Sun Country Airlines Reports Second Quarter 2023 Results

Revenue of $261 million, highest second quarter on record⁽¹⁾GAAP diluted EPS of $0.35 and operating income of $36 million
Adj. diluted EPS⁽²⁾ of $0.40 and adjusted operating income⁽²⁾ of $40 million_,highest second quarter on record⁽¹⁾

MINNEAPOLIS, Aug. 03, 2023 (GLOBE NEWSWIRE) -- Sun Country Airlines Holdings, Inc. (“Sun Country Airlines,” “Sun Country,” the “Company”) (NASDAQ: SNCY) today reported financial results for its second quarter ended June 30, 2023.

“Sun Country had an historically strong second quarter, in what is typically a seasonally weaker quarter for us,” said Jude Bricker, Chief Executive Officer of Sun Country. “Total revenue was up by 19.2% versus the second quarter 2022 and we produced a GAAP operating margin of 13.6% and an adjusted operating margin⁽²⁾ of 15.3%. The revenue environment continued to be robust as total average fare increased 2.7% and load factor was up by 2 percentage points versus the second quarter of 2022. This helped to drive a GAAP diluted EPS of $0.35 and an Adjusted diluted EPS⁽²⁾ of $0.40 in the second quarter. In addition to our excellent performance, our board of directors has authorized an additional $30 million for repurchases of Sun Country shares.”

Overview of Second Quarter

	Three Months Ended June 30,
(unaudited) (in millions, except per share amounts)		2023		2022		% Change
Total Operating Revenue	$	261.1	$	219.1		19.2
Operating Income		35.6		3.4		956.3
Income (Loss) Before Income Tax		26.8		(4.8	)	NM
Net Income (Loss)		20.6		(3.9	)	NM
Diluted earnings (Loss) per share	$	0.35	$	(0.07	)	NM

	Three Months Ended June 30,
(unaudited) (in millions, except per share amounts)		2023		2022		% Change
Adjusted Operating Income ⁽²⁾	$	40.0	$	3.9		914.2
Adjusted Income (Loss) Before Income Tax ⁽²⁾		31.3		(2.6	)	NM
Adjusted Net Income (Loss) ⁽²⁾		24.1		(1.8	)	NM
Adjusted diluted earnings (Loss) per share ⁽²⁾	$	0.40	$	(0.03	)	NM

	Six Months Ended June 30,
(unaudited) (in millions, except per share amounts)		2023		2022		% Change
Total Operating Revenue	$	555.2	$	445.6		24.6
Operating Income		91.4		25.2		262.6
Income Before Income Tax		76.4		1.6		NM
Net Income (Loss)		58.9		(0.3	)	NM
Diluted earnings per share	$	0.99	$	0.00		NM

	Six Months Ended June 30,
(unaudited) (in millions, except per share amounts)		2023		2022	% Change
Adjusted Operating Income ⁽²⁾	$	98.5	$	26.7	268.8
Adjusted Income Before Income Tax ⁽²⁾		83.8		13.0	542.3
Adjusted Net Income ⁽²⁾		64.5		10.5	514.5
Adjusted diluted earnings per share ⁽²⁾	$	1.08	$	0.18	500.0

"NM" stands for not meaningful

For the quarter ended June 30, 2023, Sun Country reported net income of $21 million and income before income tax of $27 million, on $261 million of revenue. Adjusted income before income tax⁽²⁾ for the quarter was $31 million. GAAP operating income during the quarter was $36 million, while adjusted operating income⁽²⁾ was $40 million_.

“During the quarter, revenue growth continued across our scheduled service, charter and cargo businesses, and the second quarter was our eighth consecutive quarter where year-over-year total revenue growth has exceeded total block hour growth,” said Dave Davis, President and Chief Financial Officer. “Scheduled service TRASM⁽³⁾ increased 10.3% while scheduled service ASMs increased 5.6% versus second quarter 2022. This contributed to net income of $21 million and an adjusted EBITDA margin⁽²⁾ of 23.9% for the quarter, and net income of $59 million and an adjusted EBITDA margin of 25.3% year to date. Total flown block hours during the second quarter across all business lines grew by 11.3% year over year. Adjusted CASM⁽⁴⁾ was 10.4% higher than second quarter 2022, which reflects declining year-over-year CASM growth versus the first quarter. We expect year-over-year Adjusted CASM⁽⁴⁾ trends to continue to improve in the quarters ahead.”

