Q1 2023 Wheels Up Experience Inc Earnings Call
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Ladies and gentlemen, welcome to the <unk> first quarter 2023 earnings call. My name is Glenn and I'll be the operator for today's call.
If you'd like to ask a question. During your presentation you may do so by pressing star one on tack on key pad.
I'll now hand, you over to your host Keith Robinson to begin Keith. Please go ahead.
Thank you. This morning, we announced our first quarter financial results. The earnings release, we did supporting tables as well as a copy of today's presentation can be found on our investor relations website at wheels up dotcom slashed 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.
<unk> 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.
Affiliations 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.
That I'd like to turn the call over to wheels up newly appointed executive Chairman Robert background.
Thank you Kate and thanks to all of you for joining US today. It is a pleasure to be with you today.
As a board and management team, we are committed to making the choices necessary to improve this business and deliver for our customers employees and shareholders. The board is taking action to strengthen management's ability to execute this strategy and achieve the goal of positive adjusted EBITDA.
In 2024.
In my new role as executive Chairman I'll be focused on working with management under changes Todd will discuss.
Having a strong operational <unk> CEO to unlock the scale and potential of this business.
As we execute through this transition I feel strongly suited to guide the strategic direction of eats up having served on the company's board of directors since 2021, and having served through my career in executive roles at <unk> capital and there'll be MH I have focused on driving strong profitability from luxury brands with existing <unk>.
<unk> brand strength likely looks up.
I'm also pleased that Dr. Smith to serve as our interim CEO , who will lead the day to day execution at the company, while we conduct the search.
For the full time CEO he'll report to me and continue to do so.
<unk> financial officer.
<unk> has been a tremendous asset to weeks since joining the company last year.
He has brought a significantly increased level of rigor and financial acumen to our team and more importantly is it expected strong leader across the organization.
Prior to joining built up last year at 25 years of operational and finance experience at GE.
I think in a number of diverse industry global businesses and managing through numerous market cycles.
As we continue to focus on achieving our profitability goals and improving our member program.
Provide a better customer experience.
Absolutely the right person to guide the company through this transition period.
And the rest of the board looks forward to working closely with Dr. Smith on this next chapter.
Finally, I would like to thank our founder Kenny Victor for his vision.
Chip and hard work to make we looked up what it is today.
Leading on demand charter operator in the United States.
A substantial revenue base and more than 12000 loyal members and customers.
Is that a material advantages as we embark on the next phase for the company and its stakeholders I look forward to continuing to work closely with Kenny.
In basketball for weeks up and the commission with that let me turn over the call to my friend Kenny.
Thank you Ravi and congratulations to you and Todd on your new roles I founded wheels up because I saw a clear opportunity in the industry for a new approach to private aviation technology.
Technology enhanced membership driven model built on a shared sense of community around the efficiencies the convenience and the joys of private travel.
Our passionate focus on the member continues to define wheels up today.
And less than 10 years, we've grown from a small startup with a handful of King Air 350 eyes to the largest on demand charter provider in the United States with an iconic brand more than $1 $5 billion in revenue and a loyal and engaged base of more than 12000 members and customers.
With this strong foundation for future success.
It is the perfect time to hand, the baton to new leadership for the next stage of the relay.
I would like to thank the board for their support and guidance I would like to thank our shareholders for their belief in us and our vision.
And I'd like to thank our nearly 3000 wheels up employees around the world who share our collective drive to make the extraordinary possible every day and of course I'd like to thank our members without whom none of this would've been possible by.
I am looking forward to supporting the next stage of profitable growth and the exciting times ahead for wheels up with that I'll hand, the call over to Todd.
Thanks, Kenny it has been a true pleasure working with you.
Wheels up its here today because of your vision marketing prowess and drive.
And Ravi I look forward to working with you as well in your new capacity.
Certainly we can benefit from your commercial experience and leadership before I dive into the content of the call I want to highlight that as a management team. We are committed to providing our members with exceptional service as we continue to scale and mature we expect to improve our service capability even further <unk>.
Greece, our competitiveness and deliver improved profitability.
We remain focused on achieving positive adjusted EBITDA in 2024, while strengthening our organization and improving the member experience.
As interim CEO . These are my focus areas and the places where we believe we can make meaningful gains to strengthen the company and set the stage for a strong and profitable future.
For today's call. We are prioritizing three topics that we think are most important for investors.
Our business performance for the first quarter of 2023 or.
