Q2 2024 World Kinect Corp Earnings Call

Operator: Thank you for standing by, and welcome to World Kinect Corporation's second quarter 2024 earnings conference call. At this time, all participants are in a listen-only mode.

Operator: Thank you for standing by, and welcome to World Kinect Corporation's second quarter 2024 Earnings Conference Call.

Operator: After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star 1-1 on your telephone. To remove yourself from the queue, you may press star 1-1 again.

Speaker Change: Thank you for standing by and welcome to World Kinect Corporation's second quarter 2024 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session.

Operator: At this time, all participants aren't in a listen-only mode.

Speaker Change: To ask a question during the session, you will need to press star 1 1 on your telephone to remove yourself from the queue You may press star 1 1 again I would now like to hand the call over to Elsa Ballard VP investor relations and communications Please go ahead

Operator: I would now like to hand the call over to Elsa Ballard, VP, Investor Relations and Communications. Please go ahead. Good evening, everyone, and welcome to World Kinect's second quarter 2024 Earnings Progress Call, which will be presented alongside our live slide presentation. Today's presentation is also available via webcast on our Investor Relations website. I'm Elsa Ballard, VP of Investor Relations and Communication. With me on the call today are Michael Kasbar, our Chairman and Chief Executive Officer, and Ira Birns, our EVP and Chief Financial Officer. Before we get started, I'd like to review our safe harbor agreement.

Elsa Ballard: Please, go ahead. Good evening, everyone, and welcome to World Kinect's second quarter 2024 Earnings Conference Call, which will be presented alongside our live, live presentation. Today's presentation is also available via webcast on our Investor Relations website.

Elsa Ballard: Good evening, everyone, and welcome to World Kinect's second quarter 2024 Earnings Process Call, which will be presented alongside our live slide presentation.

Elsa Ballard: Today's presentation is also available via webcast on our Investor Relations website. I'm Elsa Ballard, VP of Investor Relations and Communication.

Elsa Ballard: I'm Elsa Ballard, VP of Investor Relations and Communication. With me on the call today is Michael Kasbar, our Chairman and Chief Executive Officer, and Ira Birns, our EVP and Chief Financial Officer.

Speaker Change: With me on the call today is Michael Kasbar, our Chairman and Chief Executive Officer, and Ira Birns, our EVP and Chief Financial Officer. Before we get started, I'd like to review our Safe Harbor Statement.

Elsa Ballard: Before we get started, I'd like to review our State Barber statement. Certain statements made today, including comments about our expectations regarding future plans and performance, are forward-looking statements that are subject to a range of uncertainties and risks that could cause actual results to materially differ. Factors that could cause results to materially differ can be found in our most recent Form 10-K and other reports filed with the Securities and Exchange Commission.

Elsa Ballard: Certain statements made today, including comments about our expectations regarding future plans and performance, are forward-looking statements that are subject to a range of uncertainties and risks that could cause actual results to materially differ. Factors that could cause results to materially differ can be found in our most recent Form 10-K and other reports filed with the Securities and Exchange Commission. We assume no obligation to revise or publicly release the results of any revisions to these forward-looking statements in light of new information or future events.

Speaker Change: Certain statements made today, including comments about our expectations regarding future plans and performance, are forward-looking statements that are subject to a range of uncertainties and risks that could cause actual results to materially differ.

Speaker Change: Factors that could cause results to materially differ can be found in our most recent Form 10-K and other reports filed with the Securities and Exchange Commission.

Elsa Ballard: We assume no obligations are advised or publicly released the results of any revisions before looking statements in light of new information or future events. This presentation also includes certain non-GAF financial measures. A reconciliation of these non-GAF financial measures, their most directly comparable GAF financial measures, is included in our press release and can be found on our website.

Speaker Change: We assume no obligation to revise or publicly release the results of any revisions to these forward-looking statements in light of new information or future events.

Elsa Ballard: This presentation also includes certain non-GAAP financial measures. A reconciliation of these non-GAAP financial measures with their most directly comparable GAAP financial measures is included in our press release and can be found on our website. We will begin with several minutes of prepared remarks, which will then be followed by a Q&A period. I would now like to introduce our chairman and chief executive officer, Michael Kasbar. Thank you, Elsa, and good evening, everyone.

Speaker Change: This presentation also includes certain non-GAAP financial measures.

Speaker Change: A reconciliation of these non-GAAP financial measures, their most directly comparable GAAP financial measures, is included in our press release and can be found on our website. We will begin with several moments of prepared remarks, which will then be followed by a Q&A period.

Elsa Ballard: We will begin with several moments of prepared remarks, which will then be followed by a Q&A period.

Michael Kasbar: I would now like to introduce our Chairman and Chief Executive Officer, Michael Kasbar. Thank you, Elsa, and good evening, everyone. While we face challenging market conditions in our land business this quarter, we remained focused on increasing our percentage of core recurring revenue activities and driving improved operating efficiency to deliver our medium-term targets, which we shared with you at our recent Investor Day. As I've highlighted over the prior few quarters, our management team's focus is on building a more readable and leverageable business model across all of our businesses. Aviation is a great example of this. Our aviation business continued to deliver strong performance and has excellent momentum heading into the second half of the year.

Michael J. Kasbar: I would now like to introduce our Chairman and Chief Executive Officer, Michael Kasbar.

Michael J. Kasbar: While we face challenging market conditions in our land business this quarter, we remain focused on increasing our percentage of core recurring revenue activities and driving improved operating efficiency to deliver our medium-term targets, which we shared with you at our recent Investor Day. As I've highlighted over the prior few quarters, our management team's focus is on building a more rateable and leverageable business model across all of our businesses. Aviation is a great example of this.

Michael J. Kasbar: Thank you, Elsa, and good evening, everyone.

Speaker Change: Well, we face challenging market conditions in our land business this quarter.

Speaker Change: We remained focused on increasing our percentage of core recurring revenue activities and driving improved operating efficiency to deliver our medium-term targets, which we shared with you at our recent Investor Day.

Speaker Change: As I've highlighted over the prior few quarters, our management team's focus is on building a more rateable and leverageable business model across all of our businesses.

Michael J. Kasbar: Our aviation business continued to deliver strong performance and has excellent momentum heading into the second half of the year. Our optimized scale platform provides consistently high operating margins, and we continue to demonstrate our value to customers around the world in both business and commercial aviation. It generated a very strong operating margin in the second quarter and continues to be a model of efficiency.

Speaker Change: Aviation is a great example of this.

Speaker Change: Our aviation business continued to deliver strong performance and has excellent momentum heading into the second half of the year.

Michael J. Kasbar: Our optimized scale platform provides consistently high operating margins, and we continue to demonstrate our value to customers around the world in both business and commercial aviation. Aviation generated a very strong operating margin in the second quarter and continues to be a model of efficiency. Advancing our objective of sharpening the portfolio, the strategic the best feature of the avenue of business within the quarter further enhanced our liquidity and created economic value well beyond what we were able to achieve by retaining the business in our portfolio. This was followed by a tuck-in acquisition in business aviation that we signed today.

Speaker Change: Our optimized scale platform provides consistently high operating margins, and we continue to demonstrate our value to customers around the world in both business and commercial aviation.

Speaker Change: Aviation generated a very strong operating margin in the second quarter and continues to be a model of efficiency.

Michael J. Kasbar: Advancing our objective of sharpening the portfolio, the strategic divestiture of the Avanade business within the quarter further enhanced our liquidity and created economic value well beyond what we were able to achieve by retaining the business in our portfolio. This was followed by a tuck-in acquisition in business aviation that we signed today. This transaction will expand our bulk fuel distribution at work by adding nearly 300 customers, including 100 FBO locations.

