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spk04: Good day and welcome to the One Spa 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 Alison Malkin, partner at ICR. Please go ahead.
spk09: Thank you. Good morning and welcome to One Spout World 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 or 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 8K. 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. An explanation of these metrics can be found in our earnings release issued earlier today. Joining me today are Leonard Flexman, 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. Then Stephen will provide more details on the financials and our liquidity. I would now like to turn the call over to Leonard.
spk05: Thank you, Alison. Good morning and welcome to One Small World's 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, in a period of one year, we have successfully returned 167 health and wellness centers to service at sea, training 1,498 staff, placing 4,352 staff on board cruise ships, and booking more than 9,000 flights for personnel that we have trained, staffed, 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 our return to service was further demonstrated by our 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 during 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 and 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 that represented our sixth consecutive quarter of sequential revenue growth, significant growth in adjusted EBITDA, positive adjusted net income, and as I mentioned, a 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 return 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. Adjusted EBITDA was positive $9.1 million with positive contribution from our health and wellness centers on board cruise ships and in our destination resort spas. And thirdly, we ended the quarter with total liquidity of $47 million, including $7.8 million unlevered after-tax free cash flow. We had many accomplishments for the quarter. Most notably, our flawless return to service continued. The second quarter saw us commence service on board two new shipbuilds and 38 ships returned to service by our cruise line partners. At quarter end, we had health and wellness centers on board 172 ships, of which 167 had resumed voyages as of quarter end. This compares to 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 on board cruise ships remain below historical and 2019 levels, 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 per staff per day were all up double digits compared to Q2 of 2019. In addition, pre-booking percent of service revenue and guest 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 a 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 increase guest spend and utilization, which contributed to the growth in our key operating metrics. Firstly, these included improving retail conversion with expanded offerings from brand partners, including Elemis' Active Body 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, added on to acupuncture services, which increased average customer spend by 27% when selected. We also launched IV therapy on select NCL ships with modified pricing. Increasing penetration with expanded services and offerings targeting a wider audience. We introduced grown alchemists, which attracts new guests in areas underserved by our key brand Elemis, and modified capillus cells approach to include stylists and physicians. While 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. A London Wellness Academy continues to experience very strong demand from applicants. The London Wellness Academy website generated a record number of applicants up 160% from Q2 of 2019. Since the London Wellness Academy reopened in October of 21, we have trained nearly 1,500 health and wellness personnel at our other global training facilities. This is a further confirmation of One Spa World's leadership in training and certification. By the end of the second quarter, we had 2,778 cruise ship personnel on vessels for actual and expected voyages, and we expect 3,024 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 begin the third quarter with even more confidence that our actions have made One Spa World better positioned than ever before. With a strong business model, collaborative cruise line and destination resort partnerships, and an extraordinary team, we look forward to advancing our operational and 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. Stephen.
spk06: Thank you, Leonard. 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 and a strengthened balance sheet. all of which positions us well as we begin the second half of the year. 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 having Zoom 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 that were open and e-commerce product sales through our timetospa.com website. Cost of services were $87 million compared to $9.6 million in the second quarter of 2021. The 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 at sea and on land. Compared with service revenue of $7.6 million in the 2021 second quarter, an increased cost related to the resumption of our operations at our health and wellness centers at sea during the quarter. Cost of products were $23.3 million compared to $1.5 million in the second quarter of 2021. The increase was primarily attributable to costs associated with increased product revenues of $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 2021. Net income was $55.9 million compared to 0.3 million in the second quarter of 2021. The improvement in the second quarter of 22 was primarily a result of the $18 million change in income from operations derived from our 167 health and wellness centers onboard ships having resumed wages and the change in the fair value of warrant liabilities. The change in 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 $20.7 million during the three months ended June 30th, 2021. The change in fair value of the warrant liabilities is the result of changes in market prices deriving the value of the financial instruments. Adjusted EBITDA was $9.1 million compared to an adjusted EBITDA loss of $9.7 million in the second quarter of 2021. 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. Our confidence in the sustainability of return to service and ongoing increased performance has allowed for the subsequent cancellation of the active ATM program, which had not been utilized since October 2021. The current availability under our line of credit is $16 million. an increase of $3 million from the $13 million available at June 30, 2022, reflecting a $3 million pay down on the revolver in July with cash generated from operations. The revolver therefore currently has $4 million outstanding, and given our strengthened 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 our 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 gap basis, we expect to achieve positive adjusted EBITDA and positive adjusted net income for the year and expect to generate positive cash flow in each of the third and fourth quarters of the year, as well as for the full fiscal year 2022. Overall, our strength and balance sheet, the continued ramp of our operations, and no material debt maturities until March of 2026 has us well positioned to navigate economic uncertainty and capitalize on opportunities to leverage our preeminent position in the operations of health and wellness centers at sea 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.