Our go forward plan, including significant changes to our member programs that strengthen our outlook for positive adjusted EBITDA in 2024 and.
And changes to our management team that will support our execution.
I will start with our first quarter performance and the components of total revenue.
Membership revenue was up 5% year over year in line with expectations.
Growth in membership revenue was impacted by our focused sales and marketing spending to target more profitable revenue that Leverages network density in specific regions and at specific times.
Slight revenue was down 2% year over year, a 12% year over year increase in flight revenue per lead leg was offset by the overall decline in life flight legs without air partner, which reports on a net revenue basis slight revenue per life flight leg was up 17%.
<unk> year over year.
Aircraft management revenue was $64 million in the quarter generally consistent with recent quarters, and reflecting steady management fees and regular usage of the aircrafts by their owners.
Other revenue was $35 million up significantly year over year due to increased aircraft sales and the addition of air partner.
Our adjusted contribution margin was one 8% for the first quarter down sequentially and below our guidance of three 5% to 4%.
Sequential decline was due to lower demand in the first two months of the quarter that reduced our asset utilization and in part by the cleanup of prior period charges associated with the remediation efforts to address the control weaknesses, we disclosed in our year end filings.
Turning to operating expenses.
For the quarter sales and marketing expenses were six 5% of revenue down sequentially in dollars primarily.
Early due to lower advertising and marketing spend.
Technology and development expenses were three 7% of revenue in the quarter flat sequentially in dollars and up 24% year over year.
We continue to invest in technology to support our efficiency efforts and improve the member experience.
General and administrative expenses were five 7% of revenue down.
Down 16% sequentially in dollar terms as we continue to aggressively reduce our spending including reducing our reliance on outside consultants.
G&A costs were up year over year due primarily to the addition of air partner.
Overall, opex was down by more than $7 million sequentially in the quarter in excess of our guidance that opex will be down slightly.
As we work to offset the additional pressure in contribution margin.
First quarter, Opex was down $12 million versus our run rate in the third quarter of last year.
Adjusted EBITDA loss was $48 9 million for the quarter coming in towards the higher end of our $45 million to $50 million loss guidance range.
Accelerated opex reductions largely offset weakness in adjusted contribution margin.
Capital expenditures were $16 7 million in the quarter, including capitalized software of $8 million well within our long term target of mid single digit percent of revenue.
We ended the quarter with $363 million of cash and cash equivalents on our balance sheet down.
Down sequentially and reflective of the normal seasonal decline in prepaid block sales.
Scheduled debt payments onetime cash charges related to organizational restructuring.
Cost to build out our member Operation Center in Atlanta, and other working capital items.
Prepaid blocks were 100 million for the quarter.
Reflecting continued commitments from our loyal customers.
As many of you know the seasonal nature of our prepaid block purchases means that cash inflows typically improve over the course of the year and.
And we expect a number of the cash outflows described earlier, we will not repeat in subsequent quarters.
Let me now turn to our path to positive adjusted EBITDA in 2024, which has three key components first cost reductions.
Pricing initiatives and program changes and third operational efficiencies let.
Let me start with the first component I, just mentioned cost reductions earlier. This year, we announced a first round of organizational restructuring that we expect will produce $30 million of annual head count savings.
Despite that we are continuing to look aggressively for additional opportunities to reduce cost or better than expected progress on controlling opex cost in the first quarter is a testament to that effort.
We remain confident that we can exit this year with opex in the low teens as a percentage of revenue and in 2024 reach low double digits, we are managing to achieve that level, regardless of our revenue profile.
The next two components of our path to positive adjusted EBITDA relate to our adjusted contribution margin.
Since our inception, the company's goal has been to grow and invest in providing world class service to our customers.
While we have consistently met our growth objectives, our historical one size fits all product offering create significant operational challenges that impact our ability to deliver our profitability goals.
Truly realize the benefits of our scale and to improve our financial performance today, We announced a significant change to our member program that we expect will benefit members and customers, while improving our operational efficiency and per flight profitability profile.
The new program, which is reflective of a comprehensive analysis over the past few months and expect it to go into effect at the end of June create.
Creates two primary service areas.
One is east of the Mississippi, including parts of Texas and the other is focused on the western region of the country, which is primarily states like California, Nevada, Arizona, Colorado and Utah.
We will further concentrate our king Air fleet, one of the largest in the industry in the East Coast region.
We'll continue to offer light mid and Super mid options in both the east and west regions.
