
And it's always something that is highlighted when we meet with the board and so as performance continues to improve.
We will look at alternatives were.
Perhaps there could be pay down of debt and at the same time other activities that occur.
That cash to be returned so I don't think we need to back ourselves into a corner, where we say, we're only going to do X or Y there could be scenarios.
Sooner than perhaps anticipated, where we start to return some of the cash that regenerate and to our shareholders.
But Steve just just let me highlight the fact that paying down our second lien that bears interest at LIBOR, plus seven and a half in a rising interest environment.
Currently the most accretive thing to do in the short term.
Okay, great. Thanks, guys appreciate it.
Our next question comes from Sharon Zackfia with William Blair. Please go ahead with your question.
Yeah.
Yeah.
Yeah.
Yeah.
Yeah.
This quarter was better than the same period in 2019.
So if you could help us kind of understand the sustainability of potentially of some kind of a mid teens margin youre seeing there and then secondarily on product gross margin I guess I'm, a little surprised that that was kind of barely profitable can you walk through what was there anything like a bite off in product margin or.
What kind of impacted that line and how we should anticipate that playing out the remainder of this year.
Sure sure and Unfortunately, we didn't have the initial part of your question.
But.
I don't know maybe it was a mutual it just didnt come through but as it relates to margins.
Talking specific to each of the second part of the <unk>.
Product margins, yes, as as vessels have returned to service.
Of which unfortunately as you know now it being out of action for a year or even much longer than that on some of them.
As we validate inventory counting inventory et cetera.
There were some items that needed to be written off but they're also primarily costs.
That are associated with getting started up again.
On an expedited basis and are returning 40 ships to the water in a quarter is.
Huge its more than has ever been done before and so they would think that would necessitate that like airfreight in order to make sure that product got on board that had some negative impacts et cetera, as we start to see.
Now that all three plus saving we can get back to the cadence that we've had before which has always been such a strong expertise of Dallas in ensuring that we deliver product.
Only during a cycle times during the year that could take advantage of food containers to get it to the ports, where a number of ships are going to be talking et cetera. So we do think that there'll be some improvement in those margins as we move forward, particularly into next year.
Can you hear me better now Stephen.
Yes.
The first part of the question was on services gross margin. So it was actually better than the second quarter of 19 <unk>.
Was wondering if you could talk about what the tail winds are that you're seeing in services gross margin.
Then my follow up question was on salary payroll admin or where are you seeing you know very kind of stable sequential trends in those costs, which is pretty impressive given the labor pressure.
Is that something where you can continue to hold that kind of at that run rate of roughly like 9 million a corner or should we expect more inflationary pressure there.
As it relates to the run rate from salary and payroll.
So we feel pretty comfortable there clearly as with other companies. There is some inflationary pressure that we've been experiencing.
But for the most part I think we're pretty comfortable with it.
At the level, you're talking back onto civilian as we start getting into next year, we'll see what happens with more ships returning to service, but for the near term absolutely in terms of tailwind on service margin, we've talked about before.
Some of the pricing actions that we've taken in so those will continue to flow through and benefit the company.
We continue to see demand for higher priced Medi Spa services et cetera, some of that should have no well to the company as well so.
Overall, we feel pretty good about the position that we're in and how we're hitting Florida on March one.
Okay. Thank you.
Okay.
Our next question comes from.
Steph.
Wissink with Jefferies. Please go ahead with your question.
Thank you good morning, everyone I have a follow up to the prior question just on the cost I want to make sure that we're thinking through the line items outside of amortization.
And I know Stephen you mentioned, the 9 million in the payroll line looks pretty stable anything else, we should be thinking about in terms of the timing of costs coming back into the model.
Revenue running a little bit ahead of your cost structure in your third bringing back some of those costs or do you find that this is the new basis and you can leverage at a lower level.
Overall car.
Yeah.
So we definitely have been meet.
Metering in over the last.
I would say three quarters SME.
Essential positions to service.
Onboard activities and marketing activities.
Ply logistics et cetera, and to the extent that any more of those positions.
But we need to back so we certainly will look at that at the right time.
But we have been cautious and continue to look at each position as requested by the team and the management leadership team as to whether in fact, it's needed.
And so yeah, there could be a couple of physicians still to be added that as yet you know what we're trying to be as.
Disciplined as possible.
Alright, that's really encouraging and then my bigger question is just around the tie rate. So in the quarter sale for sale significantly beat our expectations, but the product sales were slightly below just trying to understand if there's anything to read into private pay rates at the point of service or you know you talked.
Some of the changes and brand mix.
Adding some additional brands anything you wanted to just share with us on the product sales patterns and what your expectations are going forward. Thank you.
So Steph we continue to do a lot of intensification is around service attachment and retail attachment to those services some of the services clearly could could.
Could be enhanced and we continue to.
Focus on that intensely and we will continue to intensify through the next two quarters.
We have had in certain cases, I would say not a full complement for the entire year of all of our fitness staff, who do an incredible amount of retail and a lot of that is due to.
Mentioned before consulates in countries that are not approving visas as fast as possible, we get a lot of our fitness instructors out of South Africa. They have been very slow to get visas through in the cruise lines are suffering similarly from a lot of positions not getting visa approval as quickly as we used to do historically.
I think to the extent that we continue to build a head of stuffing than the load factors, we will continue to see a ramp in retail as well.
Very helpful. Thank you.
Again, if you have a question. Please press Star then one our next question comes from Max Rec.
Rec linker with Cowen and company. Please go ahead with your question.
Hey, guys. Thanks, a lot so first on getting a pre bookings rate higher or how far along in that journey. Do you think you are and how much more room do you think that you.