Speaker Change: Advancing our objective of sharpening the portfolio, the strategic divestiture of the Avanade business within the quarter further enhanced our liquidity and created economic value well beyond what we were able to achieve by retaining the business in our portfolio.

Speaker Change: This was followed by a tuck-in acquisition in Business Aviation that we signed today. This transaction will expand our bulk fuel distribution at work by adding nearly 300 customers, including 100 FBO locations.

Michael Kasbar: This transaction will expand our bulk fuel distribution network by adding nearly 300 customers, including 100 FBO locations. Our market leading business aviation distribution platform will be able to bring additional supply and solution capabilities to these locations, as well as outstanding customer service and comprehensive operational support. While not initially a significant earnings contributor, this acquisition is an example of the type of synergistic and strategically complimentary deals we will continue to seek. But not at the rate of ability of aviation, and while results were down year over year, our marine platform remains highly efficient and working capital light.

Michael J. Kasbar: Our market-leading business aviation distribution platform will be able to bring additional supply and solution capabilities to these locations, as well as outstanding customer service and comprehensive operational support. Although not initially a significant earnings contributor, this acquisition is an example of the type of synergistic and strategically complementary deals we will continue to see. They're not at the rateability of aviation.

Speaker Change: Our market-leading business aviation distribution platform will be able to bring additional supply and solution capabilities to these locations, as well as outstanding customer service and comprehensive operational support.

Speaker Change: Well, not initially a significant earnings contributor, this acquisition is an example of the type of synergistic and strategically complementary deals we will continue to seek.

Michael J. Kasbar: And while results were down year over year, our marine platform remains highly efficient and working capital light. Because marine is more of a spot business, it can deliver outsized results when market conditions are favorable but creates value even in less beneficial environments. It is a consistent cash generator with minimal capital requirements and significant potential upside. We continue to appreciate the diversification and return profile of this business. Land is clearly where we are highly focused on building similar efficiencies.

Speaker Change: Well, not at the rateability of aviation, and while results were down year over year, our marine platform remains highly efficient and working capital light.

Michael Kasbar: Because marine is more of a spot business, it can deliver outsized results when market conditions are favorable but creates value even in less beneficial environments. It is a consistent cash generator with minimal capital requirements and significant potential upside. We continue to appreciate the diversification and return profile of this business. Land is clearly where we are highly focused on building similar efficiencies.

Speaker Change: Because Marine is more of a spot business, it can deliver outsized results when market conditions are favorable, but creates value even in less beneficial environments.

Speaker Change: It is a consistent cash generator with minimal capital requirements and significant potential upside. We continue to appreciate the diversification and return profile of this business.

Speaker Change: Land is clearly where we are highly focused on building similar efficiencies.

Michael J. Kasbar: Unfortunately, in the second quarter, we experienced an unusual situation in which a number of our market forces negatively impacted several parts of the land business. Ira will cover this in more detail in his comments. We are actively working to grow and scale those parts of the land business that we believe are more rateable, have a better return, are less susceptible to market conditions, and provide the best platform for increased operating leverage. Last week, I participated in a two-day management offsite with 50 of our key leaders.

Michael Kasbar: Unfortunately, in the second quarter, we experienced an unusual situation in which a number of our market forces negatively impacted several parts of the land business.

Speaker Change: Unfortunately, in the second quarter, we experienced an unusual situation in which a number of our market forces negatively impacted several parts of the land business.

Michael Kasbar: I will cover this in more detail in his comments. We are actively working to grow and scale those parts of the land business that we believe are more readable, have a better return, or less susceptible to market conditions and provide the best platform for increased operating leverage.

Speaker Change: Ira will cover this in more detail in his comments.

IRA: We are actively working to grow and scale those parts of the land business that we believe are more rateable, have a better return, are less susceptible to market conditions, and provide the best platform for increased operating leverage.

Michael Kasbar: Last week, I participated in a two-day management offsite with 50 of our key leaders. We focused exclusively on accelerating the transformation of our core U.S. land business. There is little doubt in my mind that we have assembled and organized the best team we've ever had, with the clear focus on flexing the capabilities we have across the company and a sense of urgency to install the processes and tools necessary for growth and operating leverage. Before I return the call to Ira, I want to stress that we believe that improvements in our land business remains a critical element of meeting our medium-term financial targets.

IRA: Last week I participated in a two-day management offsite with 50 of our key leaders. We focused exclusively on accelerating the transformation of our core US land business.

Michael J. Kasbar: We focused exclusively on accelerating the transformation of our core U.S. land business. There is little doubt in my mind that we have assembled and organized the best team we've ever had, with a clear focus on flexing the capabilities we have across the company and a sense of urgency to install the processes and tools necessary for growth and operating leverage. Before I return the call to Ira, I want to stress that we believe that improvements in our land business remain a critical element of meeting our medium-term financial targets.

IRA: There is little doubt in my mind that we have assembled and organized the best team we've ever had, with a clear focus on flexing the capabilities we have across the company, and a sense of urgency to install the processes and tools necessary for growth and operating leverage.

IRA: Before I return the call to Ira, I want to stress that we believe that improvements in our land business remains a critical element of meeting our medium-term financial targets.

Michael Kasbar: The land result of this quarter was clearly a disappointment, but in no way alters our commitment to maintain our investor-day objectives or impacting the confidence and our ability to achieve these objectives. If anything, the result underscores the need to move more quickly. To reiterate, we are committed to consolidating our offers and reallocating capital to improve operating leverage.

Michael J. Kasbar: The land result this quarter was clearly a disappointment, but it in no way alters our commitment to attain our Investor Day objectives or impacts the confidence in our ability to achieve these objectives. In fact, the result underscores the need to move more quickly.

IRA: The land result this quarter was clearly a disappointment, but in no way alters our commitment to attain our investor day objectives or impacting the confidence in our ability to achieve these objectives. If anything, the result underscores the need to move more quickly.

Michael J. Kasbar: To reiterate, we are committed to consolidating our offers and reallocating capital to improve operating leverage. This is our number one management priority, and we will be updating progress towards this objective quarterly. Now I'd like to thank our fantastic global team for their consistent dedication to our business. Your passion for what we do is evident, and in an uncertain world, our customers, suppliers, and partners know that they can rely on us, as they have for nearly 40 years. Thanks for listening. And now, Ira will give a financial and detailed business update. Thank you. Thank you, Michael, and good evening, everyone.

IRA: To reiterate, we are committed to consolidating our offers and reallocating capital to improve operating leverage. This is our number one management priority and we will be updating progress towards this objective quarterly.

Michael Kasbar: This is our number one management priority, and we will be updating progress towards this objective quarterly.

Michael Kasbar: Now I'd like to thank our fantastic global team for their consistent dedication to our business. Your passion for what we do shows, and in a certain world, our customers' suppliers and partners know that they can rely on us as they have for the nearly 40 years.

Speaker Change: Now I'd like to thank our fantastic global team for their consistent dedication to our business. Your passion for what we do shows, and in an uncertain world, our customers, suppliers, and partners know that they can rely on us, as they have for the nearly 40 years.

Ira Birns: Andrews. Thanks for listening, and now Ira will give a financial and detailed business update.

IRA: Thanks for listening. And now Ira will give a financial and detailed business update.

Ira Birns: Thank you, Michael, and good evening, everyone. Before I begin, please note that our second quarter non-GAAP results reflect approximately $88 million of pre-tax adjustments. This is primarily due to a $96 million pre-tax gain on the sale of Avonode, which was completed in early May, offset in part by certain restructuring costs and a single investment-related impairment. The after-tax gain on the Avonode sale was approximately $87 million, contributing $1.45 to GAAP diluted earnings per share for the quarter. Congratulations again to our team for successfully completing this transaction during the second quarter. Reconciliation are non-GAAP measures available on our investor relations website as well as today's webcast presentation.