spk04: 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. If 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 Steven Wisensky with Stifel. Please go ahead with your question.
spk01: Yeah. Hey guys, good morning. Um, so, so I want to ask kind of a hypothetical type question here, uh, you know, around the economy, and this might be tough to answer, but, um, you know, I, I understand, you know, what you guys are seeing right now, wouldn't indicate any type of, of slowdown in demand or spending from your, from your customers. Um, but you know, if we go back and think about the last recession, I think you guys saw revenues drop, you know, let's say upper single digits EBITDA was in a very similar position. So I guess the question is that we do encounter some kind of 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's going to look like, would have a greater or less impact to your operations now versus back then? Hopefully that all makes sense.
spk08: That's a big question, Steve.
spk05: I'll try and answer it as best as I can. Look, I think we're We're technically in a recession based upon the data we're getting. However, if you were to go, which I was at Atlantis last week, if you go around to shopping centers, and certainly when you see our ships on board, it's a very different consumer who's buying at the store or saving or making money different choices in purchasing goods, et cetera, than people who are going on vacation and buying an experience and spending on that experience. What we're seeing is continued high demand for our services and retail as well, which is certainly a big part of what we do. But look, there are retail outlets on board, and I think if you listen to some of the cruise lines calls, I 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. This one is still perhaps determining what kind of recession it is, whether it's going to be long, deep, who knows. I don't know. But we're not seeing any signs thus far of any impact to our business and certainly nothing similar to what we saw in the first nine months to date that we saw in 2009.
spk01: Okay, that's great, Keller. And then, you know, I want to ask you about your current liquidity position. It seems like you guys are in a pretty good spot, you know, at this point, you know, assuming your cruise line partners continue to roll their entire fleets, load factors go back to normal, which looks like, you know, which is in fact the case. But, you know, I guess moving forward as your free cash flow basically starts to grow, you know, Can 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 is a pretty solid indicator that you feel fine with your liquidity position, even if, in fact, the economy does go into some kind of slowdown.
spk05: Yeah, so look, I think we're sort of at a flexion 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 Steven 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. Clearly, our second lien is something that we will target. And then we're going to look at the complete capital structure of our balance sheet entering into next year. and determine a list of priorities of what we're going to 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.
spk08: Stephen, I don't know if you have any further comments on it. Yeah, the only other thing I would add is
spk06: Steve, is returning cash to shareholders through dividend and or stock repurchases remains a consideration and is always something that is highlighted when we meet with the board. And so as performance continues to improve, we will look at alternatives where perhaps there could be a pattern of debt and at the same time other activities that occur for 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 we generate into our shareholders.
spk05: But Steve, just let me highlight the fact that paying down a second lien that bears interest at LIBOR plus 7.5 in a rising interest environment is certainly the most accretive thing to do in the short term.
spk08: Okay, great. Thanks, guys. Appreciate it.
spk04: Our next question comes from Sharon Zakofa with William Blair. Please go ahead with your question.
spk11: This quarter was better than the same period in 2019. So if you could help us kind of understand the sustainability potentially of of kind of the mid-teens margins you're 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, was there anything like a write-off in product margin or what kind of impact did that line and how we should anticipate that playing out the remainder of this year?
