Q2 2024 Transcontinental Inc Earnings Call
Ladies and gentlemen, thank you for your patience and welcome to the conference call regarding the second quarter results of Fiscal Year 2024 for TC Transcontinental.
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Speaker Change: During the conference, all participants will be in listen-only mode.
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Speaker Change: A question period will follow the presentation and instructions will be given to you at that time.
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Speaker Change: We would like to remind you that this conference is being recorded today, June 6, 2024.
Speaker Change: The details will have to meet you said coffee house. He told US he gets his joint demand venkat.
Speaker Change: Welcome to TC Transcontinental Second Quarter of fiscal year 2024, results conference call.
Speaker Change: Welcome to T T. He transcon transcontinental second quarter of fiscal year 'twenty 'twenty four results conference call.
Speaker Change: During the presentation, all participants will be in a lesson-only mode.
Speaker Change: During the presentation, all participants will be in a listen only mode.
Speaker Change: Afterwards, we will conduct a question and answer session, and instructions will be provided at that time.
The words, we will conduct a question and answer session and instructions will be provided at that time.
Speaker Change: As a reminder, this conference is being recorded today, June 6, 2024.
Speaker Change: As a reminder, this conference is being recorded today June six 'twenty 'twenty four I believe.
Speaker Change: I would now like to give the floor to Yann Lapointe, Director of Investor Relations and Treasury. Mr. Lapointe, please go ahead.
Mr. Luckily: Like to turn the conference over to young Lapointe Director Investor Relations and Treasury you may have met lots of D. Let the HUD a yen that's quite a different tone or less you'll I think he is they just sir at Tulsa, Oklahoma. Mr. Luckily. Please go ahead.
Yan Lapointe: Thank you, Julie, and good morning, everyone on the call.
Julie: Thank you Julie.
Speaker Change: Good morning, everyone on the call.
Speaker Change: Welcome to Transcontinental's second quarter of fiscal 2024 earnings costs.
Speaker Change: Welcome to the cough cold snap at the second quarter of fiscal 2024 earnings call.
Speaker Change: Before we begin, please note that our quarterly report, including financial statements and related notes, as well as the slides supporting management's remarks, are available on our website at www.tc.tc under the Investor Relations section.
Speaker Change: Before we begin please note that our quarterly report, including financial statements unrelated note as well as the slides supporting managements remarks are available on our website.
Speaker Change: At Www Dot Tc that's P C.
Speaker Change: The Investor Relations section.
Speaker Change: A replay of this conference call will also be available on our website shortly after a call.
Speaker Change: A replay of this conference call will also be available on our website shortly after the call.
Speaker Change: Please note that this conference call is intended for the financial community.
Speaker Change: Please note that this conference call is intended for the financial community.
Speaker Change: Media are in listen-only mode and should contact Natadi-Sinja, senior advisor, corporate communications, for more information.
Speaker Change: Media are in listen only mode and should contact with any change in your advisor corporate communications for more information.
Speaker Change: We have with us today, our president and chief executive officer, Tom Amorin, and our executive vice president and chief financial officer, Donald Le Cabell.
Speaker Change: We have with US today are president and Chief Executive Officer, Tom I'm on it.
Speaker Change: Our executive Vice President and Chief Financial Officer vivid.
Speaker Change: As referenced on slide two, some of the financial measures discussed over the course of this conference call are non-IFRS.
Speaker Change: As referenced on slide two some of the financial measures discussed sort of course of this conference call are non ifr.
Speaker Change: can refer to the MDNA for a complete definition and reconciliation of these measures to IFRS.
Speaker Change: You can refer to the MD&A for a complete definition and reconciliation of these measures to ifr.
Speaker Change: In addition, this conference call might also contain forward-looking statements.
Speaker Change: In addition, this conference call also contains forward looking statements.
Speaker Change: These statements are based on the current expectations of management and information available as of today. And they involve numerous risks and uncertainty, known and unknown.
Speaker Change: These statements are based on the current expectations of management and information available as of today and they involve numerous risks and uncertainties known and unknown.
Speaker Change: The risks, uncertainties, and other factors that could influence actual results are described in the fiscal 2023 annual MDNA and in the annual information form.
Speaker Change: The risks uncertainties and other factors that could influence actual results are described in the fiscal 2023 annual MD&A.
Speaker Change: And then the annual information form.
Speaker Change: With that, I would now like to turn the call over to our president and CEO , Tamamaire.
Speaker Change: With that I would now like to turn the call over to our President and CEO Tom Amato.
Tom Amarek: Thank you, Jan, and good morning to everyone. We are pleased to report a third quarter in a row of improved profitability.
Tom Amarek: Thank you, Yann.
Tom Amato: Thank you Shannon and good morning to everyone.
Tom Amato: We are pleased to report a third quarter in a row.
Tom Amato: Perfect Debility.
Tom Amarek: because of our production cost initiatives and our favorable products.
Tom Amato: Largely due to our cost reduction initiatives and a favorable product mix.
Tom Amarek: First, a program to improve a profitability and financial situation, which we announced in December , is progressing well.
Tom Amato: First a program to improve our profitability and our financial situation, which we announced in December.
Tom Amato: Progressing well.
Speaker Change: We expect to reach $30 million in the run rate savings by the end of this fiscal year, close to a two-year objective of 40 million.
Tom Amato: We expect to reach $30 million run rate savings by the end of this fiscal year close to our three year objective of $40 million.
Speaker Change: I commend our team for the quick and effective execution of this important.
Tom Amato: I commend our team for their quick and effective execution of this important program.
Speaker Change: Secondly, I continued to work on optimizing our product mix, which helped improve our margins in the two main areas.
Tom Amato: Second our continued focus on optimizing our product mix, that's contributed to improve our margins.
Tom Amato: Our main sectors.
Speaker Change: In a packaging sector, while this stocking remained an issue in our medical business, and with a challenging comparable last year, we achieved a record performance.
Tom Amato: In our packaging sector wide Destocking remained an issue in our medical business and with a challenging comparable last year, we achieved a record performance.
Speaker Change: Demand in our non-food businesses remain slow, but we are starting to see an improvement in demand in most of our market.
Demand in our non food businesses remains slow.
Tom Amato: Starting to see an improvement in demand in most of our markets, which should drive modest overall top line growth in the second half of the year.
Speaker Change: which should lead to modest growth in the second half.