IRA: Thank you. Thank you, Michael, and good evening, everyone.

Ira M. Birns: Before I begin, please note that our second quarter non-GAAP results reflect approximately $88 million of pre-tax adjustments. This is primarily due to a $96 million pre-tax gain on the sale of Avanode, which was completed in early May, offset in part by certain restructuring costs and a single investment related impairment. The after-tax gain on the Avanode sale was approximately $87 million, contributing $1.45 to GAAP diluted earnings per share for the quarter.

IRA: Before I begin, please note that our second quarter non-GAAP results reflect approximately 88 million dollars of pre-tax adjustments.

IRA: This is primarily due to a $96 million pre-tax gain on the sale of Avanode, which was completed in early May, offset in part by certain restructuring costs.

IRA: and a single investment related impairment.

IRA: The after-tax gain on the Avanode sale was approximately $87 million, contributing $1.45 to GAAP diluted earnings per share for the quarter.

Ira M. Birns: Congratulations again to our team for successfully completing this transaction during the second quarter. Reconciliations or non-GATT measures are available on our investor relations website, as well as today's webcast presentation. Now, let's get into the details of the second quarter.

IRA: Congratulations again to our team for successfully completing this transaction during the second quarter. Reconciliations of our non-GAAP measures are available on our investor relations website as well as today's webcast presentation.

Ira Birns: So now getting into the second quarter details. Consolidated results were clearly impacted by weaker than expected performance in our land segment, which was offset in part by solid results in aviation. Despite the underperformance in land, our expenses again declined year-over-year. Our tax rate was lower than anticipated, and we generated strong cash flow, which contributed to a further reduction in interest expense.

Ira M. Birns: Consolidated results were clearly impacted by weaker than expected performance in our land segment, which was offset in part by solid results in aviation. Despite the underperformance in land, our expenses again declined year over year, our tax rate was lower than anticipated, and we generated strong cash flow, which contributed to a further reduction in interest expense. I'll now provide more color on the second quarter segment-by-segment results. Starting with aviation, where, as a reminder, results were modestly impacted by the Avanade sale, which we completed on May 1st.

IRA: So now getting into the second quarter details.

IRA: Consolidated results were clearly impacted by weaker than expected performance in our land segment, which was offset in part by solid results in aviation.

IRA: Despite the underperformance in land, our expenses again declined year over year, our tax rate was lower than anticipated, and we generated strong cash flow, which contributed to a further reduction in interest expense.

Ira Birns: I'll now provide more color on the second quarter segment-by-segment results. Starting with aviation, whereas the reminder results were modestly impacted by the Avonode sale, which we completed on May 1st. Aviation volume was down slightly year-over-year. This was principally related to reduction in low-margin activity over the past 12 months, including a 100 million gallon per quarter reduction in bulk activity that we discussed last quarter, offset by volume growth in much of our core aviation activities. Our efforts to improve returns in aviation contributed to a near-record 53% operating margin for the quarter. Aviation gross profit was generally flat year-over-year, with the benefit from margin improvements generally offset by the impact of the Avonode sale.

IRA: I'll now provide more color on the second quarter segment-by-segment results.

IRA: Starting with aviation, where as a reminder, results were modestly impacted by the Avanade sale, which we completed on May 1st.

Ira M. Birns: Aviation volume was down slightly year over year. This was principally related to a reduction in low margin activity over the past 12 months, including a 100 million gallon per quarter reduction in both activity that we discussed last quarter, offset by volume growth in much of our core aviation activity. Our efforts to improve returns in aviation contributed to a near record 53% operating margin for the quarter. However, aviation gross profit was generally flat year over year, with the benefit from margin improvements generally offset by the impact of the avenues.

IRA: Aviation volume was down slightly year-over-year. This was principally related to a reduction in low-margin activity over the past 12 months, including an 100 million gallon per quarter reduction in bulk activity that we discussed last quarter.

IRA: Offset by volume growth in much of our core aviation activities.

IRA: Our efforts to improve returns in aviation contributed to a near-record 53% operating margin for the quarter.

IRA: Aviation gross profit was generally flat year-over-year with the benefit for margin improvements generally offset by the impact of the Avanade sale.

Ira Birns: Just to note, since Avonode was a service business with no underlying volume, the divestiture will impact unit margins in aviation by approximately a half a cent per gallon going forward. As we look to the third quarter, if we exclude the impact of the Avonode sale, gross profit should be up meaningfully year-over-year, reflecting improved operating leverage from our growing global supply network. One of numerous examples of year-over-year growth would be an expected incremental contribution from the power-solentics as we added powers of battery airport to our network earlier this year. And looking towards the fourth quarter, we expect the aviation tuck-in transaction that might discuss earlier to be a strong strategic fit for our business aviation segment.

Ira M. Birns: Just to note, since Avanod was a service business with no underlying volume, the divestiture will impact unit margins in aviation by approximately a half a cent per gallon going forward. As we look to the third quarter, if we exclude the impact of the Avanote sale, gross profit should be up meaningfully year over year, reflecting improved operating leverage from our growing global supply network. One of the numerous examples of year-over-year growth would be an expected incremental contribution from the Paris Olympics as we added Paris-Vaterie Airport to our network earlier this year.

Speaker Change: Just to note, since Avanode was a service business with no underlying volume, the divestiture will impact unit margins in aviation by approximately a half a cent per gallon going forward.

Speaker Change: As we look to the third quarter, if we exclude the impact of the Avanote sale, gross profit should be up meaningfully year over year, reflecting improved operating leverage from our growing global supply network.

Speaker Change: One of numerous examples of year-over-year growth would be an expected incremental contribution from the Paralympics as we added Parasvatari Airport to our network earlier this year.

Ira M. Birns: And looking towards the fourth quarter, we expect the aviation tuck-in transaction that Mike discussed earlier to be a strong strategic fit for our business aviation segment. While not a significant earnings contributor on day one, this transaction will be modestly accretive, and we expect it to close in the fall subject to customary closing conditions. In our land business, while commercial and industrial retail and natural gas volumes actually increased year over year, overall volumes decreased slightly, principally driven by unfavorable market conditions in our North American Wholesale Act.

Speaker Change: And looking towards the fourth quarter, we expect the aviation tuck-in transaction that Mike discussed earlier to be a strong strategic fit for our business aviation segment.

Ira Birns: While not a significant earnings contributor, day one, this transaction will be modestly accreted, and we expected to close in the fall, subject to customary closing conditions.

Mike: While not a significant earnings contributor, Day 1, this transaction will be modestly accreted and we expect it to close in the fall subject to customary closing conditions.

Ira Birns: In our land business, while commercial and industrial retail and act gas volumes actually increase year-over-year, overall volumes decrease slightly, principally driven by unfavorable market conditions in our North American wholesale act. The percentage of land volume associated with our net gas and power business was 33% in the second quarter, down from 41% in Q1 and modestly up from 31% in the second quarter of last year. While values were generally flat, land second quarter was quite weak from a margin perspective, resulting in a 28% year-over-year decline in growth profit. The principal drivers of this decline were unfavorable supply dynamics in the renewable fuels market, principally on the West Coast, and oversupply natural gas market where inventories were 20% above the previous five-year average at the end of June, driving near record low prices and virtually no market volatility during the quarter.

Mike: In our land business, while commercial and industrial retail and nat gas volumes actually increase year over year, overall volumes decrease slightly, principally driven by unfavorable market conditions in our North American wholesale activities.