Notable Highlights

Named the Best Low-Cost Airline in North America by Skytrax at the 2023 World Airline Awards.
Added nonstop flying from Milwaukee to both Orlando and Phoenix, and increased flying between Milwaukee and Cancun over the busy winter travel period.
The Company repurchased 416,751 shares at an average price of $17.82 during the second quarter. The board of directors approved an additional $30 million of buyback authority which brings the current repurchase authorization to $32.8 million.

Capacity

System block hours flown during the second quarter of 2023 grew by 11.3% year-over-year. Cargo block hours grew in the second quarter by 10.4% year-over-year as Amazon flying was constrained last year due to scheduled maintenance events. Scheduled service block hours and charter block hours increased by 7.4% and 23.9%, respectively year-over-year on a 21.7% increase in average passenger aircraft.

Charter block hours under long-term contracts comprised 87.2% of the total charter flying performed in the second quarter of 2023. As the Company continues to normalize its aircraft utilization, it intends to pursue more ad-hoc charter flying.

Revenue

For the second quarter of 2023, the Company reported total revenue of $261 million, which was 19.2% more than the second quarter of 2022. The Company’s scheduled service TRASM⁽³⁾ of 12.74 cents in the second quarter of 2023 increased 10.3% year-over-year while scheduled service ASMs also increased 5.6%. The second quarter 2023 average total fare of $177 exceeded second quarter 2022 by 2.7% and included strong average ancillary revenue per passenger of $66. In the second quarter of 2023, the Company’s charter service revenue was $50 million, an increase of 16.1% year-over-year. On a rate basis, second quarter 2023 charter revenue per block hour was 6.3% lower than the rate in the second quarter of 2022 as lower fuel prices reduced the fuel reimbursement amount that we received from our charter customers.

In the second quarter of 2023, cargo revenue was $25 million, an 18.1% increase versus the second quarter of 2022. The variance was primarily driven by a 10.4% increase in block hours and the annual rate escalation which went into effect in mid-December 2022.

Cost

For the second quarter of 2023, total GAAP operating expenses increased 4.5% year-over-year, primarily due to a 25.9% increase in salaries, wages, and benefits. This increase was driven, in part, by a $3 million one-time vesting of management stock options. Fuel expense decreased by 32.0% compared to second quarter 2022. Adjusted CASM⁽⁴⁾ in the second quarter increased 10.4% versus the second quarter 2022 due to a decrease in daily aircraft utilization of 9.5% for the same period.

Balance Sheet and Liquidity

Total liquidity⁽⁵⁾ was $263 million on June 30, 2023, while the Company’s net debt⁽⁶⁾ was $490 million.

(in millions - amounts may not recalculate due to rounding)	June 30, 2023		December 31, 2022
	(Unaudited)
Cash and Cash Equivalents	$	86.9	$	92.1
Available-for-Sale Securities		151.5		172.6
Amount Available Under Revolving Credit Facility		24.7		24.7
Total Liquidity	$	263.0	$	289.4

(in millions - amounts may not recalculate due to rounding)	June 30, 2023		December 31, 2022
	(Unaudited)
Total Debt, net	$	448.4	$	352.2
Finance Lease Obligations		257.3		251.3
Operating Lease Obligations		22.7		26.1
Total Debt, net, and Lease Obligations		728.5		629.7
Cash and Cash Equivalents		86.9		92.1
Available-for-Sale Securities		151.5		172.6
Net Debt	$	490.1	$	364.9

Fleet

As of June 30, 2023, the Company had 43 aircraft in its passenger service fleet, operated 12 freighter aircraft in its cargo operation, and had five aircraft held for operating lease.

Guidance for Third Quarter 2023

	Q3 2023	H/(L) vs Q3 2022
Total revenue - millions	$240 to $250	8% to 13%
Economic fuel cost per gallon	$2.90	(26%)
Operating income margin - percentage	6% to 11%	(1pp) to 4pp
Effective tax rate	23%
Total system block hours - thousands	34.5 to 35.5	13% to 16%

Conference Call & Webcast Details

Sun Country Airlines will host a conference call to discuss its second quarter 2023 results at 8:30 a.m. Eastern Time on Friday, August 4, 2023. A live broadcast of the conference call will be available via the investor relations section of Sun Country Airlines’ website at https://ir.suncountry.com/news-events/events-and-presentations. The online replay will be available on the same website approximately one hour after the call.

About Sun Country Airlines

Sun Country Airlines is a new breed of hybrid low-cost air carrier that dynamically deploys shared resources across our synergistic scheduled service, charter and cargo businesses. Based in Minnesota, we focus on serving leisure and visiting friends and relatives ("VFR") passengers and charter customers and providing cargo services, with flights throughout the United States and to destinations in Mexico, Central America, Canada, and the Caribbean.