Speaker Change: In line with the need to accelerate the commercialization of recycle-ready packaging, the rollout of our cutting-edge, the OPE line in Farnberg, occurs in North America, is going well in accordance with that plan, and it is now in its commissioning process.
Tom Amato: In line with the need to accelerate the commercialization of recycled packaging the rollout of our cutting edge beauty line in Spartanburg, but first in North America is going well in accordance with our plan.
Tom Amato: And it is now in its commissioning phase.
Speaker Change: Over the last few months, the quality of our work was highlighted by our peers and customers. We have received a number of awards for the Flexible Packaging Association and Pack Global. And we are particularly pleased with the direct customer recognition received from Crofton Gamble, with the Partner Excellence Award, and from Coca Cola, Canada, a supply of the year 2023 for direct material.
Tom Amato: Although the last few months quite a few of our work was highlighted by our peers and customers. We have received a number of awards for their <unk>.
Tom Amato: Flexible packaging Association in fact global and we are particularly pleased with the with the direct customer recognition received from Procter and Gamble with a partner Excellence award and from Coca Cola to Canada. The supplier of the year 2023 for direct materials.
Speaker Change: Now turning to retail services and printing.
Now turning to retail services and printing.
Speaker Change: We are giving up the sector to reflect on the evolution of our company.
Tom Amato: We are renaming the sector to reflect the evolution of our business.
Speaker Change: Of course, newspapers, books, magazines, and other specialty printing remain an important part of our operation.
Tom Amato: Of course newspapers books magazines and other specialty printing remain an important part of our operations.
Speaker Change: That said, most of our activities today serve a wide range of retailers and brands.
Tom Amato: Most of our activities today sort of a wide range of retailers and brands from the production of digital and print advertising from 10th to the design and manufacturing of in store retail arguments are extended surface offering covers far more than the sectors former name indicated and it has room for growth.
Speaker Change: From the production of digital and print appetizing content to the design and manufacturing of in-store retail environments, our extended service offering covers far more than the sector's former name indicated, and it has room for growth.
Speaker Change: We are proud to have served a great number of retailers over the years, and look forward to helping them deliver even more value and better shopping experiences to customers.
Tom Amato: We are proud to have served a great number of retailers over the years and look forward to helping them deliver even more value and better shopping experiences to customers.
Speaker Change: In reviewing the second quarter, we, as well as our clients, are pleased with the successful roll-out of Radar in Quebec, complete at the end of April to 3.6 million foreign users.
Tom Amato: Reviewing the second quarter.
As well as our clients are pleased with 606 six full rollout of radar.
Tom Amato: Complete at the end of their pool to $3 6 million forums.
Speaker Change: We look forward to the further expansion of radar in British Columbia and radar's entry in Newfoundland, both in the month of July .
Tom Amato: We look forward to their further expansion of radar in British Columbia, and radars entry frontline both in the month of July.
Speaker Change: Finally, I am encouraged by the continued evolution of the ISMF.
Speaker Change: Finally, I'm encouraged by the continuous growth in the same activity.
Speaker Change: Tomorrow, June 7 marks the one year into the job for me. And while much remains to be done, I am pleased with the direction we have taken. I'm proud of the accomplishments of our teams in delivering on our priorities.
Speaker Change: Tomorrow June seven marks the one year into the job for me and while much remains to be done I am pleased with the direction. We have taken I'm proud of the accomplishments of our teams in delivering on our priorities.
Speaker Change: On that note, I turn it over to you, Donald. Thank you.
On that note at <unk> over to you Donald.
Donald LeCavalier: Thank you, Tamas, and good morning, everyone. Moving to consolidated numbers on slide five of the earnings call presentation.
Donald: Thank you Tamara and good morning, everyone moving to consolidated numbers on slide five of the earnings call presentation.
Donald LeCavalier: For the second quarter of 2024, we reported revenues of $683.2 million at 8.6% decrease in revenues versus the same period last year.
Donald: The second quarter of 2024, we reported revenues of $683 $2 million at eight 6% decrease in revenues versus the same period last year.
Donald LeCavalier: This decline was caused by lower volume in both our main sectors.
Speaker Change: This decline was caused by lower volume in both our main sectors.
Donald LeCavalier: Regarding profitability.
Speaker Change: Regarding profitability, despite the lower volume, we delivered a strong quarter with consolidated adjusted EBITDA of $110 $1 million.
Thomas Morin: Despite the lower volume, we delivered a strong quarter with consolidated adjusted a bidda of $110.1 million, a 1% improvement versus a solid Q2 last year.
Speaker Change: A 1% improvement versus a solid Q2 last year.
Speaker Change: This increase was mainly due to cost reduction initiatives related to the profitability improvement program and also a favorable product mix, partially upset by lower volume.
Speaker Change: This increase was mainly due to cost reduction initiatives related to the profitability improvement program and also a favorable product mix, partially offset by lower volumes.
Speaker Change: These three elements, cost reductions, mix, and volume impacted both our main sectors during the quarter.
Speaker Change: These three elements cost reductions mix and volume impacted both our main sectors during the quarter.
Speaker Change: Financial expense decreased by 0.8 million to 14.4 million, mainly due to a lower debt level following strong cash flow generation in the last 12 months, partially upset by exchange rate fluctuations and a higher interest rate on our floating red debt.
Speaker Change: Financial expenses decreased by <unk> 8 million to $14 4 million, mainly due to a lower debt level. Following strong cash flow generation in the last 12 months, partially offset by exchange rate fluctuations and a higher interest rate on our floating rate debt.
Speaker Change: Adjusted income tax increased by 0.6 million to $12.5 million, and represented an effective tax rate of 21.6%.
Speaker Change: Adjusted income tax increased by <unk> 6 million to $12 $5 million and represented an effective tax rate of 21, 6%.
Speaker Change: This led to an adjusted earnings per share of 52 cents, a 7 cents or 15.6% increase compared to the same quarter last year.
Speaker Change: This led to an adjusted earnings per share of <unk> 52 sets of seven or 56% increase compared to the same quarter last year.
Speaker Change: Now moving to slide 6 for the sector review.
Speaker Change: Now moving to slide six for the sector review.
Speaker Change: In packaging, we generated revenues of $4.4 million compared to $44.2 million last year.
Speaker Change: In packaging, we generated revenues of $412 $4 million compared to $444 $2 million last year.
Speaker Change: The 31.8 million decrease is mainly due to the lower volume caused by a slowdown in demand, in particular in the medical market.
