Allegiant Travel Company

Good afternoon and thank you for standing by and welcome to the Q1 2021 Allegiant Travel Company earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone keypad. If you require any further assistance, please press star 0. I would now like to hand the conference over to your speaker today, Ms. Sherry Wilson. Thank you. Please go ahead.

Thank you, Sherry. Welcome to the Allegiant Travel Company's first quarter 2021 earnings call. On the call with me today are Maury Gallagher, the company's chairman and chief executive officer, John Redman, the company's president, Greg Anderson, our EVP and chief financial officer, Scott Sheldon, our EVP and chief operating officer, Scott D'Angelo, our EVP and Chief Marketing Officer, Drew Wells, our SVP of Revenue and Planning, and a handful of others to help answer questions. We've scheduled today's call for 75 minutes to ensure sufficient time for questions. We will start with some commentary and then open it up for questions. We ask that you please limit yourself to one question and one follow-up. The company's comments today will contain forward-looking statements concerning our future performance and strategic plans. Various risk factors could cause the underlying assumptions of these statements and our actual results to differ materially from those expressed or implied by our forward-looking statements. These risk factors and others are more fully disclosed in our filings with the SEC. Any forward-looking statements are based on information available to us today. We undertake no obligation to update publicly any forward-looking statements, whether as a result of future events, new information, or otherwise. The company cautions investors not to place undue reliance on forward-looking statements, which may be based on assumptions and events that do not materialize. To view this earnings release, as well as the rebroadcast of the call, feel free to visit the company's investor relations site at ir.allegiantair.com. With that, I'll turn it over to Maury.

Thank you, Sherry, and good afternoon, everyone. Thank you again for joining our Q1 call. First, let me take a moment and thank all of our team members. their spouses, families, as they continue to fly our passengers in these difficult times. They've been the true warriors for our side of the house here, so thank you again. I'm extremely excited about our future, more so than I have been in previous quarters. I expect traffic to continue to grow in the coming months. Based on the data we're seeing, I would say we are back. 2021 and beyond, I believe, will be as good or better than I could have hoped. In Q1, we had EPS of 42 cents and EBITDA total of 68 million for the quarter. But the thing that was very positive is each month of the quarter was a positive EBITDA number. Understand both of these numbers include our PSP amounts of $92 million. I want to share with you some interesting facts that I've seen concerning the impact of the pandemic and how it's affected us and others. our balance sheet is in much better shape than before we entered the pandemic, particularly as it relates to cash. By the end of Q2, our cash balance will have more than doubled to a billion dollars. And this is measured since the end of 2019. While our cash balance has been growing, our net debt balance has actually declined over $50 million. By the end of the year, we could be approaching $500 million of net debt down from $950 million at the end of An interesting stat I was taken with last year was we generated $235 million of positive cash from our operational statement off our cash flow things for 2020 as a whole. The industry during this time lost $18 billion from operations. And I might add this includes $800 million of losses from the other ULCCs. Lastly, as a factoid, during Q1, without any PSP, we only had a $15 million EBITDA loss or a negative 5.5% margin. The remainder of the industry's EBITDA loss for this quarter just ended was $9 billion on $15 billion of revenues or a 60% negative margin. My conclusion from that is our personnel, our model, and our excellent management team have done yeoman's work during this difficult year. We were the first to get back to positive growth. We did this just this previous quarter. We were the first to achieve positive EBITDA late last year, and we were among the first to achieve positive EPS, and we did that again this quarter. We were fortunate to be a domestic leisure-oriented carrier. Leisure is king today. Business and international traffic continue to substantially underperform. Profile of our customer and their behavior is an important distinction in our model. Our leisure customers are made up of millions of individuals, families, small independent units that make personal, individual decisions to travel and spend their funds. Business traffic has a different decision process. While there are millions of business travelers, as we know, their decision to travel in most cases is ultimately controlled by the company's senior management. Namely, given dramatic circumstances, company business travel is stopped. We have seen this phenomenon three times in the past 20 years. 9-11, obviously, a great financial crisis shut down a good chunk of business traffic, and obviously this past year with the pandemic. These have been full-tilt stop traveling business, traveling decisions for business customers. This has been devastating to the airline and travel industries, particularly those focused on that business customer. Allegiant has lived through two of these massive shutdowns, and while we were certainly impacted by the pandemic this past year, We candidly didn't even feel the GFC. Our leisure customer profile and our flexible model allow us to bounce back faster than everyone else, including our other ULCC compatriots. This has been the backbone of how we have built this great company. We had a terrific 2019, and we're off to an excellent start in early 2020. We've just had to wait a delay of a year so we could get back to it. Vaccines have been a terrific catalyst, as we all know, and combined with people's strong desire to get out and go, has made for a really nice rebound that we're seeing these days. We believe our income levels for the remainder of 2021 and 22 and beyond will meet or exceed our last full year of 19. We want to be a leader in this effort and take advantage of our great model in the coming years and plant flags as we attack more than 1,000 markets that we have, routes we have targeted. We've upped our game substantially in the past three to four years. Our brand is extremely well positioned We made some bold moves that have worked out extremely well as Legion Stadium has been all we could have hoped for and more. I continue beating the drum for our model, its flexibility, which allows us to both shrink and rebound. It continues to demonstrate its benefits, allowing us to separate ourselves from the competition. This is particularly evident when you review the industry's operating margin results for the past 20 years. From our beginning in 2001, we've averaged over 15% in operating margin during this 20-year period, while the next closest carriers, Alaska and Southwest, have been at 10% margins. Perhaps the best highlight of the past few months has been the elevation of our status from a noun to a verb. From what I've heard, we were the standard of comparison for the recent IPO roadshow efforts, as well as for the group of startups that are showing up at this point. Twenty years ago, most in the airline space didn't consider us an airline, which was fine by me. No one paid attention to us, but today we are the The model will follow. This is the ultimate compliment from your industry peers. In closing, I can't tell you how proud I am again of this group of team members, particularly those who have carried the water on the front lines this past year. They've been the true heroes in our part of the world. Every day they have boarded their airplanes and carried our passengers safely and on time during these trying days. John?