These changes allow us to focus our efforts on the specific regions, where we have a density advantage those areas account for approximately 80% of our customer flight revenue and our highest spending members.
By focusing our efforts, we expect to lower our unit cost through improved asset utilization via more efficient aircraft and crew scheduling and fewer repositioning legs.
In addition, a smaller operating region is anticipated to improve our maintenance economics.
We expect our members will benefit in those regions from lower prices with our new program, including highly competitive capped rates, which provides certainty in peak periods for our customers versus others in the market.
Our dynamic pricing capabilities allow customers to take advantage of lower rates during off peak periods.
To be clear, we will continue to service all regions in the U S. But for those regions outside of our primary service area, we will leverage the capability of our air partner business team, which for decades has delivered a world class profitable business utilizing an asset light model.
He's out of region flights will be dynamically priced at competitive market rates.
We expect the new program will significantly improve our flight margins and strengthens our confidence in our plan to deliver positive adjusted EBITDA in 2024.
We are also enhancing our corporate go to market initiatives through our new industry, leading program with Delta Airlines, and which delta's business customers will received volume based preferential rates on wheels up charters and memberships.
Multimillion dollar two year program reflects confidence that the expanded partnership will enable unmatched travel experiences on private and commercial travel for our mutual customers Delta.
Delta will continue to provide wheels up customers unique access and exclusive benefits such as earnings Skymiles sky bonus points and medallion status.
Let me now shift to what we're doing internally to improve our operations.
We are now managing our fleets to make decisions on a more granular level that optimize the performance of each aircraft type across critical metrics such as pilot staffing.
Maintenance availability spare parts inventory and demand is shaping.
This new structure has already resulted in improved processes that have reduced fuel burn and over time through more efficient management of our operations.
We are continuing to overhaul our internal and external maintenance operations that are expected to improve aircraft availability by nearly 10% in 2023.
A well functioning maintenance operation supports higher utility of our aircraft and significantly reduces the need for expensive recovery flights, which can negatively impact member experiences and our financials.
Our focus on leveraging our network density should effectively add capacity through more efficient and increased utilization of our asset base.
It allows us to review our fleet strategy to optimize the size and composition of our fleet to best capitalize on future customer demand.
We are also working to simplify our business operations, which will improve our agility.
Next week and ahead of schedule, we will consolidate the management of our operations to our new state of the art member Operation Center, which combines multiple operating facilities from around the country into Atlanta, one of the world's largest aviation hubs and the location of our partners at Delta.
Our service delivery has already shown significant progress across multiple key metrics we track.
Specifically, we reduced our controllable service interruption rate by half in the past year, resulting in 4000 fewer customer trips impacted.
That is the result of faster recoveries.
Real time flight tracking and improved maintenance operations.
We believe our new Mo's C will lead to even further improvement via better automation and collaboration.
We also continue to work towards the consolidation of our FAA operating certificates, which are expected to simplify our flight operations by harmonizing, our procedures and scheduling across the entire company.
We anticipate seeing incremental benefits over the course of the year with a larger impact in 2024.
We believe that all these initiatives will help us exit this year at a high single digit adjusted contribution margin and achieve a mid teens level in 2024.
To help simplify our business and focused on executing on our core charter operations. We are evaluating the disposition of some of our non core assets as part of a comprehensive strategic review.
Separately, we also remain confident in the value of our fleet.
Transactions continued to support the aircraft appraisal values from our October debt financing, we believe the market value of our aircraft is well above the carrying value on our books and the principal outstanding on our debt.
To further support our program changes and continued focus on operational improvement.
I'm pleased to introduce some key management additions and changes that will be integral in helping us achieve our goals.
First I am pleased that date holds a 30 year veteran of Delta Airlines is taking on expanded leadership responsibilities in our fleet operations.
Dave brings valuable perspective on delivering efficient operations at scale.
It has recently helped develop and launch our forthcoming member Operation Center.
Delta's willingness to provide data in support of our operations is another example of the benefits and support we get from our strong partnership.
In addition, as we announced last week, Dave Gottesman will join US as Chief Digital officer in this new role he will focus on leveraging our technology investments and infrastructure to drive business results further scale operations and helped deliver an extraordinary member experience.
Additionally, Christian Lauria will join us as our chief customer and marketing officer.
Where she will oversee the company's brand and creative efforts as well as customer acquisition and customer experience.