Speaker Change: The 38, $31 8 million decrease is mainly due to the lower volume caused by a slowdown or a slowdown in demand in particular in the medical market.
Speaker Change: In terms of profitability, despite a strong performance last year, adjusted EBITDA and packaging grew by 5.6% to 71.2 million.
Speaker Change: In terms of profitability. Despite our strong performance last year, adjusted EBITDA and packaging grew by five 6% to $71 2 million.
Speaker Change: This solid performance led to a 17.3% EBADA margin, a 210 basis point improvement versus last year.
Speaker Change: This solid performance led to a 17, 3% EBITDA margin 210 basis point improvement versus last year.
Speaker Change: Cost Reduction Initiative and February product mix supported the margin growth.
Speaker Change: Cost reduction initiative in February.
Speaker Change: Mixed supported the margin growth.
Speaker Change: This is also the third consecutive quarter of margin improvement for the sector.
Speaker Change: This is also the third consecutive quarter of margin improvement for the sector.
Speaker Change: Moving to the retail services and printing sector on slide 7.
Speaker Change: Moving to the retail services and printing sector on slide seven.
Speaker Change: Revenue decreased by 10.8% to 266.3 million.
Speaker Change: Revenues decreased by 10, 8% to $266 3 million.
Speaker Change: This was mainly due to the lower volume in flyer printing activities related to the end of Publisac in Quebec, and also lower volume in magazine and book printing.
Speaker Change: This was mainly due to the lower volume in flyer printing activities related to the end of <unk> in Quebec, and also lower volume in magazine and book printing.
Speaker Change: Retail services and printings adjusted in bed was $47.1 million for a quarter.
Speaker Change: Retail services and <unk>, adjusted EBITDA was $47 $1 million for the quarter.
Speaker Change: Excluding the $1 million impact from exchange rates, earnings decreased organically by 1.9 million, as the lower volume was mostly upset by our cost reduction initiative and the favorable effect of the rollout of radar.
Speaker Change: Excluding the $1 million impact from exchange rates earnings decreased organically by $1 9 million as the lower volume was mostly offset by our cost reduction initiatives and a favorable.
Speaker Change: <unk> of the rollout of radar.
Speaker Change: Adjusted a bet down margin grew 90 basis point to 17.7% as a result of cost reduction initiative and the favorable effect of the rollout of radar.
Speaker Change: Adjusted EBITDA margin grew 90 basis points to 17, 7% as a result of cost reduction initiatives and the favorable effect of the rollout of radar.
Speaker Change: Now turning to cash flow. We generated $73 million from operating activities compared to $105 million in the previous year following the strong working capital benefit from inventory reduction in Q2 last year.
Speaker Change: Now turning to cash flow, we generated $73 million from operating activities compared to $105 million in the previous year. Following the strong working capital benefit from inventory reduction in Q2 last year.
Speaker Change: Our Cappex, at $30.1 million, were 23.1 million lower than last year, and in line with our full year guidance of around 135 million.
Speaker Change: Our capex at $30 $1 million were $23 1 million lower than last year and in line with our full year guidance of around $135 million.
Speaker Change: Despite the impact in the strengthening of the US dollar at the end of the quarter, we maintain in our net debt ratio to two times
Speaker Change: Despite the impact and the strengthening of the U S. Dollar at the end of the quarter, we made in our net debt ratio to two two times.
Speaker Change: We are confident that our leverage ratio will decrease materially in the second half of the year in line with a significant cash flow that we expect to generate over the next two quarters.
Speaker Change: We are confident that our leverage ratio will decrease materially in the second half of the year in line with a significant significant cash flow that we expect to generate over the next two quarters.
Speaker Change: [inaudible]
Speaker Change: In this context.
Speaker Change: We believe we are in a good position to launch subject to the TSX approval, a normal course issue or bid, to repurchase up to 5% of our shares.
Speaker Change: We believe we are in a good position to large subject to <unk> approval, our normal course issuer bid to repurchase up to 5% of our shares.
Speaker Change: We believe this decision is a good use of capital while we continue to reduce our net debt.
Speaker Change: We believe this decision is a good use of capital while we continue to reduce our net debt.
Speaker Change: Looking ahead, we are improving our outlook for fiscal 2024. We now expect our print sector to deliver a stable, adjusted in fiscal 2024 compared to fiscal 2023.
Speaker Change: Looking ahead, we are improving our outlook for fiscal 2024, we now expect our print sector to deliver a stable adjusted EBITDA in fiscal 2024 compared to fiscal 2023.
Speaker Change: At the consolidated level, we therefore expect to grow the adjusted bed up, and this fiscal year to reflect the strong performance year to date.
Speaker Change: At the consolidated level, we therefore expect to grow the adjusted EBITDA in this fiscal year to reflect our strong performance year to date.
Speaker Change: We are very pleased with the traction we are seeing from our profitability and financial position improvement program.
Speaker Change: We are very pleased with the traction we're seeing from our profitability and financial position improvement program, we expect to reach a run rate of $30 million in savings by the end of this fiscal year.
Speaker Change: We expect to reach a run rate of $30 million in savings by the end of this fiscal year.
Speaker Change: We are also cautiously optimistic about closing the sale of one or two buildings by the end of the calendar year and continue to be confident to reach 100 million in sale of real estate assets by the end of fiscal 2025.
Speaker Change: We are also cautiously optimistic about closing the sale of one or two buildings by the end of the calendar year and continue to be confident to reach $100 million in sale of real assets real estate assets by the end of fiscal 2025.
Speaker Change: On that note, we will not proceed with the question period.
Speaker Change: On that note. We will now proceed with the question period.
Speaker Change: Thank you, ladies and gentlemen, we will now proceed to the question and answer period.
Speaker Change: Maxie Madame.
Speaker Change: And gentlemen, now call today alopecia digestion, if you pause.
Speaker Change: If you have a question, please press the star key followed by 1 on your telephone keypad. A tone will be heard confirming your request. Questions will be taken in the order they are received.
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Speaker Change: Danny for Nick.
Speaker Change: Ladies and.
Speaker Change: Gentlemen, with with demand Nicholas Joseph please download the Sovaldi assume Bonnie.
Speaker Change: Please also ensure to pick up the receiver of your telephone device if you are using the hands-free function before pressing the keys. One moment please for your first question.