End Notes

1 -	Records begin in January 2017
2 -	See additional details, including reconciliations to the most comparable GAAP measures, in the section titled “Non-GAAP financial measures”
3 -	Scheduled Service TRASM includes Schedule Service revenue, Ancillary revenue, and ASM generating revenue classified within Other Revenue on the Condensed Consolidated Statement of Operations / Scheduled Service ASMs. Other Revenue includes rental revenue of approximately $6 million associated with five aircraft held for operating lease in the second quarter, which is not included
4 -	Adjusted CASM is a non-GAAP measure derived from CASM by excluding fuel costs, non-cash management stock compensation expense, costs arising from its cargo operations, depreciation recognized on our aircraft and flight equipment held for operating lease, certain commissions, and other costs of selling its vacations product from this measure. See table titled “Reconciliation of CASM to Adjusted CASM”
5 -	Total liquidity = cash and cash equivalents + available-for-sale securities + amount available under revolver
6 -	Net debt = current portion of long-term debt + long-term debt + finance lease obligations + operating lease obligations – cash and cash equivalents - available-for-sale securities

Forward Looking Statements

This press release contains forward-looking statements, which involve risks and uncertainties. These forward-looking statements are generally identified by the use of forward-looking terminology, including the terms “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “likely,” “may,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “target,” “will,” “would” and, in each case, their negative or other various or comparable terminology. All statements other than statements of historical facts contained in this press release, including statements regarding our strategy, future operations, future financial position, future revenue, projected costs, prospects, plans, objectives of management, and expected market growth are forward-looking statements. The forward-looking statements are relating to:

• our strategy, outlook and growth prospects;

• our operational and financial targets and dividend policy;

• general economic trends and trends in the industry and markets;

• potential repurchases of our common stock; and

• the competitive environment in which we operate.

These statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance, or achievements to be materially different from any future results, performance, or achievements expressed or implied by the forward-looking statements.

These forward-looking statements reflect our views with respect to future events as of the date of this press release and are based on assumptions and subject to risks and uncertainties. Given these uncertainties, you should not place undue reliance on these forward-looking statements. These forward-looking statements represent our estimates and assumptions only as of the date of this press release and, except as required by law, we undertake no obligation to update or review publicly any forward-looking statements, whether as a result of new information, future events or otherwise after the date of this press release. We anticipate that subsequent events and developments will cause our views to change. You should read this press release completely and with the understanding that our actual future results may be materially different from what we expect. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures, or investments we may undertake. We qualify all of our forward-looking statements by these cautionary statements. Additional information concerning certain factors is contained in the Company’s Securities and Exchange Commission filings, including but not limited to the Company’s Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K.

Non-GAAP Financial Measures

We sometimes use information that is derived from the Consolidated Financial Statements, but that is not presented in accordance with GAAP. We believe these non-GAAP measures provide a meaningful comparison of our results to others in the airline industry and our prior year results. Investors should consider these non-GAAP financial measures in addition to, and not as a substitute for, our financial performance measures prepared in accordance with GAAP. Further, our non-GAAP information may be different from the non-GAAP information provided by other companies. We believe certain charges included in our operating expenses on a GAAP basis make it difficult to compare our current period results to prior periods as well as future periods and guidance. The tables below show a reconciliation of non-GAAP financial measures used in this document to the most directly comparable GAAP financial measures.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share amounts)
(Unaudited)

	Three Months Ended June 30,
		2023			2022		% Change
Operating Revenues:
Scheduled Service	$	111,467		$	108,412		2.8
Charter Service		49,626			42,749		16.1
Ancillary		66,773			44,201		51.1
Passenger		227,866			195,362		16.6
Cargo		25,017			21,190		18.1
Other		8,203			2,515		226.2
Total Operating Revenue		261,086			219,067		19.2

Operating Expenses:
Aircraft Fuel		52,360			76,947		(32.0)
Salaries, Wages, and Benefits		75,919			60,298		25.9
Aircraft Rent		779			2,211		(64.8)
Maintenance		15,942			12,782		24.7
Sales and Marketing		8,507			7,881		7.9
Depreciation and Amortization		22,355			16,854		32.6
Ground Handling		11,311			8,212		37.7
Landing Fees and Airport Rent		12,962			9,496		36.5
Other Operating, net		25,364			21,017		20.7
Total Operating Expenses		225,499			215,698		4.5
Operating Income		35,587			3,369		956.3