The skills and experiences of all three of these individuals complement our existing leadership team and align directly with our objectives of improving operations leveraging technology to drive efficiency and ensuring a world class customer experience.
So with that let me turn to our guidance.
There are a number of items related to our pending program changes that could create a higher than normal degree of financial variability in the short term as we move through the transitional stage of implementation.
As a result of this and to a lesser degree the current macro environment. We are suspending our total year 2023 guidance and we will focus in the near term on the second quarter outlook as well as the year end 2023 exit rates.
We expect second quarter revenue to come in at a range of $350 million to $360 million.
Reflecting a seasonal pick up and some revenue headwinds from our focus on profitable flying that leverages the density of our network.
We expect second quarter adjusted contribution margin will come in the range of 3% to 4%, which balances lower short term utilization with the migration to the new program model.
We continue to expect to exit the year with high single digit adjusted contribution margins.
We are continuing to focus on additional opportunities to reduce our cost profile on top of the better than expected improvements in the first quarter and expect to end the year with opex at low teens as a percent of revenue.
We expect second quarter, adjusted EBITDA loss to be in the range of $39 million to $44 million reflective of increased adjusted contribution margin and lower opex.
We expect to report a GAAP net loss of between $95 million to $105 million for the second quarter.
We expect capital spending for 2023 will be in line with what we had outlined as normal capital spending in the mid single digit range of revenue going forward.
While there was a lot announced today, including some items that may contribute to short term variability.
Were resolved in our belief that these changes are positive steps that position wheels up to improve profitability and continue to service to our members and customers at the highest quality possible.
We are committed to making the decisions necessary to improve this business and deliver for our customers employees and shareholders.
Before I close I want to take the opportunity to sincerely. Thank all of our employees, who tirelessly work to fulfill our most important obligation delivering a world class flight experience for all of our members and customers.
With that let me open up the call for questions.
Thank you.
Ladies and gentlemen, if you would like to ask a question. Please press star followed by one on path on key patent now planning to ask your question. Please ensure your mute locally.
We have our first question comes from Sheila <unk> from Jefferies.
Your line is now open.
Thank you and good morning, everyone and Kenny.
Thank you for all that you've done for the <unk>.
Todd.
Thank you as well.
And maybe if I could ask the first question on the revenue guidance for 2023 I know you attended at parties gave us a lot to digest.
The down 15% to 19 organically.
Whats driving that step down is that the changes in membership.
If you could talk a little bit about that.
Yes, Thanks, Sheila I think it's a combination of things I think first and foremost as we've been talking now for a couple of quarters, we're trying to be really thoughtful about where we're targeting growth and I think as we go through these program changes a lot of that is really the culmination of a lot of work we've done to think about how do we win where we want to win and where.
We can best execute profitably and where do we think differently about some of the areas that we pursued growth in the past in the past that just may not be profitable. So.
Lot of it has to do with us being more targeted in terms of where we're approaching and going after that growth I would say beyond that we certainly have to acknowledge that there is a macro impact here as well and we are seeing a general slowdown I think it would be consistent across all of the industry in terms of a bit of the wider demand.
Across a number of our segments in the first half of this year.
Certainly we saw that in the first couple of months since we talked about.
On the fourth quarter call and I think that's really continued into March and early April So I think as we think about it.
Part macro part more targeted and focused and then I think part of the reason behind the suspension of the guidance as we are announcing a pretty significant change in terms of the program offering today.
We're incredibly excited about that in terms of what that does to better position wheels up to be successful, but at the same time, we know that as we go through this transition period, there's probably a little bit more variability here than what we would typically see so we're just trying to be thoughtful around letting a little bit of that play out over the coming weeks.
Here that hopefully will help us firm up a more solid view us as the year progresses.
Got it no that makes sense.
And then maybe on the.
Partnership you have with sounds like can you talk about your existing partnership and how that's changed and how business class.
Passengers be April .
Yeah.
Yes.
It doesn't really change the partnership I think it enhances it.
We're incredibly appreciative of the relationship we have with Delta, we get a number of benefits from them not only in the commercial side and in support of our business and our revenue, but also just the benefit of being able to tap into their expertise whether that be in operations and maintenance et cetera and date Dave holds.
An expanded risk.
Responsibilities here.
Great sign for US I mean, Dave has got a wealth of experience from his long career at Delta So being able to tap into that is it is a great example of where we can leverage them I think this new arrangement that we announced today. It's just about how do we further the growth of our own corporate business and how do we team up with Delta to offer something that's.