Ira M. Birns: The percentage of land volume associated with our nat gas and power business was 33% in the second quarter, down from 41% in Q1 and modestly up from 31% in the second quarter of last year. While values were generally flat, land's second quarter was quite weak from a margin perspective, resulting in a 28% year-over-year decline in gross profit. The principal drivers of this decline were unfavorable supply dynamics in the renewable fuels market, principally on the West Coast; an oversupplied natural gas market where inventories were 20% above the previous five-year average at the end of June, driving near-record low prices and virtually no market volatility during the quarter.

Mike: The percentage of land volume associated with our nat gas and power business was 33% in the second quarter, down from 41% in Q1, and modestly up from 31% in the second quarter of last year.

Mike: While values were generally flat, Land's second quarter was quite weak from a margin perspective, resulting in a 28% year-over-year decline in gross profit.

Mike: The principal drivers of this decline were unfavorable supply dynamics in the renewable fuels market, principally on the West Coast.

Mike: An oversupplied natural gas market where inventories were 20% above the previous 5-year average at the end of June , driving near-record low prices and virtually no market volatility during the quarter.

Ira Birns: And even Brazil, where exponential growth in cargo imports, which started impacting us in the first quarter, has further driven down local market prices, resulting in further pressure on margins. And finally, while up sequentially, gross profit from our core sustainability-related offerings declined year-over-year, but you are seeing growing opportunities for the second half of the year and beyond in many parts of this exciting business throughout the world. One example for the second half relates to renewable credits, where demand generally strengthens in the latter part of the year when customers firm up their carbon requirements before closing out their fiscal years.

Ira M. Birns: And even Brazil, where exponential growth in cargo imports, which started impacting us in the first quarter, has further driven down local market prices, resulting in further pressure on margins. And finally, while up sequentially, gross profit from our core sustainability-related offerings declined year over year, we are seeing growing opportunities for the second half of the year and beyond in many parts of this exciting business throughout the world. One example for the second half relates to renewable credits, where demand generally strengthens in the latter part of the year when customers firm up their carbon requirements before closing out their fiscal year. In summary, LAND's second quarter was clearly a bump in the road.

Mike: And even Brazil, where exponential growth in cargo imports, which started impacting us in the first quarter, has further driven down local market prices, resulting in further pressure on margins.

Mike: And finally, while, up sequentially, gross profit from our core sustainability-related offerings declined year over year, we are seeing growing opportunities for the second half of the year and beyond in many parts of this exciting business throughout the world.

Mike: One example for the second half relates to renewable credits, where demand generally strengthens in the latter part of the year when customers firm up their carbon requirements before closing out their fiscal years.

Ira Birns: In summary, land second quarter was clearly a bump in the road. We had made it clear that the work necessary to achieve our medium-term targets for land specifically would not be a straight upward arrow. So, while we certainly aren't pleased with the second quarter outcome, we are confident in our ability to achieve these targets, and we remain very much committed to doing so.

Speaker Change: In summary, LAND's second quarter was clearly a bump in the road. We had made it clear that the work necessary to achieve our medium-term targets for LAND, specifically, would not be a straight upward arrow.

Ira M. Birns: We had made it clear that the work necessary to achieve our medium-term targets for LAND, specifically, would not be a straight upward arrow. So while we certainly aren't pleased with the second quarter outcome, we are confident in our ability to achieve these targets, and we remain very much committed to doing so. What are we doing here?

Speaker Change: So while we certainly aren't pleased with the second quarter outcome, we are confident in our ability to achieve these targets, and we remain very much committed to doing so.

Ira Birns: What are we doing here? Well, we remain focused on continuing to sharpen our portfolio of activities in land and significantly improving operating efficiencies. With the continued goal to migrate more and more of the business, the higher margin, higher return, more leverageable and rateable activities, such as our card lock and retail distribution networks. We also have the ability to utilize a strong liquidity position to capitalize on a growing pipeline of synergistic investment opportunities in these areas of our business, which should enable us to accelerate profitable growth and returns in a land business over time. In a short term, while we are currently seeing a reversal of some of the unfavorable trends that impacted the second quarter, which should result in overall sequential improvement in land, third quarter growth profit is still expected to be down when compared to an extremely strong third quarter in 2023.

Ira M. Birns: We remain focused on continuing to sharpen our portfolio of activities in land and significantly improving operating efficiency, with the continued goal of migrating more and more of the business to higher margin, higher return, more leverageable, and rateable activities, such as our card lock and retail distribution network. We also have the ability to utilize a strong liquidity position to capitalize on a growing pipeline of synergistic investment opportunities in these areas of our business, which should enable us to accelerate profitable growth and returns in the land business over time.

Speaker Change: What are we doing here? Well, we remain focused on continuing to sharpen our portfolio of activities in land and significantly improving operating efficiencies.

Speaker Change: With the continued goal to migrate more and more of the business to higher margin, higher return, more leverageable and rateable activities, such as our card lock and retail distribution networks.

Speaker Change: We also have the ability to utilize a strong liquidity position to capitalize on a growing pipeline of synergistic investment opportunities in these areas of our business, which should enable us to accelerate profitable growth and returns in a land business over time.

Ira M. Birns: In the short term, while we are currently seeing a reversal of some of the unfavorable trends that impacted the second quarter, which should result in overall sequential improvement in land, third quarter gross profit is still expected to be down when compared to an extremely strong third quarter in 2023. However, we should return to year-over-year gross profit growth in the fourth quarter while remaining focused on driving greater opportunities for growth and increasing returns in 2025 and beyond.

Speaker Change: In the short term, while we are currently seeing a reversal of some of the unfavorable trends that impacted the second quarter, which should result in overall sequential improvement in land, third quarter gross profit is still expected to be down when compared to an extremely strong third quarter in 2023.

Ira Birns: However, we should return to year-over-year profit growth in the fourth quarter, while remaining focused on driving greater opportunities for growth and increasing returns in 25 and beyond.

Speaker Change: However, we should return to year-over-year gross profit growth in the fourth quarter while remaining focused on driving greater opportunities for growth and increasing returns in 2025 and beyond.

Ira Birns: Moving on to Marine, while volumes were essentially flat year-over-year, growth profit decreased about 13%, driven principally by lower market volatility than experience in the prior year period. While we anticipated a sequential margin decline heading into the second quarter, the actual decline was a bit more than had been anticipated. As Mike mentioned earlier, while marine profitability is down from the highs of 2022, it remains an extremely efficient capital model and allows for strong returns and contributions to cash flow each quarter. As we look to the third quarter, we expect Marine Gross Profit to be effectively flat when compared to the third quarter of 2023, as year-over-year volatility comparisons finally seem to be normalizing.

Ira M. Birns: Moving on to Marine, while volumes were essentially flat year over year, gross profit decreased about 13%, driven principally by lower market volatility than experienced in the prior year period. While we anticipated a sequential margin decline heading into the second quarter, the actual decline was a bit more than had been anticipated.

Speaker Change: Moving on to Marine. While volumes were essentially flat year-over-year, gross profit decreased about 13 percent, driven principally by lower market volatility than experienced in the prior year period.

Speaker Change: While we anticipated a sequential margin decline heading into the second quarter, the actual decline was a bit more than had been anticipated.

Ira M. Birns: As Mike mentioned earlier, while marine profitability is down from the highs of 2022, it remains an extremely efficient capital model and allows for strong returns and contributions to cash flow each quarter. As we look to the third quarter, we expect Marine Gross Profit to be effectively flat when compared to the third quarter of 2023, as year-over-year volatility comparisons finally seem to be normalized.

Speaker Change: As Mike mentioned earlier, while marine profitability is down from the highs of 2022, it remains an extremely efficient capital model and allows for strong returns and contributions to cash flow each quarter.