Non-operating Income (Expense):
Interest Income		2,545			532		378.4
Interest Expense		(11,239	)		(7,042	)	59.6
Other, net		(143	)		(1,702	)	(91.6)
Total Non-operating Expense, net		(8,837	)		(8,212	)	7.6

Income (Loss) before Income Tax		26,750			(4,843	)	NM
Income Tax Expense		6,132			(921	)	NM
Net Income (Loss)	$	20,618		$	(3,922	)	NM

Net Income (Loss) per share to common stockholders:
Basic	$	0.37		$	(0.07	)	NM
Diluted	$	0.35		$	(0.07	)	NM
Shares used for computation:
Basic		56,084,759			58,060,716		(3.4)
Diluted		59,712,048			58,060,716		2.8

“NM” stands for not meaningful

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share amounts)
(Unaudited)

	Six Months Ended June 30,
		2023			2022		% Change
Operating Revenues:
Scheduled Service	$	264,124		$	232,479		13.6
Charter Service		95,813			75,628		26.7
Ancillary		135,198			89,287		51.4
Passenger		495,135			397,394		24.6
Cargo		48,378			42,243		14.5
Other		11,688			5,954		96.3
Total Operating Revenue		555,201			445,591		24.6

Operating Expenses:
Aircraft Fuel		124,650			141,492		(11.9)
Salaries, Wages, and Benefits		151,349			119,915		26.2
Aircraft Rent		2,259			5,397		(58.1)
Maintenance		28,981			24,777		17.0
Sales and Marketing		18,436			16,509		11.7
Depreciation and Amortization		41,815			32,182		29.9
Ground Handling		22,349			16,170		38.2
Landing Fees and Airport Rent		25,013			19,782		26.4
Other Operating, net		48,979			44,166		10.9
Total Operating Expenses		463,831			420,390		10.3
Operating Income		91,370			25,201		262.6

Non-operating Income (Expense):
Interest Income		5,286			556		850.7
Interest Expense		(19,869	)		(15,604	)	27.3
Other, net		(355	)		(8,577	)	(95.9)
Total Non-operating Expense, net		(14,938	)		(23,625	)	(36.8)

Income before Income Tax		76,432			1,576		NM
Income Tax Expense		17,486			1,861		839.6
Net Income (Loss)	$	58,946		$	(285	)	NM

Net Income (Loss) per share to common stockholders:
Basic	$	1.05		$	0.00		NM
Diluted	$	0.99		$	0.00		NM
Shares used for computation:
Basic		56,364,170			57,984,608		(2.8)
Diluted		59,630,008			57,984,608		2.8

“NM” stands for not meaningful

KEY OPERATING STATISTICS

The following tables presents key operating statistics and metrics for the three and six months ended June 30, 2023 and 2022.

	Three Months Ended June 30,
		2023			2022		% Change
Scheduled Service Statistics:
Revenue passenger miles (RPMs) – thousands		1,216,261			1,126,030		8.0
Available seat miles (ASMs) – thousands		1,417,778			1,343,116		5.6
Load factor		85.8	%		83.8	%	2.0
Revenue passengers carried		1,005,126			884,088		13.7
Departures		6,401			5,674		12.8
Block hours		19,561			18,205		7.4
Scheduled service TRASM⁽¹⁾ - cents		12.74			11.55		10.3
Average base fare per passenger	$	110.90		$	122.63		(9.6)
Ancillary revenue per passenger	$	66.43		$	50.00		32.9
Total Fare per Passenger	$	177.33		$	172.63		2.7
Fuel gallons - thousands		15,128			14,187		6.6

Charter Statistics:
Departures		2,759			2,235		23.4
Block hours		5,666			4,573		23.9
Available seats miles (ASMs) - thousands		337,319			278,804		21.0
Fuel gallons - thousands		4,023			3,271		23.0

Cargo Statistics:
Departures		3,184			2,693		18.2
Block hours		8,570			7,762		10.4

Total System Statistics:
Average passenger aircraft		42.0			34.5		21.7
Passenger aircraft – end of period		43			41		4.9
Cargo aircraft – end of period		12			12		—
Aircraft held for operating lease – end of period		5			—		NM
Available seat miles (ASMs) – thousands		1,780,340			1,632,501		9.1
Departures		12,495			10,687		16.9
Block hours		34,230			30,755		11.3
Daily utilization – hours		6.7			7.4		(9.5)
Average stage length – miles		1,046			1,120		(6.6)
Total revenue per ASM (TRASM)⁽²⁾ - cents		12.93			12.12		6.7
Cost per ASM (CASM) - cents		12.67			13.21		(4.1)
Adjusted CASM - cents		7.88			7.14		10.4
Fuel gallons - thousands		19,399			17,568		10.4
Fuel cost per gallon	$	2.71		$	4.39		(38.3)
Employees at end of period		2,749			2,282		20.5