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Speaker Change: Thank you. One moment, please. Ladies and gentlemen, we will now conduct the question and answer session. If you have a question, please press the start, followed by the one on your touchstone phone. You will hear a tone acknowledging your request.
Speaker Change: Thank you one moment, please ladies and gentlemen, we will now conduct a question and answer session.
Speaker Change: I have a question. Please press star followed by the one on your Touchtone phone you will hear a tone acknowledging your request.
Speaker Change: Your questions will be pulled in the order they are received.
Speaker Change: Questions will be pulled in the order they are received.
Speaker Change: Please ensure you live the handset if you're using a speaker phone before pressing any keys. One moment please for your first question.
Speaker Change: Please ensure you lift the handset if you're using a speaker phone refurbishing any keys.
Speaker Change: Woman. Please for your first question.
Speaker Change: Your first question comes from Amir Patel from CIPC, Capital Markets. Please go ahead.
Speaker Change: Your first question comes from Amir <unk> from CIBC capital markets. Please go ahead.
Hamir Patel: Hi, good morning.
Speaker Change: Hi, good morning.
Hamir Patel: Thomas, you pointed to seeing improvement in some packaging end markets here in the third quarter. Are you able to quantify the volume trends you're seeing there, you know, maybe which areas are the strongest? And when would you expect to lap the negative comps that you're experiencing in the medical market?
Speaker Change: Thomas.
Amir <unk>: You pointed to seeing improvement in some packaging end markets here in the third third quarter are you able to quantify the volume trends you're seeing there.
Speaker Change: Maybe which areas are the strongest and when would you expect to lap.
Speaker Change: The negative comps that you're experiencing in the medical market.
Hamir Patel: Yeah, thank you, Amy Ann, and good morning.
Speaker Change: Yes, Thank you Amy and good morning.
Thomas Morin: The trends are picking up at the back end of Q2 in most of our end segments in packaging. The one that remains low is medical, as we said. And we believe this will continue certainly in Q3 for this very segment. The rest are expectations, and that covers basically all the rest, should yield about low single-digit growth.
Speaker Change: The trends are picking up at the back end of Q2 in most of our segments and packaging. The one that remains there Louise medical as we said.
Speaker Change: And we believe this will continue certainly in Q3 for these very segment. The risks are expectations and Thats covers basically all the risks should should yield a low single digit growth.
Speaker Change: in the second part of this year, say around 2%, I would guess. That's where, that's where we
Speaker Change: In the second quarter of this year.
Speaker Change: So around two 2% I would guess that's where it this way we see it.
Speaker Change: Okay, that's helpful. And you highlighted, in terms of the real estate sales expectation to monetize one or two buildings later this year. Are you able to quantify the potential proceeds of what's remaining at least this year?
Speaker Change: Okay.
Speaker Change: That's helpful and you highlighted.
Speaker Change: In terms of the real estate sales.
Speaker Change: And the expectation to monetize one or two buildings. Later this year are you able to quantify.
Speaker Change: The potential proceeds.
Speaker Change: What's remaining this at least this year.
Speaker Change: Well, as I said, for 2025, we expect to add by the end of 2025 at least 100 million. For those that we might close this year, there's one that, you know, we're really close. It's a small one. But too early to tell because it depends. You know, we're we feel we're in good position and we want to make sure we are at the right time in the market. So to be confirmed, but as I said, overall, we expect 100 million by the end of 2025 and confident.
Speaker Change: Well as I said.
For 2025, we expect to by the end of 2025 at least 100 million.
Speaker Change: For those that we might close this year. There is one that we're really close with a small one.
Speaker Change: But too early to tell because we.
We feel we're in good position and we want to make sure. We are at the right time in the market so to be confirmed but as I said overall, we expect $100 million by the end of 2025 and confident we can close them this year.
Speaker Change: Okay, fair enough. That's a toll I had for now. I'll get back in the queue. Thanks.
Speaker Change: Okay.
Sure Fair enough.
Speaker Change: That's all I had for now I'll get back in the queue. Thanks.
Speaker Change: Your next question comes from Adam Schein from National Bank Financial. Please go ahead.
Speaker Change: Your next question comes from Adam Shine from National Bank Financial. Please go ahead.
Speaker Change: Thanks, log. Good morning. Tomorrow, obviously a good first year. A couple of questions. Where's some of the traction or, you know, faster traction that you're seeing in regards to the profitability improvement, which clearly is moving ahead of expectations, it appears?
Adam Shine: Thanks, a lot good morning Tomorrow, obviously, a good first year a couple of questions.
Speaker Change: Some of the traction already.
Adam Shine: Foster traction that Youre seeing in regards to the profitability improvement, which clearly is moving ahead of expectations. It appears.
Speaker Change: Thank you, Adam, and good morning. It's a combination of two things. Adam, we've been working on product mix improvement for some time now. It's not something new.
Speaker Change: Thank you thank you Adam and good morning.
Speaker Change: It's a combination of two things we've been working on product mix improvement for some time now it's not something new.
Adam Shine: Back some quarters ago, we were talking about, you know, commercial excellence, understanding the value some of our products bring, and we've been pushing those products, you know, month after month. So there is a mix improvement here, and that is true for both businesses for packaging and the retail service.
Speaker Change: Some quarters ago, we were talking about commercial excellence understanding the value some of our products spring and we've been pushing those.
Speaker Change: Those products.
Speaker Change: <unk>. So there is a mix improvement here and that is true for both.
Speaker Change: Businesses for packaging and retail services and printing.
Speaker Change: It is one of the elements. The second element is obviously the reduction of atmospheric space.
Speaker Change: So thats one element of it the second element of it is obviously the reduction of our cost base.
Speaker Change: which we've been accelerating since December , as we could share with you. And then when you combine the two together, this is where the margin improve on both ends. Now, the big chunk of effort we've done is on fixed costs and SGNA. So this obviously yields some straightforward bottom line.
Speaker Change: Which we've been accelerating.
Speaker Change: Since December as we could share with you.
Speaker Change: Then when you combine the two together and this is where the margin improved on both hands.
Speaker Change: No.
Speaker Change: Chunk of efforts, we've done used on fixed costs and SG&A. So this obviously yields some straightforward bottom line impacts.
Speaker Change: Perfect. Thanks for that. And, you know, when we go back to the potential volume improvement in packaging that you're alluded to, I think you talked previously on the last call that you were hoping to see sort of retailers doing a bit more promotional activity to stimulate food demand. Is that part of the equation here, or are there other things afoot to sort of see better volumes in H2?