Unique in the industry Delta has.
Terrific business with a number of corporates in terms of commercial travel now we're able to also offer those same customers the opportunity to access wheels up and I think that combination is something that's really unique in the in the market gives their teams a competitive advantage and hopefully leads to.
More growth in that area that were really targeting which is expanding our own corporate business.
Great. Thank you.
Thank you.
Our next question comes from just higher Choi from pad to sound line is now open.
Hey, Thank you for taking my question.
I guess, a little bit piggybacking piggybacking on.
The prior question, but you noted that the prepaid blocks were down calling out seasonality, but.
Looking at year over year. It was down so can you provide a little bit more color on that or are we seeing a signal that consumers are pulling back.
Yes. So a couple of comments I think if you look at the prepaid block sales of $100 million in the first quarter that was lower on a year over year basis, but I think if you. If we look at it on a more normalized basis and put some context around last year. So if you. If you look at the history of Q4.
21, and the first quarter of 'twenty two those were two of our highest block.
<unk> ever and I think that was very much reflective of what was going on in the macro at that point in time huge supply constraints.
Customers were looking for opportunities to guarantee themselves access to that available supply. So we saw really really heavy block funding in those quarters. So if you look at the relationship on a more normalized level, so going back to 'twenty first quarter of 'twenty one.
First quarter of 'twenty, I think you'd see a relationship there thats much more consistent with what we saw this quarter.
Particularly relative to the relationship between new block inflows and the burn down of the existing deferred. So I think you have to have a little bit of that context, I think again, we see a lot of attractiveness customers willing to put blocks up for us, but I think what we're really expecting now is that as we've announced these program changes.
You can create an even more attractive offer.
For our customers and particularly in the areas, where we think we can service them the best and I think as we go out with these new offers we will do so at competitive rates and competitive rule sets designed to put us in a position to win in those markets and regions, where we have the most density and where we have the best opportunity to service our.
<unk>, well and at a profitable level so.
We're really hopeful over the coming months does that offer makes its way when we go live and it makes its way into the market that that's going to be.
Very competitive and well received and that will give us an opportunity to drive.
More blocks as customers come in in the right places, where we can be successful.
Got you. Thank you that's very helpful. And then shifting gears little bit I know you noted.
Pursuing Nathan dispositions of certain noncore assets or businesses could you provide some color on what are those noncore businesses, what do they look like.
Yes, I mean, just given where we are in the process I won't give any specifics about exactly what those are.
As I'm sure you can understand I mean, obviously, we're working through that with the.
And the appropriate in the appropriate way, but I would say this is really a continuation of some of the things that we've been talking about for now for a few quarters right. How do we make sure that we are prioritized and focused that we're targeting the parts of our business that allow us to be the most successful and moving away from some things that are not as core or strategic to us.
And and.
And I think we see this as kind of a natural complement to continuing that journey.
New program changes really a big step forward for us in terms of focusing on the areas, where we want to concentrate and be successful.
And we will move through an orderly process on those strategic non strategic.
Dispositions over the course of the coming months, but again, all about us being focused and targeted in terms of where we're going to to position. The efforts of the company positioned the resources et cetera.
And again that obviously those dispositions are helpful from us from a number of areas.
Not only in terms of the focus but also proceeds and things of that nature.
Got it. Thank you very much that's all for me. Thank you for your time.
Thank you. Thank you.
As a reminder, ladies and gentlemen, if you would like to ask any further question.
Please press star followed by one on tax on key patent now.
Yeah.
We have our next question comes from Marvin Fong from PT PCI E. Marvin Your line is now open.
Good morning, Thanks for taking my questions.
So my first question I guess, just I just wanted to better understand what youre, saying.
You are making these changes that you're going to realize the operational efficiencies I think you.
<unk> in the release that you would expect to pass on some of the savings and lower and lower prices and cap rates for Flyers can you just kind of.
Help us understand that balance how much.
Cost savings you expect to kind of pass on through pricing as opposed to let fall to the bottom line I would think since word bill.
Building on our path to EBITDA breakeven.
Just wanted to understand.
Why not.
Maximize the flow through to the bottom line or do you feel that your current pricing in the market does need to come down a little.
Yeah. Thanks Martin.
Look I think.
I'd start by just saying Hey, we've been we've been working on this for a number of months right. So this has been a thoughtful piece of analysis that we have methodically work through to understand how best to position ourselves for success.
You heard me talked about last quarter of.