spk06: Sharon, unfortunately, we didn't have the initial part of your question, but I don't know, maybe it was on mute or just didn't come through. But as it relates to margins, talking specifically to the second part, the product margins, yes, as vessels have returned to service, many of which, unfortunately, as you know now, have been out of action for a year or even much longer than that on some of them. As we validate inventory, count inventory, et cetera, there were some items that needed to be written off, but there are also primarily costs that are associated with getting startup again on an expedited basis. Returning 40 ships to the water in a quarter is huge. It's more than has ever been done before. There were things that were necessitated like air freight in order to make sure that product got on board that had some negative impacts, et cetera. As we start to see now that our fleets are sailing, we can get back to the cadence that we've had before, which has always been such a strong expertise of ours in ensuring that we deliver product only during our cycle times during the year that we take advantage of full containers to get it to the ports where a number of ships are going to be docking, et cetera. We do think that there'll be some improvement in those margins as we move forward, particularly into next year.
spk11: Can you hear me better now, Steven?
spk06: Yes.
spk11: Okay. The first part of the question was on services gross margin. So it was actually better than the second quarter of 19. So I was wondering if you could talk about what the tailwinds are that you're seeing in services gross margin. And then my follow-up question was on salary, payroll, and admin, where you've seen you know, very kind of stable sequential trends in those costs, which is pretty impressive given labor pressure. Is that something where you can continue to hold that kind of at the run rate of roughly like $9 million a quarter, or should we expect more inflationary pressure there?
spk06: As it relates to the run rate on salary and payroll, no, 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 at the level you're talking, that nine or so million. 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 tailwinds on service margin, we've talked about before some of the pricing actions that we've taken, and so those will continue to flow through and benefit the company. as we continue to see demand for higher priced MediSpar services, et cetera. Some of that should inure well to the company as well. So overall, we feel pretty good about the position that we're in and how we're heading forward on the margin line.
spk02: Okay, thank you.
spk04: Our next question comes from Steph Wisink with Jefferies. Please go ahead with your question.
spk10: 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? Is revenue running a little bit ahead of your cost structure and you're bringing back some of those costs? Or do you find that this is the new basis and you can leverage at a lower level of overall costs.
spk05: So Steph, we've been metering in over the last, I would say, three quarters, essential positions to service onboard activities, marketing activities, supply, logistics, et cetera. And to the extent that any more of those positions that we need to backfill, 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 positions still to be added, but as yet we're trying to be as disciplined as possible.
spk10: Right, that's really encouraging. And then my bigger question is just around the tie rates. So in the quarter, service sales significantly beat our expectations, but the product sales were slightly below. Just trying to understand if there's anything to read into product tie rates at the point of service. Or, you know, you talked about some of the changes in brand mix, adding some additional brands. Anything you wanted to share with us on the product sales patterns and what your expectations are going forward? Thank you.
spk05: So, Steph, we continue to do a lot of intensifications around service attachment and retail attachment to those services. Some of those services clearly could be enhanced, and we continue to focus on that intensely and 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, as we 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, and 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 ahead of staffing than the load factors, we will continue to see a ramp in retail as well.
spk10: Very helpful. Thank you.
spk04: Again, if you have a question, please press star, then one. Our next question comes from Max Ruklinko with Cowan & Company. Please go ahead with your question.
spk00: Hey, guys. Thanks a lot. So first, on getting the pre-bookings rate higher, how far along in that journey do you think you are, and how much more room do you think that you can go up higher by, and sort of what are the top catalysts there? And then when we're thinking about 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.
spk05: Okay, Max. So we are very, very, I mean, we're excited to see our pre-booking move up to 22%, which is the first we've ever hit up from the first quarter. And that's without any additional banners being added to our pre-booking platform. We believe 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 a little bit behind or they're a little bit behind We're both a little bit by in terms of some of the preparation testing etc on the site But we'll be very excited to see that site go live at the end of the third quarter that will see Hopefully that 22% notch up higher internally We have a higher target than than the one that we are sort of beating right now and we will continue to set that because as you know, I a pre-booked guest spends 35% more than anybody who just comes on board without pre-booking. So clearly that's a big focus for us, big initiative, not only now, but will continue to be in 2023. Sorry, what was the second question that you had again? Can you just repeat that?