Speaker Change: Perfect. Thanks for that and we go back to the.
Speaker Change: Potential volume improvement in packaging that you alluded to I think you talked previously.
Speaker Change: On the last call that you were hoping to see sort of retailers doing a bit more promotional activity to stimulate food demand is that part of the equation here or are there other things afoot to sort of see better volumes in <unk>.
Speaker Change: You remember very well what I said.
Yes good.
Speaker Change: Remember very well what I said.
Speaker Change: What I would say on Q2, when we look at Q2 specifically, the core of our activities really held very well, and it's a tough comparable to last year, as you remember last year was pretty high. So core of our segments, including the product mix, I've talked about, held strongly. And that's certainly on account of what we just commented on, the improved and enhanced retailer promotional action. The non-food core segments really suffered in Q2, a bit the same as in Q1. So we've addressed this and we've been active on the market to develop and grow some relationship with new or existing customers. And that's also what yields what we believe a better second hand.
What I would say on Q2, when we look at Q2 specifically.
Speaker Change: The core of our activities really held very well and it's a tough comparable to last year. As you remember last year was pretty high so core of articles art segments, including the product mix have talked about held strongly.
Speaker Change: And Thats certainly on account of what we just commented on the improved and enhanced retailer promotional it.
Speaker Change: The non food core segments really suffered in Q2 a bit the same as in the us in Q1. So we've addressed this and we've been active in the market to develop and grow some some relationship with the new or existing customers and that's also what yields.
Speaker Change: What we believe is a better a better second half.
Speaker Change: OK. Thank you for that. I appreciate it. I will meet again.
Speaker Change: Okay, thanks for that. Appreciate it.
Speaker Change: Okay. Thanks for that I appreciate it I'll queue up again.
Speaker Change: Your next question comes from Maheri from Skosha Bank. Please go ahead.
Speaker Change: Your next question comes from Maher Yaghi from Scotiabank. Please go ahead.
Speaker Change: Great, thank you to have put my question. I just wanted to ask you just a clarification on your earlier comment regarding packaging growth in the second half. Is that the 2% or 3% that you talked about, is that including medical or excluding medical?
Speaker Change: Great.
Speaker Change: Joe.
Joe: I just wanted to ask you just a clarification.
Joe: On your earlier comment regarding packaging growth in the second half is that the 2% to 3% that you talked about is that including medical or excluding medical.
Maher Yaghi: You have already added 1% to my figure, Maher. It's very kind of you to say so. So far, we think that includes it. The doctor is not a significant segment for us, but it is impactful in terms of decline, as we say. We are billing this low activity for the rest of the year.
Speaker Change: Are you already at 1% to my number.
Sorry.
Joe: Yes.
Joe: Yes.
Speaker Change: I think so far we believe it includes it.
Speaker Change: Medical is not a big segment for us, but just yet impactful from a from a decline as we speak.
Speaker Change: We factored that.
Speaker Change: Lower activity for the rest of the year.
Speaker Change: Okay, great. Thanks for that. So in terms of the printing side, you know, you were facing quite a heavy comp, you know, tough comps in the second quarter. It does look like we're still in that 5 to 6%, 7% range in terms of decline year on year. Is that
Okay great.
Speaker Change: Thanks for that so in terms of the printing side.
Speaker Change:
Speaker Change: You were facing quite a heavy com.
Speaker Change: Comp tougher.
Speaker Change: Comps in the second quarter. It does look like we're still in that 5% to 6%, 7% range in terms of decline year on year.
Speaker Change: Is that.
Speaker Change: Is that what you're looking at in the second half potentially or things have changed?
Speaker Change: Is that what you youre looking at in the second half potentially or things have changed.
Speaker Change: Things have changed, my view, not so much in terms of volume, but in terms of product offering.
Speaker Change: Things have changed in my view not so much in terms of volume, but in terms of product offering.
Speaker Change: What you need to factor in, Mael, is the change in the product offering we have in the retail services and printing activity. And that's the rollout of radar, which has an impact, obviously, on the top line.
Speaker Change: What you need to factor in.
Speaker Change: That is the change in the in their product offering we have been in the retail services and printing activity and Thats the rollout.
Speaker Change: Radar, which has an impact obviously on the top line.
Maher Yaghi: And that's reflected in the minus 5%, but also an impact from a product mix standpoint in terms of bottom line. The other thing is the book segment. If you compare year over year, our book activity was actually strong in the first half and much less so in the second.
Speaker Change: And that's reflected in the minus 5%.
Speaker Change: But also an impact from a product mix standpoint in time in terms of bottom line.
Speaker Change: The other thing is the book segment, if you compare year over year.
Speaker Change: Activity.
Speaker Change: Was actually strong in the first half and much less so in the second half. So when you compare year over year, we will have an easier comparable.
Maher Yaghi: So when you compare year over year, we'll have an easier comparison.
Speaker Change: And maybe just to complete on radar, you know, last year we had started the radar rollout in Montreal. So year over year, two, three, Montreal will have no impact and now it's more the rest of Quebec that will be affected by radar.
Speaker Change: And maybe just to complete on radar you.
Speaker Change: Last year, we had.
Speaker Change: We have started the radar rollout in Montreal, so year over year in Q3 months, we all will be will have no impact and now it's more the rest of Quebec that will be impacted by radar. So I know, there's some crazy alright.
Speaker Change: it's a bit crazy.
Speaker Change: Okay, okay, great. Now, just turning on the cost side, you know, definitely strong performance in the second quarter, how much additional cost control we could look at or could see on the packaging side, you know, still not visible yet in results.
Speaker Change: Okay, Okay, great and now just turning on the cost side.
Speaker Change: Definitely.
Speaker Change: Strong performance in the second quarter, how much additional cost control, we could look at or could see on the packaging side.
Speaker Change: Still not visible yet in results.
Speaker Change: So a plan as we communicated is to aim at 40 million. We believe we're going to be on a run rate of 30 at the end of this fiscal year, so there is another 10 to go for. And this is not specific to packaging, it is company-wide, obviously, as we're addressing a fixed cost in particular.
Speaker Change: So our plan our plan as we've communicated is to aim at $40 million.
Speaker Change: We believe we're going to be on a run rate of <unk> at the end of this fiscal year. So there is another thing to go for and this is not specific to packaging.
Speaker Change: It is a companywide obviously as we as we are addressing our fixed costs in the in particular.