The kind of a six week special we ran on King airs that we're focused on the east coast only we're currently out in the market doing something similar with light Jets now those test cases have really helped us validate in many ways. This theory that if we target the right segments with the right density we can unlock real meaningful efficiency.
That gives us a much more.
Profitable case in terms of the delivery model, but also is highly attractive to players who are in those regions and I think this is really a continuation of that that work. So if you think about our model today, we're effectively one size fits all in terms of a nationwide guarantee program and I think that's very difficult to operationally execute.
Successfully particularly in some of the lower density regions. So as we do the analysis and think about how we reposition our fleet, how we target a programmatic offering within those more dense corridors. We think that we see a number of benefits there right I think in many ways. If you think about the.
The portion of our revenue today that wouldn't be covered it's about 20% or so that would be in those regions that no longer will be covered on a programmatic basis.
That is typically our lowest spend members on average and generally unprofitable routes for us. So we need an alternate delivery model. So as you move away from that we focus on the regions, where we can be most successful we think that there is efficiency improvements and thats, probably anywhere from the 4% to seven point range, depending on the individual fleet.
We see improved utility that can be five to 10 points again based on the individual fleets, we see reduced maintenance cost as we rethink that footprint.
In terms of where we need maintenance coverage and mobile service units and things of that nature and then most importantly, it allows us to achieve improved levels of service and delivery for our members. So we will think and be thoughtful about how we think about those savings and what that translates to in terms of the bottom line, but at the same time it gives us the opportunity.
<unk> to come out with a much more competitive offer to make sure we win in the areas, where we want to win.
And I think in the past, we've probably been adversely selected and some areas where we win in those regions that were less successful than we lose in some of the higher density corridors and we're really trying to change that.
And then the final point I'd make is we're going to continue to service all of the U S and all of this region. So what we're really talking about is a differentiated delivery model.
So we have a.
Long legacy of delivering our programmatic offering but we also have an air partner business that has demonstrated decades of success in an asset light model delivering to their customers in the on demand model and we're going to leverage that capability and skill set to service. The other regions of the country that will no longer be covered in this programmatic offering.
And that'll be done at a profitable level. So when we put that whole equation together and I know theres a lot of pieces to it we're really excited about what that can mean for us in terms of putting us on a much stronger footing in terms of our future profitability.
That's terrific. Thanks for all that detail really appreciate it and I guess my follow up question just wanted to better understand the active number of accounts I think the press release alluded.
A lot of the core membership was up year over year.
But just just maybe at a higher level can you kind of talk about the retention rates in.
It sounds like we're seeing the pressure coming from like the connect customer.
Should we continue.
Sort of that customer base.
To see churn over the next few quarters as you implement these changes.
Yes, I mean, what I broadly say as our retention levels have remained strong so I think for our existing members are existing customers.
We've continued to stay with us at high levels consistent around what we've had in the past.
Core core retention levels about 80%, 90% for those who have blocks. That's remained relatively relatively constant I think we have seen some of the macro impact on the new membership levels and I think again some of that's reflective of there being a.
A more reasonable demand supply balance in the market. So in the past where unless you were part of a program and put up big blocks to guarantee availability. It may have been very difficult to get access to aircraft now there's a bit more availability in the market and I think we have to acknowledge there's been some impact on those new membership level.
I think a lot of that also informs some of the changes we announced today. So how do we get out into the market with the most competitive offer.
Possible and make sure that it's focused in the areas, where we want to win and I think that obviously there'll be a little bit of churn. During this transition aerie period, I mean that was part of that variability as part of the reason that we've decided to pull back on the guidance for the time being but again I think this gets implemented over the next few weeks we're really.
Cited about what it positions us to do.
And if that means that we are a little smaller.
In terms of transitioning to a higher degree of profitability then we're fine with that because we think thats the right the right answer for our business and our shareholders.
Great really appreciate that and just wanted to say good luck to Kenny Ravi Todd as you all kind of move on to these evolving role. So good luck.
Thank you very much.
Thank you.
As a reminder, ladies and gentlemen, if you would like to ask any further question.
Please press star followed by one on telephone keypad now.
We have no further questions on the line.
Okay. Thanks, very much everyone. We appreciate you joining us today and in.
And certainly reach out with any additional questions, we look forward to being in touch.
Thank you.
Ladies and gentlemen. This concludes today's call. Thank you for joining you may now disconnect your lines.
Yeah.
You may now disconnect your lines.