spk00: Just getting average spend per guest hire.
spk05: Yeah, you know what amazes me actually is you look across all the mass and larger banners, contemporary banners, it's really exciting to see the extent of average guest spend and guest spend per staff member. What I find so fascinating, where we've got much fuller load factors or higher load factors, and with our staffing well over the 80% threshold, we are seeing guest 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 it's a very interesting inversion that typically you don't see. And so that's a healthy sign of the type of passenger that you're seeing on the very big banners thus far. So we're very encouraged by that.
spk00: Okay, great. That's helpful. And then as the environment continues to normalize, can you just speak to what you think the steady state growth algorithm of the company could be, both on 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 wages, labor, tech investments, or anything else? Thank you.
spk08: Thanks, guys.
spk04: Our next question comes from Asia Georgieva with Invitae Research. Please go ahead with your question.
spk03: Good morning. This is Asia. I had a couple of questions. Leonard, Stephen, as FCCs start to get used up, do you think there might be somewhat less of a momentum towards onboard spend, and in particular, does it affect you?
spk05: You know, as we mentioned before, we really don't have visibility as to where any of the guests are spending their 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 the extent of the FCC continues to diminish. They can spend it in virtually any place on board outside of the casino, to the extent that they're utilizing that in the spa, we just cannot trace that because the granularity of where it posts on the folio is not available to us.
spk03: Yeah, I've always wanted to kind of get a post on this number, but obviously we can't. Do you also see the economy between the short Caribbean Bahamas cruises where the ticket prices seem to be very strong. Obviously, these are destinations, especially for North American passengers, that are easier to reach 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 see in your numbers?
spk05: No, not really. I can't really speak to that right now. Certainly, Caribbean continues to have higher load factors than some of the banners in the MED right now, but since the relaxation of some of the COVID requirements, we're 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, it seems like demand is still there. So Alaska's performing incredibly well, as is the Caribbean. I mean, we've just finished July, and I continue to be encouraged by what I'm seeing.
spk03: Great. And last question. Can we discuss sort of a longer-term balance sheet thoughts, you know, the liquidity question? That has been at everyone's minds lately. I think we can look at 2023. Oh, I'm sorry.
spk05: The liquidity question, I think, was pretty much put to bed by Stephen in his commentary. Again, I'm sorry.
spk03: I jumped a little bit late.
spk05: Okay. Well, the maturities that we have are nothing before 2026. We will continue to deleverage on high interest rate instruments, the second lien being the one that we'll 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 industry, are not concerned about liquidity. We've also removed the ATM, as you may have read in the press release, and so we 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.
spk03: And also you're the first one out of the industry to actually have positive adjusted net income. So congratulations.
spk04: Thank you. this concludes our question and answer session.
spk06: I would like... Operator, sorry, just before we conclude, sorry to interrupt. I'm just going to jump back to, we didn't answer Max's final question there with regards to the growth algorithm. I just want to jump back to that real quick and briefly provide a response there. So Max, I think as you know, if we look back historically, cruise ship passenger growth has grown at a CAGR from 1995 through 2019, including the effects of the 9-11 and the 08-09 recession at a rate of almost 7%. We would expect our revenue to grow at above that level and would be disappointed if it didn't. I mean, we have, as you know, 22 new bills that are being introduced into service in 2022. There's another 11 new bills coming into service in 2023. And so our expectation would be for our growth to at least surpass 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 return to service in their entirety, as occupancy levels improve, that there's no reason for our margins to not go back to at least historical levels.
spk04: Okay, this concludes our question and answer session. I would like to turn the conference back over to Leonard Fluxman, CEO and President, for any closing remarks.
spk05: All right, 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.
spk04: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.
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