Speaker Change: That being said, the focus remains the same. Beyond fixed costs, we're looking at the cost of goods sold. We have still some work to be done in there, and that would be more on the packaging site, to your point. And the second thing would be on the underperforming sites. We still have some sites lagging behind, and we're addressing this at the same time. So we believe...
Speaker Change: That being said the focus remains the same beyond <unk>, we are looking at the cost of goods sold.
Speaker Change: We have still some work to be done in there and that would be more on the packaging side to your point and the second thing would be on the on the underperforming sites, we still have some sites lagging behind.
Speaker Change: And we are addressing this.
Speaker Change: At the same time, so we believe.
Speaker Change: Say over the two years, we believe we should be in a position to meet our targets of 40 million.
Speaker Change: So over the two years, we believe we should be in a position to meet our targets of $40 million are continuing to work on those three things.
Speaker Change: continuing to work on those
Speaker Change: Great, and Tomah, you know, a significant part of your initial objective was to reduce volatility on the margin side, on the profitability side that we saw maybe in the past. Can you tell us, you know,
Great.
Speaker Change: In our part a significant part of your initial.
Speaker Change: Active what's to reduce volatility on the margin side on the profitability side.
Speaker Change: Maybe.
Speaker Change: In the past.
Speaker Change: Can you tell US you know.
Thomas Morin: How do you believe the company has repositioned itself so far when it comes to reducing that volatility? Definitely, we're seeing less volatility on the earnings side than your reported results. But maybe you can tell us a little bit more if that project has run its course and achieved its goal.
How do you believe the company has repositioned itself so far when it comes to reducing that volatility is definitely we're seeing less volatility on the earnings side in your reported results, but maybe you can tell us a little bit more.
Speaker Change: If that project has run its course and it achieved at school.
Thomas Morin: Good question.
Speaker Change: Yes, good question.
Thomas Morin: Well, there is so much we can control. But what we can control, I think, the story is that we have a much better control, obviously, on our costs. And we're using this to reduce this volatility, if you will, but more importantly, to improve a profitability. That's what matters as we speak. Moving forward, we've been experiencing in the last three quarters a lower demand, as you all know, and that's not specific to us.
Speaker Change: Well there is so much we can control.
Speaker Change: But what we can control I think the.
Speaker Change: Stories that we have a much better control, obviously on our costs and we're using this to reduce this.
Speaker Change: Volatility, if you will but more importantly to improve our profitability.
Speaker Change: That's what's the matter manner.
Speaker Change: As we speak move.
Speaker Change: Moving forward.
Speaker Change: We have been experiencing in the last three quarters of lower demand as you well know and that's not specific to us.
Thomas Morin: we will see what demand can offer in terms of profit in the future. Volatility will always be there, depending on market demand, but as I said, we can control everything in the right direction. This is what has led to less volatility and a margin for improvement.
Speaker Change: We'll see what's a better demand gen yield in terms of profit moving forward volatility will still be there given the demand on the marketplace, but again as I said everything we can control.
Speaker Change: In the right direction, so that's what led to less volatility and improve margins.
Speaker Change: Okay, thank you. Maybe one last question on the buyback that you discussed earlier. You know, we're seeing leverage come down. What is your overall leverage level that you'd like to maintain, you know, just for us to understand how much
Speaker Change: Great. Thank you maybe one last question on the buyback.
Speaker Change: You discussed earlier.
Speaker Change: We're seeing leverage come down.
Speaker Change: What is your overall leverage level that you'd like to maintain.
Speaker Change: And just for us to understand how much cash.
Speaker Change: cash you could deploy on the buyback. You mentioned the 5%, but that's kind of an overall goal. But what is the level of leverage that you think the business
Speaker Change: Cash you could deploy on the buyback.
Speaker Change: You mentioned, the 5%, but that's kind of a.
Speaker Change: Okay, Kent and overall goal but.
Speaker Change: What is the level of leverage that you think that the business.
Speaker Change: long-term should trend to and, you know, we'll make the math work on the other side to see how much extra cash you have for the buyback.
Speaker Change: Long term.
Speaker Change: Should trends too and.
Speaker Change: We'll make the math work on the other side to see how much extra costs you have put the buyback.
Speaker Change: We always said that we, you know, other than following acquisition, we want to be below two. It's important for us. It's important for the board, and that's what we're aiming by the end of this fiscal year. Also, what's good for us is the large part of our huge Catex program is behind us, so that encourages us that we will be in a great position regarding debt to EBTA by the end of this fiscal year. So we, you know, instead of say what is the target, we, we, we. what we can say is that we're confident that we're going in the right direction regarding our priority to reduce the debt, and we feel comfortable to put this program in place while maintaining this direction of going down, and we expect, you know, that
Speaker Change: We always said that.
Speaker Change: And all other than the following acquisition, we want to be below two.
Speaker Change: It's unfortunate for us it's important for the board.
Speaker Change: What we are aiming by the end of this fiscal year.
Speaker Change: Also what's good for US is the large part of our huge Capex program is behind us so that encourage us that we will be in a great position regarding debt to EBITDA by the end of it.
Speaker Change: This fiscal year, so we and our incentives what is the target.
Speaker Change: What we can say is that we're confident that we're going into right direction regarding our priority to reduce debt and we feel comfortable to put this program in place while maintaining this.
Speaker Change: Direction of going down and we expect that now we don't have those issues working cap. So transport is not that historically has been very.
Speaker Change: Now we don't have those issues working gaps. So Transpons Natales, Syracians,
Speaker Change: a very good company to produce a lot of free cash flow, and that's the direction we're going. So we're comfortable where we're going on the debt level to conclude on that, and we have room to make NCIB and still decrease the debt. That's the strategy.
Speaker Change: Very good capex to produce a lot of free cash flow and thats the direction were going so.
We're comfortable where we're going on the debt level to conclude on that and we have room to make in CIB, it's still decreased.
Speaker Change: That's the strategy.
Speaker Change: Great. Thank you very much.
Speaker Change: Great. Thank you very much.
Speaker Change: Your next question comes from Stephen McLeod from BMO Capital Markets. Please go ahead. Thank you.
Speaker Change: Your next question comes from Stephen Macleod from BMO capital markets. Please go ahead.
Speaker Change: Thank you. Good morning, morning everyone. Lots of great color so far, so thank you. Just a couple of things. When I looked at the packaging margin in Q2, obviously quite robust that north is 17%. Just curious if you can break down on a year-over-year basis, how much of that improvement was driven by mix, and how much of that improvement was driven by the cost reductions that you've identified.