1 – See note 3 in end notes

2 – See note 4 in end notes

	Six Months Ended June 30,
		2023			2022		% Change
Scheduled Service Statistics:
Revenue passenger miles (RPMs) – thousands		2,648,392			2,464,490		7.5
Available seat miles (ASMs) – thousands		3,043,506			3,027,648		0.5
Load factor		87.0	%		81.4	%	5.6
Revenue passengers carried		2,003,364			1,806,740		10.9
Departures		12,578			11,901		5.7
Block hours		41,503			40,638		2.1
Scheduled service TRASM⁽¹⁾ - cents		13.31			10.82		23.0
Average base fare per passenger	$	131.84		$	128.67		2.5
Ancillary revenue per passenger	$	67.49		$	49.42		36.6
Total Fare per Passenger	$	199.33		$	178.09		11.9
Fuel gallons - thousands		32,511			31,587		2.9

Charter Statistics:
Departures		5,128			3,855		33.0
Block hours		10,720			8,377		28.0
Available seats miles (ASMs) - thousands		639,231			514,509		24.2
Fuel gallons - thousands		7,550			6,029		25.2

Cargo Statistics:
Departures		6,211			5,267		17.9
Block hours		16,346			15,152		7.9

Total System Statistics:
Average passenger aircraft		41.7			34.3		21.6
Passenger aircraft – end of period		43			41		4.9
Cargo aircraft – end of period		12			12		—
Aircraft held for operating lease – end of period		5			—		NM
Available seat miles (ASMs) – thousands		3,725,341			3,560,651		4.6
Departures		24,167			21,174		14.1
Block hours		69,313			64,560		7.4
Daily utilization – hours		7.0			8.0		(12.5)
Average stage length – miles		1,132			1,227		(7.7)
Total revenue per ASM (TRASM)⁽²⁾ - cents		13.45			11.33		18.7
Cost per ASM (CASM) - cents		12.45			11.81		5.4
Adjusted CASM - cents		7.47			6.64		12.5
Fuel gallons - thousands		40,472			37,813		7.0
Fuel cost per gallon	$	3.10		$	3.76		(17.6)
Employees at end of period		2,749			2,282		20.5

1 – See note 3 in end notes

2 – See note 4 in end notes

SUMMARY BALANCE SHEET
(Dollars in millions)
(amounts may not recalculate due to rounding)

	June 30, 2023		December 31, 2022		% Change
	(Unaudited)
Cash & Cash Equivalents	$	86.9	$	92.1	(5.6	)
Other Current Assets		215.3		253.4	(15.0	)
Total Current Assets		302.3		345.5	(12.5	)
Total Property & Equipment, net		948.1		785.7	20.7
Other		384.3		393.3	(2.3	)
Total Assets		1,634.6		1,524.4	7.2

Air Traffic Liabilities		130.3		158.0	(17.6	)
Current Finance Lease Obligations		33.6		18.0	87.0
Current Operating Lease Obligations		4.5		6.3	(28.8	)
Current Maturities of Long-Term Debt, net		83.2		57.5	44.6
Income Tax Receivable Agreement Liability		8.0		2.3	254.0
Other Current Liabilities		123.7		135.0	(8.4	)
Total Current Liabilities		383.3		377.1	1.6
Finance Lease Obligations		223.6		233.3	(4.1	)
Operating Lease Obligations		18.3		19.8	(7.9	)
Long-Term Debt, net		365.2		294.7	23.9
Income Tax Receivable Agreement Liability		93.0		101.5	(8.4	)
Other		10.5		5.2	101.1
Total Liabilities		1,093.9		1,031.7	6.0

Total Stockholders Equity	$	540.8	$	492.7	9.8

SUMMARY CASH FLOW
(Dollars in millions)

(Unaudited - amounts may not recalculate due to rounding)

	Six Months Ended June 30,
		2023			2022		% Change
Net Cash Provided by Operating Activities	$	95.7		$	37.1		158.2

Purchases of Property & Equipment		(192.4	)		(137.6	)	39.7
Other, net		24.3			(61.3	)	(139.6)
Net Cash Used in Investing Activities		(168.0	)		(199.0	)	(15.5)