Speaker Change: As we look to the third quarter, we expect Marine Gross Profit to be effectively flat when compared to the third quarter of 2023, as year-over-year volatility comparisons finally seem to be normalizing.

Ira Birns: The health federal framework comments on expected year-over-year gross profit performance segment by segment. We have decided to begin providing color on consolidated gross profit for the third quarter and going forward. With the backdrop of the related segment gross profit comments I've just shared, we expect consolidated gross profit to be in the range of $265 to $274 million in the third quarter. Hopefully, this will be helpful for modeling purposes going forward.

Ira M. Birns: Unexpected Year-over-Year Gross Profit Performance, Segment-by-Segment. We have decided to begin providing color on Consolidated Gross Profit for the third quarter and going forward. With the backdrop of the related segment gross profit comments I've just shared, we expect consolidated gross profit to be in the range of $265 to $274 million in the third quarter. Hopefully, this will be helpful for modeling purposes going forward.

Speaker Change: To help better frame our comments on expected year-over-year gross profit performance, segment-by-segment, we have decided to begin providing color on consolidated gross profit for the third quarter and going forward.

Speaker Change: With the backdrop of the related segment gross profit comments I've just shared, we expect consolidated gross profit to be in the range of $265 to $274 million in the third quarter. Hopefully this will be helpful for modeling purposes going forward.

Ira Birns: Now let's go to consolidated operating expenses that was $192 million in the second quarter, down 7% from the second quarter of 2023 and below our guidance range provided last quarter. Second quarter expenses were lower than anticipated, principally by reduced variable compensation, but also lower G&A expenses, serving as evidence of our ongoing efforts to carefully manage all cost categories and across the entire business. The elimination of avanode-related expenses was earlier reflected in the expense guidance we provided last quarter, so the avanode sales did not contribute to our expenses being lower than forecasted for the second quarter.

Ira M. Birns: Now let's go to consolidated operating expenses. That was $192 million in the second quarter, down 7% from the second quarter of 2023 and below our guidance range provided last quarter. Second quarter expenses were lower than anticipated, principally due to reduced variable compensation, but also lower G&A expenses, serving as evidence of our ongoing efforts to carefully manage all cost categories across the entire business. The elimination of Avanode-related expenses was already reflected in the expense guidance we provided last quarter, so the Avanode sale did not contribute to our expenses being lower than forecasted for the second quarter. For the third quarter, we are expecting adjusted operating expenses to be in the range of $193 to $197 million, another year-over-year reduction, in this case, benefiting in part from the elimination of Avanote expenses.

Speaker Change: Now let's go to Consolidated Operating Expenses. That was $192 million in the second quarter, down 7% from the second quarter of 2023, and below our guidance range provided last quarter.

Speaker Change: Second quarter expenses were lower than anticipated, principally by reduced variable compensation, but also lower G&A expenses, serving as evidence of our ongoing efforts to carefully manage all cost categories across the entire business.

Speaker Change: The elimination of Avanode-related expenses was already reflected in the expense guidance we provided last quarter, so the Avanode sale did not contribute to our expenses being lower than forecasted for the second quarter.

Ira Birns: For the third quarter, we are expecting adjusted operating expenses to be in the range of $193 to $197 million, another year-over-year reduction, in this case benefiting in part from the elimination of Avanode expenses. We remain focused on our medium-term consolidated operating margin target. We discussed efforts in our land business earlier, but we also focused on driving cost efficiencies across the business, including our corporate back office functions. There are numerous ongoing initiatives aimed at further improving our cost structure.

Speaker Change: For the third quarter, we are expecting adjusted operating expenses to be in the range of $193 to $197 million, another year-over-year reduction, in this case, benefiting in part from the elimination of Avanote expenses.

Ira M. Birns: We remain focused on our medium-term consolidated operating margin target. We discussed efforts in our land business earlier, but we also focused on driving cost efficiencies across the business, including our corporate back office function. There are numerous ongoing initiatives aimed at further improving our cost structure. Interest expense was $27 million in the second quarter.

Speaker Change: We remain focused on our medium-term consolidated operating margin target.

Speaker Change: We discussed efforts in our land business earlier, but we also focused on driving cost efficiencies across the business, including our corporate back office functions.

Speaker Change: There are numerous ongoing initiatives aimed at further improving our cost structure.

Ira Birns: Interest expense was $27 million in the second quarter; that's down about 15% year over year, as our team remains focused on optimizing our working capital position and related cash flow, with additional benefit from last year's low coupon convertible notes issuance and the cash proceeds from the sale of Avanode this past quarter. As we've demonstrated over the past few quarters, we've been successful at reducing our quarterly run rate of interest expense by 25% from the peak level reached in the fourth quarter of 2022. And we expect another year-over-year decline in interest expense in the third quarter to $26 to $27 million, with our full year 24 interest expense on track to come in 10 to 15% below fiscal year 23.

Ira M. Birns: That's down about 15% year over year, as our team remains focused on optimizing our working capital position and related cash flow, with additional benefit from last year's low-coupon convertible notes issuance and the cash proceeds from the sale of Aveno this past quarter. As we've demonstrated over the past few quarters, we've been successful at reducing our quarterly run rate of interest expense by 25% from the peak level reached in the fourth quarter of 2022.

Speaker Change: Interest expense was $27 million in the second quarter. That's down about 15% year over year, as our team remains focused on optimizing our working capital position and related cash flow.

Speaker Change: With additional benefit from last year's low coupon convertible notes issuance and the cash proceeds from the sale of Aveno this past quarter.

Speaker Change: As we've demonstrated over the past few quarters, we've been successful at reducing our quarterly run rate of interest expense by 25% from the peak level reached in the fourth quarter of 2022.

Ira M. Birns: And we expect another year-over-year decline in interest expense in the third quarter to $26 to $27 million, with our full-year 24 interest expense on track to come in 10 to 15 percent below fiscal year 23. Our adjusted effective tax rate for the second quarter was only 6% as our effective tax rate was positively impacted by a discrete tax benefit realized in the second quarter, resulting in an effective tax rate significantly lower than anticipated heading into the quarter.

Speaker Change: And we expect another year-over-year decline in interest expense in the third quarter to 26 to 27 million dollars with our full year 24 interest expense on track to come in 10 to 15 percent below fiscal year 23

Ira Birns: Our adjusted effective tax rate for the second quarter was only 6% as our effective tax rate was positively impacted by the street tax benefit, realizing the second quarter, resulting in an effective tax rate significantly lower than anticipated heading into the quarter. Based on what we know today, we expect our effective tax rate for the second half of the year to be down to approximately 19 to 22%, resulting in a forecasted full year rate of 15 to 18%.

Speaker Change: Our adjusted effective tax rate for the second quarter was only 6%, as our effective tax rate was positively impacted by a discrete tax benefit realized in the second quarter, resulting in an effective tax rate significantly lower than anticipated heading into the quarter.

Ira M. Birns: Based on what we know today, we expect our effective tax rate for the second half of the year to be down to approximately 19 to 22 percent, resulting in a forecasted full-year rate of 15 to 18 percent.

Speaker Change: Based on what we know today, we expect our effective tax rate for the second half of the year to be down to approximately 19 to 22 percent, resulting in a forecasted full year rate of 15 to 18 percent.

Ira Birns: We generated $68 million of operating cash flow and $53 million of free cash flow in the second quarter. This cash flow performance was positively impacted by our continuing efforts to drive efficiencies in our working capital model, resulting in a net trade cycle at just over two days for the second quarter. and our strong cash flow performance also enabled us to reduce our net debt to $355 million and our net debt to adjusted EBITDA to below one time.