You can go up or higher by and sort of what one of the top catalyst there and then we're getting almost thinking about your your average spend per guest and we're thinking about opportunities to get that higher what are some of the top initiatives, there and where have you seen the best customer response, and then I have a follow up.
Okay back. So we are we are very very I mean, we're excited to see a pre booking move up to 22%, which is a first we've ever had.
Up from it from the first quarter and that's without any additional banners being added to our pre booking platform we.
We believe in the next catalyst will be at the end of the third quarter, when we add a very large banner to that.
We had hoped to add that slightly sooner, but we're little bit behind those are little bit behind that were both a little bit behind in terms of some of the preparation testing et cetera on the site.
We'd be very excited to see that site go live at the end of the third quarter that we'll see hopefully that 22% notch up higher internally, we have a higher targets than than the one that we are sort of beating right now and we will continue to set that because as you know.
A pre booked guests spans 35% more than anybody who just comes onboard without pre booking. So clearly that's a big focus for US Big initiative, not only now, but we'll continue to be in 2023.
With what sorry, what does the second question that you had again.
Can you just repeat that just getting average spend per I guess higher.
Yeah, you know what Amazes me actually if you look across all the mass and larger Banas contemporary ban is it's really <unk>.
Sighting to see the.
To the extent of average guest spend and guess spanned a staff member.
But what I find fascinating, where we've got much fuller load factors are higher load factors and without stuffing well over the 80% threshold. We are seeing guests spend per staff at levels. We haven't seen before now that contrasts on some of the luxury ones, where it's not as solid.
And so that's a very interesting and version that typically you don't see and so that's a healthy sign of the type of passengers are that you're seeing on the very big banners. Thus far so we're very encouraged by that.
Okay, Great. That's helpful. And then as the environment continues to normalize can you just speak to what you think the <unk>.
Steady state growth algorithm of the company could be well within the revenue and margin side and then on the cost side is there anything structural that we should keep in mind that could hamper expansion longer term, whether it's you know wages labor tech investments or anything else. Thank you. Thanks guys.
Our next question comes from Asia G O.
George Eva with invite a research. Please go ahead with your question.
Good morning, this is assia.
Late into the call, but I had a couple of questions Steven.
FCC's start to get used up do you think there might be.
Somewhat less of a momentum towards onboard spend and in particular as it affects you.
You know as we mentioned before we really don't have visibility as to where any of the guests. So spending the FCC and they certainly are coming down substantially as we've heard from some of the cruise lines and we'll probably hear from others as they report so to the extent that the FCC's continues to diminish.
Spend it in virtually any place on board outside of the casino to the extent that they are utilizing that and this fall. We just cannot trace that cause the granularity of where it posts on the failure is not available to us.
Yeah, I've always wanted to kind of get a Boe.
Both on this number but obviously we can't.
Do you also see the economy between the short Caribbean Bahamas cruises, we our ticket prices seem to be very strong. Obviously these are destinations, especially for north American passengers that are easier to reach them relative to what you see in Europe .
And maybe Alaska might be in the middle of that spectrum is there anything of that nature that you seen in your numbers.
No not really I can't really speak to that right now.
Suddenly.
You know.
Caribbean continues to have higher load factors.
Then some of the banners in the Mad right now, but since the relaxation of some of the Covid requirements, we starting to see that build again.
There's still a little while to go here in the season and from what we've heard from.
Some of the cruise lines you know it seems like demand is still there.
So Alaska is performing incredibly well.
As is the Caribbean I mean, we've just finished July and I continue I continue to be encouraged by what I'm, saying.
Great.
The last question.
Can we discuss sort of a longer term balance sheet thoughts you know the liquidity question that has been everyone's minds, yeah, we've even looked at 'twenty three M B a.
Oh I'm sorry.
Liquidity question, I think was pretty much put to bed by Stephen in his commentary I mean.
I'm, sorry, I jumped a little bit late okay, well the maturities that we have are nothing.
Nothing before 2026, we will continue to deleverage on high interest rate instruments second lien being the one that will focus on first we've already paid down already $3 million of our revolver and we will continue to take out pieces of leverage where we can as well as look at.
Anything else on the cap structure that makes sense as we continue to build cash so we.
Unlike the.
The industry are not concerned about liquidity.
So remove the ATM as you may have read in the press release, and so we remain pretty confident about where we're at in terms of building.
More liquidity as we continue to build successive quarters of building you know free positive cash flow in the business.
And also you had the first one out of the industry to actually has positive adjusted net income so congratulations.
Thank you.
This concludes our question and answer session I would like operator, sorry, just before we conclude.
To disrupt I'm, just going to jump back to we didn't answer the mix as a final question there with regards to the growth algorithm I just wanted to jump back to that real quick.
And briefly provide a response there so.
And it makes I think as you know if we look back historically cruise ship passenger growth has grown at a cake or some 95 through 2019, including.
The fix after 911 and Oh eight.
Oh non recession.
Eight of almost 7%.
We would expect our revenue to grow at above that level and we would be disappointed if it didn't I mean, we have as you know 22, new builds it'll be introduced into service in 2022 is another newbuild 2011, new builds coming into service in 2023, and so our expectation would be for <unk>.
I'll close to at least support that and perhaps handily.
On the margin side.
Because of the variable cost nature of the business. It is a little bit more challenging to grow margin. We're much more focused on growing the absolute cash flow that we generate from the business and as revenue grows and we generate more cash flow that's truly where our focus is but we do expect that as fleets returned to service in there.
Their entirety as occupancy levels improve that Theres no reason for our margin should not go back to at least historical levels.
Okay. This concludes our question and answer session I would like to turn the conference back over to Leonard Flaxman, CEO and president for any closing remarks.
Alright, Thank you and thanks again, everyone for joining US today on Q2 conference call. We look forward to speaking with you when we report third quarter results in November thanks, everyone.
Yeah.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.