Common Stock Repurchases		(22.2	)		—		NM
Proceeds from Borrowing		119.2			172.5		(30.9)
Repayment of Finance Lease Obligations		(8.7	)		(24.3	)	(64.3)
Repayment of Borrowings		(21.8	)		(86.0	)	(74.7)
Other, net		(2.8	)		(1.0	)	174.8
Net Cash Provided by Financing Activities		63.6			61.1		4.1

Net Decrease in Cash		(8.7	)		(100.8	)	(91.4)
Cash, Cash Equivalents and Restricted Cash – Beginning of the Period		102.9			317.8		(67.6)
Cash, Cash Equivalents and Restricted Cash – End of the Period	$	94.2		$	217.0		(56.6)

“NM” stands for not meaningful

NON-GAAP FINANCIAL MEASURES

Adjusted Operating Income, Adjusted Operating Income Margin, Adjusted Income (Loss) Before Income Tax, Adjusted Pre-tax Margin, Adjusted Net Income (Loss), Adjusted Net Income (Loss) per share, Adjusted EBITDA and Adjusted EBITDA Margin are non-GAAP measures included as supplemental disclosure because we believe they are useful indicators of our operating performance. Derivations of Operating Income and Net Income are well recognized performance measurements in the airline industry that are frequently used by our management, as well as by investors, securities analysts and other interested parties in comparing the operating performance of companies in our industry.

The measures described above have limitations as analytical tools. Some of the limitations applicable to these measures include: they do not reflect the impact of certain cash and non-cash charges resulting from matters we consider not to be indicative of our ongoing operations; and other companies in our industry may calculate these non-GAAP measures differently than we do, limiting each measure’s usefulness as a comparative measure. Because of these limitations, the following non-GAAP measures should not be considered in isolation or as a substitute for performance measures calculated in accordance with GAAP and may not be the same as or comparable to similarly titled measures presented by other companies due to the possible differences in the method of calculation and in the items being adjusted.

For the aforementioned reasons, Adjusted Operating Income, Adjusted Operating Income Margin, Adjusted Income (Loss) Before Income Tax, Adjusted Pre-tax Margin, Adjusted Net Income (Loss), Adjusted Net Income (Loss) per Share, Adjusted EBITDA and Adjusted EBITDA Margin have significant limitations which affect their use as indicators of our profitability. Accordingly, readers are cautioned not to place undue reliance on this information.

Reconciliation of GAAP Operating Income to Adjusted Operating Income

Dollars in millions – Unaudited - amounts may not recalculate due to rounding

The following table presents the reconciliation of GAAP operating income to adjusted operating income.

	Three Months Ended June 30,						Six Months Ended June 30,
		2023			2022			2023			2022
Operating Revenue	$	261.1		$	219.1		$	555.2		$	445.6
Operating Income		35.6			3.4			91.4			25.2
Stock Compensation Expense		4.4			0.6			7.1			1.5
Adjusted Operating Income	$	40.0		$	3.9		$	98.5		$	26.7

Operating Income Margin		13.6	%		1.5	%		16.5	%		5.7	%
Adjusted Operating Income Margin		15.3	%		1.8	%		17.7	%		6.0	%

Reconciliation of GAAP Income (Loss) Before Income Tax to Adjusted Income (Loss) Before Income Tax

Dollars in millions – Unaudited - amounts may not recalculate due to rounding

The following table presents the reconciliation of GAAP income (loss) before income tax to adjusted income (loss) before income tax.

	Three Months Ended June 30,						Six Months Ended June 30,
		2023			2022			2023			2022
Net Income (Loss)	$	20.6		$	(3.9	)	$	58.9		$	(0.3	)
Add: Provision for Income Tax Expense (Benefit)		6.1			(0.9	)		17.5			1.9
Income (Loss) Before Income Tax, as reported		26.8			(4.8	)		76.4			1.6
Pre-tax margin		10.2	%	(2.2) %				13.8	%		0.4	%

Stock Compensation Expense		4.4			0.6			7.1			1.5
Tax Receivable Agreement adjustment ⁽¹⁾		—			1.7			(0.4	)		8.5
Gain on asset transactions, net ⁽²⁾		—			(0.1	)		—			(0.1	)
Loss on refinancing credit facility		—			—			—			1.6
Secondary offering costs		0.1			—			0.6			—
Adjusted Income (Loss) Before Income Tax	$	31.3		$	(2.6	)	$	83.8		$	13.0

Adjusted Pre-tax margin		12.0	%	(1.2) %				15.1	%		2.9	%

(1	)	This represents the adjustment to the TRA for the period, which is recorded in Non-Operating Income (Expense)
(2	)	Due to changes in the Company’s operations, Management determined that, beginning in the fourth quarter of 2022, certain asset transactions will no longer be included as adjustments to Adjusted Net Income because these transactions are part of our recurring operations. This change was made prospectively beginning in the fourth quarter of 2022, and no prior period amounts have been adjusted.