Ira M. Birns: We generated $68 million of operating cash flow and $53 million of free cash flow in the second quarter. This cash flow performance was positively impacted by our continuing efforts to drive efficiencies in our working capital model, resulting in a net trade cycle at just over two days for the second quarter. And our strong cash flow performance also enabled us to reduce our net debt to $355 million and our net debt to adjusted EBITDA to below one times. Returning capital through share buybacks and dividends, as always, remains an important part of our balanced capital allocation framework. And there are no changes to our priorities going forward.

Speaker Change: We generated $68 million of operating cash flow and $53 million of free cash flow in the second quarter.

Speaker Change: This cash flow performance was positively impacted by our continuing efforts to drive efficiencies in our working capital model, resulting in a net trade cycle at just over two days for the second quarter.

Speaker Change: And our strong cash flow performance also enabled us to reduce our net debt to $355 million and our net debt to adjusted EBITDA to below one time.

Ira Birns: Returning capital through sheer buybacks and dividends, as always, remains an important part of our balance capital allocation framework, and there are no changes to our priorities going forward. The underscore that commitment in addition to our quarterly cash dividend, we repurchased $30 million of stock, or approximately 1.2 million shares during the second quarter.

Speaker Change: Returning capital through share buybacks and dividends, as always, remains an important part of our balanced capital allocation framework, and there are no changes to our priorities going forward.

Ira M. Birns: To underscore that commitment, in addition to our quarterly cash dividend, we repurchased $30 million of stock, or approximately 1.2 million shares, during the second quarter. So in closing, yes, our land segment had a weak quarter due to a confluence of factors which negatively impacted an unusually large number of business activities within a single quarter. And as already stated, while this was an unfortunate bump in the road, we remain focused on improving land operating efficiencies and profitability going forward, both by continuing to sharpen the portfolio of activities in which we participate while significantly improving our cost structure, something we're focused on each and every day.

Speaker Change: To underscore that commitment, in addition to our quarterly cash dividend, we repurchased $30 million of stock, or approximately 1.2 million shares, during the second quarter.

Ira M. Birns: So, in closing, yes, our land segment had a weak quarter due to a confluence of factors which negatively impacted an unusually large number of business activities within a single quarter. And as already stated, while this was an unfortunate bump in the road, we remained focused on improving land operating efficiencies and profitability going forward, both by continuing to sharpen the portfolio of activities in which we participate, while significantly improving our cost structure, or something we're focused on each and every day. Our radiation business performed well as our team continues to deliver on a strong value proposition globally, and we see strong momentum heading into the second half of the year.

Speaker Change: So, in closing, yes, our land segment had a weak quarter due to a confluence of factors which negatively impacted an unusually large number of business activities within a single quarter.

Speaker Change: And as already stated, while this was an unfortunate bump in the road, we remain focused on improving land operating efficiencies and profitability going forward.

Speaker Change: Both by continuing to sharpen the portfolio of activities in which we participate while significantly Improving our cost structure is something we're focused on each and every day

Ira M. Birns: Our aviation business performed well as our team continues to deliver on a strong value proposition globally, and we see strong momentum heading into the second half of the year. We generated $68 million in operating cash flow and $53 million of free cash flow in the second quarter, plus approximately $200 million from the Avanode sale, further strengthening our liquidity profile. Interest expense again continued to decline from peak levels of interest in late 22, and we were once again able to reduce operating expenses year over year by remaining laser-focused on cost control.

Speaker Change: Our aviation business performed well as our team continues to deliver on a strong value proposition globally, and we see strong momentum heading into the second half of the year.

Ira Birns: We generated $68 million in operating cash flow and $53 million of free cash flow in the second quarter, plus approximately $200 million from the avinoid sale for the strengthening of our liquidity profile. Interest expense, again, continued to decline from peak levels of interest in late 22, and we were once again able to reduce operating expenses year over year by remaining laser-focused on cost controls. We were purchased approximately 2% of our outstanding shares, demonstrating our continued commitment to returning value to our shareholders.

Speaker Change: We generated $68 million in operating cash flow and $53 million of free cash flow in the second quarter plus approximately $200 million from the Avanode sale, further strengthening our liquidity profile.

Speaker Change: Interest expense again continued to decline from peak levels of interest in late 22 and we were once again able to reduce operating expenses year over year by remaining laser focused on cost controls.

Ira M. Birns: We repurchased approximately 2% of our outstanding shares, demonstrating our continued commitment to returning value to our shareholders. And finally, we remain focused on driving our EBITDA and operating margin towards our 2026 stated goals, which should deliver increasing levels of cash flow and an improvement in our overall return on capital. Nothing has changed there.

Speaker Change: We repurchased approximately 2% of our outstanding shares, demonstrating our continued commitment to returning value to our shareholders.

Ira Birns: And finally, we remain focused on driving our EBITDA and operating margin towards our 2026 state of goals, which are delivering increasing levels of cash flow and improving it in our overall return on capital. Nothing has changed there; we remain equally committed to achieving those goals. There's lots of work to be done, but our team remains relentlessly focused on driving towards these critical goals over the next several months and quarters to come.

Speaker Change: And finally, we remain focused on driving our EBITDA and operating margin towards our 2026 stated goals, which should deliver increasing levels of cash flow and an improvement in our overall return on capital. Nothing has changed there. We remain equally committed to achieving those goals.

Operator: We remain equally committed to achieving those goals. There's lots of work to be done, but our team remains relentlessly focused on driving towards these critical goals over the next several months and quarters. Thank you. I'll now turn the call back to our operator to open up the Q&A session. As a reminder, to ask a question, you will need to press star 11 on your telephone to remove yourself from the queue. Then, you may press star 11 again.

Speaker Change: There's lots of work to be done, but our team remains relentlessly focused on driving towards these critical goals over the next several months and quarters to come. Thank you. I'll now turn the call back to our operator to open up the Q&A session.

Operator: Thank you. I'll now turn the call back to our operator to open up the Q&A session. As a reminder to ask a question, you will need to press star 1-1 on your telephone. To remove yourself from the Q, you may press star 1-1 again. We ask that you please limit yourself to one question and one follow-up. Please stand by while we compile the Q&A roster.

Operator: We ask that you please limit yourself to one question and one follow-up. Please stand by while we compile the Q&A roster. Our first question comes from the line of John Royall of JPMorgan. Hi, good evening.

Speaker Change: As a reminder, to ask a question, you will need to press star 11 on your telephone. To remove yourself from the queue, you may press star 11 again. We ask that you please limit yourself to one question and one follow-up. Please stand by while we compile the Q&A roster.

John Royall: Our first question comes from the line of John Royale on J.K. Morgan. Good evening, thanks for taking my question. So my first question is on land. Can you talk a little more about the headwinds in renewable fuels on the West Coast that I spoke about for one pursuit Q? And then what you're seeing in terms of the recovery there into the third quarter? Yeah, thanks for the question, John. To try to answer it in a simplest way possible, there have been what I would best describe as logistics-related issues, which have both impacted our ability to push through volume on the West Coast and push it through as economically as we would like to.

Speaker Change: Our first question comes from the line of John Royall of J.P. Morgan.

John Macalister Royall: Thanks for taking my question. So my first question, my first question is on land. Can you talk a little more about the headwinds in renewable fuels on the West Coast that Ira spoke about for one, for 2Q, and then what you're seeing in terms of the recovery there into the third quarter? Yeah, thanks.

John Macalister Royall: Hi, good evening. Thanks for taking my question.

John Macalister Royall: My first question is on land. Can you talk a little more about the headwinds in renewable fuels on the West Coast that Ira spoke about for 2Q, and then what you're seeing in terms of the recovery there into the third quarter?