Stephen MacLeod: Thank you and good morning, good morning, everyone.
Speaker Change: Lots of great color so far so thank you.
Stephen MacLeod: Just a couple of things when I looked at the packaging margin in Q2.
Stephen MacLeod: Obviously quite robust at north of 17% just curious if you can break down on a year over year basis, how much of that improvement was driven by <unk>.
Stephen MacLeod: Mix and how much of the improvement was driven by the cost reductions that you've that you've identified.
Stephen MacLeod: Okay.
Speaker Change: Well, we won't say that this close a number, but cost reduction is the big impact, and I will see Mix is the second impact.
Speaker Change: Well, we won't see that disclosed the number but cost reduction is the big impact and I will say mix is the second impact.
Stephen MacLeod: Yes.
Speaker Change: That's the way to look at it, but cost reduction, you can see it because you see the decrease on sales and large improvement we add on the margin side. Well, margin and imbeda, which is the most important thing for us, growing the dollars. So cost reduction, for sure, had a big impact, but
Stephen MacLeod: Yes.
Stephen MacLeod: If you look at it but cost reduction you can see it because that you will see the decrease in sales in the large improvement we add on the margin side, well margin and EBITDA, which is the most important thing for us growing the dollars.
So cost reduction force rather they get back but what we're encouraged is that mix is going in the right direction and this is because we invested capex in those plans that are good for us on the margin side and it's working as we speak.
Speaker Change: What we're encouraged is the mix is going in the right direction, and this is because we invest
Speaker Change: Right, okay, great. And then just, you know, looking forward here,
Stephen MacLeod: Right, Okay, Great and then just.
Stephen MacLeod: Looking forward here.
Speaker Change: previously talked about sort of, you know, I think like a 16% margin level being a good place to be, potentially aspirational on the packaging business.
Stephen MacLeod: We previously talked about.
Stephen MacLeod: Sort of I think like a 16% margin level being being a good place to be potentially.
Speaker Change: Potentially aspirational on the packaging business.
Speaker Change: You know, just curious, like, how do you feel about your margins for the balance of the year? And is that 16% baseline, you know, all else equal, a higher number now when you think about the long-term margin profile of the packaging business?
I'm just curious like how do you feel about your margins for the balance of the year and is that 16% baseline.
Speaker Change: A higher number now when you think about the long term margin profile of the packaging business.
Speaker Change: Well, first, yes, we're confident for the rest of the year with this baseline. We don't like to talk too much about margin in the future because as we saw, you know, a couple years ago with the large impact of the risen price going up, that can influence. But the most important thing for us is we grow the deadline dollars, and this is what we've been doing in the last.
Speaker Change: First yes, we're confident for the rest of the year with this baseline.
Speaker Change: We don't like to talk too much about margin in the future because as we saw in a couple of years ago with the larger backup there isn't price going up that Kevin threats, but the most important thing for US is as we grow the deadline and this is what we've been doing in the last.
Speaker Change: you know, six quarters for packaging, and this is what we want to maintain. As far as merit margin, we think the mix improvement will help, the cost program will help, but are to say where we'll be two years now because of what I said.
Six quarters for packaging and this is what we want to maintain as far as moderate margin. We think that mix improvement will lay out the cost program rollout, but aren't just say where it will be two years ago because of what I said.
Speaker Change: Yeah, okay, that makes sense. Thank you. And then maybe just turning to the printing, the new retail or newly named retail and printing services, or retail services of printing, sorry. Um,
Speaker Change: Yeah, Okay that makes sense. Thank you.
Speaker Change: And then maybe just turning to the printer.
Speaker Change: New retail our newly named retail and printing.
Speaker Change: Services are we still sort of a sprinting sorry.
Speaker Change: just remind us sort of where you sit in terms of the revenue breakdown between, I guess, what we would consider to be, you know, legacy printing or traditional printing and the ISM and sort of retail focused businesses that are providing some offsets and offsetting growth.
Speaker Change: Could you just remind us sort of where you sit in terms of the revenue breakdown between I guess, what we would consider to be.
Speaker Change: Legacy printing, our traditional printing and the ISN sort of retail focused businesses that are providing some some offsets offsetting growth.
Speaker Change: Well, you know, just maybe to say that what's the legacy printing represents
Speaker Change: Goodbye.
Speaker Change: Well, just maybe to say that west legacy printing represent.
Speaker Change: Supposed to a third of the business as we speak right now, which is mainly newspaper, magazine, and books.
Speaker Change: Close to a third of the business as we speak right now, which is mainly newspaper magazine and book.
Speaker Change: And ISM, you know, is now part of the, what we call the retail parts. So, ISM and everything regarding the flyer that is now radar, but it's way more than radar. It is also the digital we're working in the premedia part of the business. So it does represent roughly two-third of the business.
Speaker Change: And ISS.
Speaker Change: Now as part of the REIT, what we call the retail part so it ISN and everything regarding the flyer that small radar, but there's way more than radar to his household that digital we're working in a pre media part of the business. So it does represent roughly two third of the business.
Speaker Change: Okay, that's great. Thanks so much, guys. Appreciate it.
Speaker Change: Okay.
Speaker Change #100: That's great. Thanks, so much guys appreciate it.
Speaker Change #101: Thank you.
Speaker Change: Ladies and gentlemen, once again, if you have any additional questions, please press star 1.
Speaker Change #102: Madame finished carbon flat you said the biggest comes pretty Mad dog Phase two Smith episodes swag.
Speaker Change #101: Alright.
Speaker Change #100: If you are using the hands-free function, please pick up the receiver before pressing the keys.
Speaker Change #101: Steve.
Speaker Change #103: That folks are mainly via the question and answer sector have under Pisa latus ladies.
Speaker Change #104: And gentlemen, if there are any additional questions. At this time. Please press the star followed by day, one as a reminder, if youre using a speakerphone. Please leave Dan said before pressing any keys.
Speaker Change #100: Your next question comes from David McSaghan from Carmark Securities. Please go ahead.
Speaker Change #105: Next question comes from David <unk> from <unk> Securities. Please go ahead.
David John McFadgen: Okay, great. A couple questions. Just on the medical, is this vertical just going through a short-term impact or is this a permanent impairment?