Reconciliation of GAAP Net Income (Loss) and Earnings (Loss) per Share to Adjusted Net Income (Loss) and Adjusted Earnings (Loss) per Share

Dollars and shares in millions, except for per share – Unaudited - amounts may not recalculate due to rounding

The following table presents the reconciliation of GAAP net income (loss) and earnings (loss) per share to adjusted net income (loss) and adjusted earnings (loss) per share.

	Three Months Ended June 30,
		2023						2022
		2023		Per Share - diluted			Dollars			Per Share - diluted
Net Income (Loss)	$	20.6		$	0.35		$	(3.9	)	$	(0.07	)
Stock Compensation Expense		4.4			0.07			0.6			0.01
Tax Receivable Agreement adjustment ⁽¹⁾		—			—			1.7			0.03
Gain on asset transactions, net ⁽²⁾		—			—			(0.1	)		—
Secondary offering costs		0.1			—			—			—
Income tax effect of adjusting items, net ⁽³⁾		(1.0	)		(0.02	)		(0.1	)		—
Adjusted Net Income (Loss)	$	24.1		$	0.40		$	(1.8	)	$	(0.03	)

Diluted share count		59.7						58.1

	Six Months Ended June 30,
		2023						2022
	Dollars			Per Share - diluted			Dollars			Per Share - diluted
Net Income (Loss)	$	58.9		$	0.99		$	(0.3	)	$	—
Stock Compensation Expense		7.1			0.12			1.5			0.03
Tax Receivable Agreement adjustment ⁽¹⁾		(0.4	)		(0.01	)		8.5			0.15
Gain on asset transactions, net ⁽²⁾		—			—			(0.1	)		—
Loss on refinancing credit facility		—			—			1.6			0.03
Secondary offering costs		0.6			0.01			—			—
Income tax effect of adjusting items, net ⁽³⁾		(1.8	)		(0.03	)		(0.7	)		(0.01	)
Adjusted Net Income	$	64.5		$	1.08		$	10.5		$	0.18

Diluted share count		59.6						58.0

(1	)	This represents the adjustment to the TRA for the period, which is recorded in Non-Operating Income (Expense)
(2	)	Due to changes in the Company’s operations, Management determined that, beginning in the fourth quarter of 2022, certain asset transactions will no longer be included as adjustments to Adjusted Net Income because these transactions are part of our recurring operations. This change was made prospectively beginning in the fourth quarter of 2022, and no prior period amounts have been adjusted.
(3	)	The tax effect of adjusting items, net is calculated at the Company’s statutory rate for the application period

Reconciliation of GAAP Net Income (Loss) to Adjusted EBITDA

Dollars in millions – Unaudited - amounts may not recalculate due to rounding

The following tables present the reconciliation of net income (loss) to adjusted EBITDA for the periods presented below.

	Three Months Ended June 30,						Six Months Ended June 30,
		2023			2022			2023			2022
Net Income (Loss)	$	20.6		$	(3.9	)	$	58.9		$	(0.3	)
Interest Income		(2.5	)		(0.5	)		(5.3	)		(0.6	)
Interest Expense		11.2			7.0			19.9			15.6
Stock Compensation Expense		4.4			0.6			7.1			1.5
Tax Receivable Agreement adjustment ⁽¹⁾		—			1.7			(0.4	)		8.5
Secondary offering costs		0.1			—			0.6			—
Gain on asset transactions, net ⁽²⁾		—			(0.1	)		—			(0.1	)
Provision for Income Taxes		6.1			(0.9	)		17.5			1.9
Depreciation and Amortization		22.4			16.9			41.8			32.2
Adjusted EBITDA	$	62.3		$	20.7		$	140.2		$	58.7

Adjusted EBITDA margin		23.9	%		9.5	%		25.3	%		13.2	%

(1	)	This represents the adjustment to the TRA for the period, which is recorded in Non-Operating Income (Expense)
(2	)	Due to changes in the Company’s operations, Management determined that, beginning in the fourth quarter of 2022, certain asset transactions will no longer be included as adjustments to Adjusted Net Income because these transactions are part of our recurring operations. This change was made prospectively beginning in the fourth quarter of 2022, and no prior period amounts have been adjusted.