Speaker Change: Thanks for the question, John .

Speaker Change: you know, to try to answer it in a simplest way possible.

Michael J. Kasbar: There have been, you know, what I would best describe as logistics-related issues, which have both impacted our ability to push through volume on the West Coast and push it through as economically as we would like to. What does that mean? Pipeline terminals have effectively been slow to convert to renewable diesel. So in many parts of the region, we're forced to move more product through, you know, rail and truck, and that's not as cost efficient.

Speaker Change: There have been, you know, what I would best describe as logistics related issues, which have both impacted our ability to push through volume on the West Coast, and and push it through as economically as we would like to, you know, what does that mean? There, you know, there have been

Michael Kasbar: What does that mean there have been pipeline terminals effectively been slow to convert to renewable diesel? So, in many parts of the region, we're forced to move more products through rail and truck, and that's not as cost-efficient. So that impacted us from a volume perspective and a margin perspective as well. What does that mean going forward? There are discussions and activities going on each and every day, which hopefully will enable us to create more efficiencies in that network, but it's probably going to take a couple of months or so before we see any significant change there.

Speaker Change: Pipeline terminals have effectively been

Speaker Change: slow to convert to renewable diesel. So in many parts of the region, we're forced to move more product through, you know, rail and truck, and that's not as cost efficient. So that that impacted us.

Michael J. Kasbar: So that it impacted us from a volume perspective and a bit from a margin perspective as well. What does that mean going forward? There are discussions and activities going on each and every day, which hopefully will enable us to create more efficiencies in that network, but it's probably going to take a couple of months or so before we see any significant change there. But there are, you know, opportunities for that to improve.

Speaker Change: from a volume perspective and you know a bit from a margin perspective as well.

Speaker Change: What does that mean going forward? There are discussions and activities going on each and every day, which hopefully will enable us to create more efficiencies in that network, but it's probably going to take

John Macalister Royall: There are some new refineries that have come online that have impacted the market. So there's a bunch of factors that, you know, when put all together, had a meaningful enough impact on us for us to mention that as a factor in the second quarter. It's really helpful.

Speaker Change: You know, a couple months or so before we see any significant change there. But there are you know, there are opportunities for that.

Michael Kasbar: But there are opportunities for that to improve. There's some new refineries that have come online that have impacted the market. There's a bunch of factors that, when put all together, had a meaningful and not the impact on us for us to mention that as a factor in the second quarter.

Speaker Change: for that to improve. There's some new refineries that have come online that have impacted the market. So there's a there's a bunch of factors that that, you know, when when put all together had a meaningful enough impact on us for us to mention that as a as a factor in the second quarter.

Ira M. Birns: Thanks. And then my follow-up question is just a housekeeping question: I don't think we have the 10 Q yet. Can you talk about what's been received in cash on the Avanode sale and when the tax bill will be paid if it hasn't already been paid? And should we think about the tax portion is just the 87 million gain times tax rate? Actually, the tax on that transaction, for all sorts of reasons, is a relatively small number.

Ira Birns: It's really helpful, thanks, and then my follow-up is just a housekeeping question, and I don't think we have the ten cue yet. Can you talk about what's been received in cash on the Avenue sale, and when the tax bill will be paid if it hasn't already, and should we think about the tax portion is just the 87 million gain times tax rate? Actually, the tax on that transaction is, you know, for all sorts of reasons, it's a relatively small number. So for starters, almost exactly $200 million is what came in and may. You'll see that on the cash flow statement, and the related tax that would go out the door, I would say most likely in Q3 is only about $9 million.

Speaker Change: It's really helpful. Thanks.

Speaker Change: My follow-up is just a housekeeping question is I don't think we have the the 10-q yet. Can you talk about what's been? received in cash on the Avanade sale and When the tax bill will be paid if it hasn't already and should we think about the tax portion is just The 87 million gain times tax rate

Speaker Change: Actually, the tax on that transaction is...

John Macalister Royall: So for starters, almost exactly $200 million is what came in in May. You'll see that on the cash flow statement. And the related tax that would go out the door, I would say most likely in Q3, is only about $9 million. Great, thanks very much.

Speaker Change: You know, for all sorts of reasons, it's a relatively small number.

Speaker Change: So, for starters...

Speaker Change: Almost exactly 200 million dollars is what came in in May.

Speaker Change: You'll see that on the cash flow statement and the related tax that would go out the door, I would say most likely in Q3 is only about $9 million.

Ira Birns: Great, thanks very much. So you know, net net, it has a positive after-tax benefit from a cash perspective of about $190 million. Great, thank you.

Ira M. Birns: So, you know, net nettle, you know, has a positive after tax benefit from a cash perspective of about $190 million. Great, thank you. Welcome. Thank you. Our next question comes from the line of Ben Nolan, from Steve. Thanks. A couple.

Speaker Change: Great, thanks very much. So, you know, net nettle, you know, has a positive after tax, you know, benefit from a cash perspective of about $190 million.

Operator: Well, thank you.

Speaker Change: Great, thank you.

Ben Nolan: Our next question comes from the line of Ben Nolan of Steve Fool.

Speaker Change: You're welcome. Thank you.

Speaker Change: Our next question.

Speaker Change: comes from the line of Ben Nolan of Stifel.

Benjamin Joel Nolan: First, just quickly, you talk about the token acquisition on the aviation side; any context on how the capital outlay for that? Thanks for pushing me to the capital outlay for that. Is that the question? Yes, right.

Ira Birns: Thanks. A couple first, just quickly, you talk about the Tucking acquisition on the Aviation Center, any context on how the capital out like for that. Thanks for the question. So the capital outlay for that, is that the question? Yeah, it's about total purchase price was around $45 million, which several million dollars is deferred for a period of time. So it's somewhere around $40 million that will go out the door when we close that transaction somewhere around the end of the third quarter. Okay, perfect.

Benjamin Joel Nolan: Thanks. A couple. First, just quickly, you talk about the token acquisition on the aviation side. Any context on how the capital outlay for that?

Ira M. Birns: Yeah, the total purchase price was around 45 million dollars, of which several million dollars are deferred for a period of time. So it's somewhere around 40 million dollars. That'll go out the door when we close that transaction somewhere around the end of the third quarter. Okay, perfect. And I was going to also dig in a little bit on the land side. It did seem like some of these factors should have been, we should have seen them in the first quarter as well.

Speaker Change: Thanks for the question. Is there a capital outlay for that? Is that the question? Yes. Right. Yeah, it's about... total purchase price was around $45 million, of which several million dollars is deferred for a period of time. So it's...

Speaker Change: Somewhere around $40 million that will go out the door when we close that transaction somewhere around the end of the third quarter.

Ira Birns: And I was going to also dig in a little bit on the land side. It did seem like some of these factors should have been; we should have seen them in the first quarter as well. I'm curious whether that's the West Coast, our fuels, or Brazil, or any of the handful of things that you laid out there. I'm curious what change from sort of how you were thinking about the business when you last reported and as compared to how it played out over the quarter and maybe how it was in the first quarter versus out was in the second quarter.

Speaker Change: Okay, perfect.

Speaker Change: And I was going to also dig in a little bit on on the land side. It did seem like some of these factors should have been.

Benjamin Joel Nolan: I'm curious whether that's the West Coast fuels or Brazil or any of the handful of things that you laid out there. I'm curious what changed from sort of how you were thinking about the business when you last reported and as compared to how it played out over the quarter and maybe how it was in the first quarter versus how it was in the second. Sure, so yeah, a great question. Thanks. So in the first quarter, you know, thinking back, the largest, you know, year over year variance really related to weather issues that impacted both the UK that had a week or quarter year over year and our NatGAS business. So we highlighted those.