Speaker Change #106: Okay, Great couple of questions just starting on the medical vertical.
Speaker Change #107: Is this vertical.
Speaker Change #108: Turning to our short term impact or is this a permanent impairment.
Speaker Change #102: We believe it is, well, it depends what you mean by short term, that's always the same thing. What happened in medical is, this has been overstocked in, I would say, last year. Last year was strong in the medical. This is obviously the aftermath of the pandemic.
Speaker Change #109: We believe it is well it depends what you mean by short term that's always the same thing.
Speaker Change #110: What happened in medical is.
Speaker Change #111: This has been over stock.
Speaker Change #111: So last year last year was strong in the medical is obviously, India after maps of the pandemic.
Speaker Change #103: The difference between medical and the rest of our activities from a customer standpoint is that inventories can last for some time. So we've been talking to all our customers there and some of them sit on six months, some others on 10. So we believe this is, depending on what you mean by short or long term, this can be another couple of course.
The difference between medical and the rest of activities from our customer standpoint is that inventories can last for some time.
Speaker Change #111: So we've been talking to all our customers there and some of them see them six months some others on 10.
Speaker Change #111: So we believe this is depending on what you mean by short or long term. This can be another couple of quarters.
Speaker Change #103: That's our understanding.
Speaker Change #111: That's our understanding.
Speaker Change #104: So it seemed that, to me it would seem that, you know, the business is going to right size, and once it's right size, then it probably grows again, no? Agreed.
So I've seen that.
Speaker Change #112: Can we haven't seen that.
Speaker Change #112: The business is kind of right size in line fits right size than a trailing grows again now.
Speaker Change #112: Great.
Speaker Change #104: Okay. And that could maybe be another couple quarters to get to the right sides and then... That's the best...
Speaker Change #112: Okay.
Speaker Change #112: Can maybe another couple of quarters to get to the right size and then that's it.
Speaker Change #105: This is the best estimate at this time. We obviously have extremely regular connections with our clients, so that we can monitor this.
Speaker Change #113: That's our best estimate is at this point in time, we're obviously, having a extremely regularly connections with our customers. So that we monitored these with them.
Speaker Change #113: Okay.
Speaker Change #105: And then I was just looking in the cash flow statement.
Speaker Change #113: And then I was just looking at the cash flow statement.
Speaker Change #106: I believe that you indicated at the beginning of this fiscal year that you thought you would have a working capital inflow similar to what you had last year to recover that big investment that you made a few years ago. I'm just wondering, is that still the expectation?
Speaker Change #114: I believe that you indicated at the beginning of this fiscal year.
Speaker Change #115: That you thought you would have a working capital inflow similar to what you had last year to recover that big investment that you've made a few years ago. Im just wondering is that still the expectation.
Speaker Change #107: Yeah, we expect to be a positive working cap at the end of fiscal year, and we expect the second half to be positive on that side, for sure, yes. Obviously, not what we had last year, because last year we were coming from, last year was very solid, coming from few years of being very negative on the working cap, but we're trending in the direction to get better again.
Speaker Change #116: Yes, we expect to be positive working cap by the end of fiscal <unk>, we expect the second half to be positive on that side for sure yes.
Speaker Change #116: What we had last year because last year, we were coming from last year with very solid coming from few years have been very negative on the working cap, but we're trending in the direction to get better again this year.
Speaker Change #107: Okay, so if you look back a few years and you
Speaker Change #116: Okay.
Speaker Change #116: So if you look back a few years and you.
Speaker Change #108: accumulated that working capital investment is about $200 million, a bit more than that. Do you expect to eventually...
Speaker Change #116: Accumulated that working capital investment is about $200 million, but more than that.
Speaker Change #117: Do you expect to eventually.
Speaker Change #109: get all that back or probably not going to get to that level, but you still expect some info.
Speaker Change #117: All of that back.
Speaker Change #117: Our.
Speaker Change #117: Probably not going to get to that level.
Speaker Change #118: You still expect some info.
Speaker Change #110: Yeah, well, to be exactly back where we were before will be tough because there's still some raw material that are not at the price it was back then so that, you know, that's changed since. So it's hard to say, but we feel that by the end of this fiscal year, all the work we've done internally, obviously the supply chain now is more secure for us, so we don't have to maintain that much of inventory, but we're really proactive to get better at every part of the working gap. So we have fun going on that we feel comfortable with, but to catch everything back is hard, and the business is changing at the same time. The mix for us is changing, so it's hard to compare Apple to Apple with what was the situation, I would say, pre-COVID.
Speaker Change #119: Yes, well to be exactly back where we were before will be stopped because theres still some raw materials that are not at the price. It was bad debt. So that is that's changed.
Speaker Change #119: So it's hard to say, but.
Speaker Change #119: We feel that by the end of this fiscal year all of the work was done internally obviously the supply chain is more secure for us. So we don't have to maintain that much of inventory.
Speaker Change #119: Really proactive to get better at every part of the working cap. So we have five going on that we feel comfortable with but to catch everything back as art and the business is changing at the same time the mix for US is changing so it's hard to compare Apple to Apple what was the situation I'll say pre COVID-19.
Speaker Change #111: Okay, all right.
Speaker Change #110: Okay, all right.
Speaker Change #120: Okay Alright.
Speaker Change #121: Thank you.
Speaker Change #121: Alright.
Speaker Change #110: There do not seem to be any more questions at the moment. Mr. Lapointe, there are no further questions at this time.
Speaker Change #122: Given the assumption you have all the guesthouse MA Mr. Lebovitz there are no further questions at this time.
Speaker Change #112: Thank you, everyone, for joining us on the call today, and we look forward to speaking to you soon.
Speaker Change #123: Thank you everyone for joining us on the call today, and we look forward to speaking to you soon.
Speaker Change #113: Ladies and gentlemen, this concludes today's conference call. You may now disconnect. Thank you.
Speaker Change #124: May dampen issue just the gentleman at the coffeehouse Chelsea.
Speaker Change #125: Ladies and gentlemen. This concludes today's conference call you may now disconnect. Thank you.
Speaker Change #125: [music].
Speaker Change #125: Okay.
Speaker Change #125: Okay.
Speaker Change #125: Okay.
Speaker Change #125: [music].
Speaker Change #125: Okay.
Thanks.
Speaker Change #125: [music].
Speaker Change #125: Yes.
Speaker Change #125: Okay.
Speaker Change #125: Okay.
Speaker Change #125: [music].