Adjusted CASM

Adjusted CASM is a non-GAAP measure derived from CASM by excluding fuel costs, costs related to our cargo operations, stock based compensation, depreciation recognized on our aircraft and flight equipment held for operating lease, certain commissions and other costs of selling our vacations product from this measure as these costs are unrelated to our airline operations and improve comparability to our peers. Adjusted CASM is an important measure used by management and by our board of directors in assessing quarterly and annual cost performance. Adjusted CASM is also a measure commonly used by industry analysts and we believe it is an important metric by which they compare our airline to others in the industry, although other airlines may exclude certain other costs in their calculation of Adjusted CASM. The measure is also the subject of frequent questions from investors.

Adjusted CASM excludes fuel costs. By excluding volatile fuel expenses that are outside of our control from our unit metrics, we believe that we have better visibility into the results of operations and our non-fuel cost initiatives. Our industry is highly competitive and is characterized by high fixed costs, so even a small reduction in non-fuel operating costs can lead to a significant improvement in operating results. In addition, we believe that all domestic carriers are similarly impacted by changes in jet fuel costs over the long run, so it is important for management and investors to understand the impact and trends in company-specific cost drivers, such as labor rates, aircraft and maintenance costs, and productivity, which are more controllable by management.

We have excluded costs related to the cargo operations and depreciation recognized on our aircraft and flight equipment held for operating lease as these operations do not create ASMs. During the six months ended June 30, 2023, the Company acquired five 737-900ERs that are currently on lease to an unaffiliated airline. Depreciation expense on these aircraft materially began during the three months ended June 30, 2023. Adjusted CASM further excludes other adjustments, as defined in the relevant reporting period, that are not representative of the ongoing costs necessary to our airline operations and may improve comparability between periods. We also exclude stock compensation expense when computing Adjusted CASM. The Company’s compensation strategy includes the use of stock-based compensation to attract and retain employees and executives and is principally aimed at aligning their interests with those of our stockholders and at long-term employee retention, rather than to motivate or reward operational performance for any particular period. Thus, stock-based compensation expense varies for reasons that are generally unrelated to operational decisions and performance in any period.

As derivations of Adjusted CASM are not determined in accordance with GAAP, such measures are susceptible to varying calculations and not all companies calculate the measures in the same manner. As a result, derivations of Adjusted CASM as presented may not be directly comparable to similarly titled measures presented by other companies. Adjusted CASM should not be considered in isolation or as a replacement for CASM. For the aforementioned reasons, Adjusted CASM has significant limitations which affect its use as an indicator of our profitability. Accordingly, readers are cautioned not to place undue reliance on this information.

Reconciliation of CASM to Adjusted CASM

Amounts may not recalculate due to rounding, dollar amounts in millions

The following table presents the reconciliation of CASM to Adjusted CASM.

	Three Months Ended June 30,
		2023			2022
	Operating Expenses - mm		Per ASM (cents)	Operating Expenses - mm		Per ASM (cents)
CASM	$	225.5	12.67	$	215.7	13.21
Less:
Aircraft Fuel		52.4	2.94		76.9	4.71
Stock Compensation Expense		4.4	0.25		0.6	0.04
Cargo expenses, not already adjusted above		26.0	1.46		21.3	1.31
Sun Country Vacations		0.3	0.01		0.2	0.01
Aircraft and Flight Equipment Held for Operating Lease, Depreciation Expense		2.3	0.13		—	—
Adjusted CASM	$	140.2	7.88	$	116.6	7.14

Available seat miles (ASMs) - mm		1,780.3			1,632.5

	Six Months Ended June 30,
		2023			2022
	Operating Expenses - mm		Per ASM (cents)	Operating Expenses - mm		Per ASM (cents)
CASM	$	463.8	12.45	$	420.4	11.81
Less:
Aircraft Fuel		124.7	3.35		141.5	3.97
Stock Compensation Expense		7.1	0.19		1.5	0.04
Cargo expenses, not already adjusted above		50.8	1.36		40.4	1.14
Sun Country Vacations		0.7	0.02		0.6	0.02
Aircraft and Flight Equipment Held for Operating Lease, Depreciation Expense		2.3	0.06		—	—
Adjusted CASM	$	278.3	7.47	$	236.3	6.64

Available seat miles (ASMs) - mm		3,725.3			3,560.7

Sun Country Airlines Reports Second Quarter 2023 Results

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