Speaker Change: We should have seen them in the first quarter as well. I'm curious whether that's the West Coast fuels or Brazil or any of the handful of things that you laid out there. I'm curious what changed from sort of how you were thinking about the business when you last reported.

Speaker Change: As compared to how it played out over the quarter and maybe how it was in the first quarter versus how it was in the second quarter.

Ira Birns: Sure. So, you know, great question. Thanks. So in the first quarter, you know, thinking back that the largest, you know, year-over-year variance really related to weather issues that impacted both the UK that had a weaker quarter year-over-year and our NACF business. So we, you know, we highlighted those on something like Brazil. So we did have an impact on the first quarter, but in terms of the overall year of the year variance, it wasn't quite significant that situation deteriorated a bit further this quarter and it became, you know, meaningful enough to call it out. But we weren't impacted by that one in Q1 as well.

Speaker Change: Sure. So, you know, great question. Thanks. So, in the first quarter, you know, thinking back, the largest, you know, year-over-year variance really related to weather issues that impacted both the UK, that had a weaker quarter year-over-year, and our NatGas business.

Ira M. Birns: On something like Brazil, we did have an impact on the first quarter, but in terms of the overall year-over-year variance, it wasn't quite as significant. That situation deteriorated a bit further this quarter, and it became meaningful enough to call it out. But we were impacted by that one in Q1 as well.

Speaker Change: So we, you know, we highlighted those. On something like Brazil, we did have an impact.

Speaker Change: on the first quarter, but in terms of the overall year-over-year variance.

Speaker Change: It wasn't quite as significant. That situation deteriorated a bit.

Speaker Change: further this quarter and it became, you know, meaningful enough to

Speaker Change: to call it out. But we were impacted.

Ira Birns: We weren't impacted as much on that renewable piece of the puzzle that I just described to John. And in terms of NACFs, you know, we called NACFs out last quarter and this quarter, right? So I think those are the principal moving parts. So, you know, again, biggest factors last quarter were the weather impacts in Europe and the US, and this quarter you had, you know, more significant impact.

Speaker Change: by that one in Q1 as well. We weren't impacted as much on that renewable piece of the puzzle that I just described to John . And in terms of NatGas, you know, we called NatGas out last quarter and this quarter, right? So I think those are the

Benjamin Joel Nolan: We weren't impacted as much on that renewable piece of the puzzle that I just described to John. And in terms of NatGas, we called NatGas out last quarter and this quarter. So I think those are the principal moving parts.

Ira M. Birns: So again, the biggest factors last quarter were the weather impacts in Europe and the U.S. And this quarter, you had more significant impacts, and a little bit of sustainability this week. Yeah, and then, and then in this quarter, it's just, you know, our sustainability-related products and services, as I alluded to, were off a little bit. So, you know, we mentioned that as well. But, you know, but, you know, not, Yeah, somewhat different than what we experienced in the first quarter.

Speaker Change: Principal Moving Parts. So, you know, again, biggest factors last quarter were the weather impacts in Europe and the U.S. In this quarter you had, you know, more significant impacts.

Speaker Change: a little bit of sustainability this week. Yeah, and then and then in this quarter, it's just, you know, there are sustainability related products and services, as I alluded to, were off a little bit. So, you know, we mentioned that as well. But, you know, but, you know, not.

Speaker Change: you know somewhat different than what we what we experienced in the first quarter.

Benjamin Joel Nolan: All right. I appreciate it. Thank you guys. Thank you. Once again, to ask a question, please press star 11 on your telephone. Again, that's star 11 on your telephone to ask a question.

Speaker Change: All right. I appreciate it. Thank you, guys.

Speaker Change: Thank you. Once again, to ask a question, please press star 11 on your telephone. Again, that's star 11 on your telephone to ask a question.

Operator: Our next question comes from the line of Graham Price of Raymond James. Hey, good afternoon, guys. Thanks.

Speaker Change: Our next question comes from the line of Graham Price of Raymond James.

Graham Price: Thanks for taking the question. Unknown Speaker Maybe firstly on aviation, given that we've seen a lot of problems in the airline industry with outages and whatnot, just wondering if there's any impact from that that you're seeing on Q3 guidance specifically. So far, none.

Graham Price: Hey, good afternoon, guys. Thanks. Thanks for taking the question.

Graham Price: Maybe firstly on aviation, given that we've seen a lot of problems.

Graham Price: in the airline industry with the outages and whatnot. Just wondering if there's any impact from that that you're seeing on Q3 guidance specifically.

Michael J. Kasbar: You know, we know some of the airlines that got impacted. Obviously, capacity is a little bit more than what is optimum. And there are some adjustments being made, but really no impact. You know, our network continues to increase and expand. So being able to grab market share as the locations increase is a favorable development for us. But no, no impact. I'm not expecting an impact. And if there is one, we're not expecting it to be impactful.

Speaker Change: So far, none, you know, we we know some of the airlines that got impacted. Obviously, capacity is

Speaker Change: A little bit more than what is optimum, and there's adjustments being made.

Speaker Change: But really no impact, you know, our network continues to increase and expand.

Speaker Change: So being able to grab market share as the locations increase is a favorable development for us.

Speaker Change: but no

Speaker Change: No impact, not expecting an impact. And if there is one, we're not expecting it to be

Graham Price: So I think it's steady as she goes. And we'll, you know, we'll we'll sort of ride that. You know, a lot of our business there is contractual. We do have a good amount of ad hoc, is what we call it in the aviation market. So there's always the possibility, obviously, but that's not presently in our forecast. It's, it's the opposite. Great, good, good to hear it there. And then just just a housekeeping question.

Speaker Change: Impactful. So I think it's steady as she goes and we'll, you know, we'll sort of ride that

Speaker Change: You know, a lot of our business there is contractual. We do have a good amount of ad hoc is what we call it in the aviation market. So

Speaker Change: There's always the possibility, obviously, but that's not presently in our forecast. It's the opposite.

Graham Price: For my follow up question, what was the second quarter percentage of EBITDA from low carbon energy? I guess the Kinect businesses?

Speaker Change: Great, good to hear there. And then just a housekeeping question for my follow-up. What was the second quarter percentage of EBITDA from low-carbon energy, I guess the Kinect businesses?

Ira M. Birns: In the second quarter, Graham, the number I usually give Pavel is GP. Actually, the percentage of that part of our business was about 8%. The EBITDA percentage this quarter was much lower, principally on the back of a much weaker performance on the NatGas side, but it was about 90% of gross profit. Okay, that GP number of 8% compares to, I think you told us 12% last quarter. That's right. Okay, I got it.

Speaker Change: In the second quarter, Graham, the number I usually give Pavel is GP. Actually, the percentage of that part of our business was about eight percent. The EBITDA percentage this quarter was much lower on the back of principally of the much weaker performance on the NatGas side.

Speaker Change: But it was about 9% of gross profit.

Speaker Change: Okay, that that GP number that 8% compares to I think you told us 12% last quarter. That's right.

Graham Price: Thank you. You're welcome, Graham. Thank you. I would now like to turn the conference back to Michael Kasbar for closing remarks, sir. Well, thank you, everyone, for listening this afternoon and this evening. I appreciate the interest and look forward to speaking to you next quarter. Be safe, take care, bye-bye.

Graham Price: Okay, got it. Thank you.

Speaker Change: You're welcome, Graham.

Michael Kasbar: I would now like to turn the conference back to Michael Kasbar, closing remarks, sir. Well, thank you everyone for listening this afternoon, this evening. Appreciate the interest and look forward to speaking to you next quarter.

Graham Price: Thank you.

Graham Price: I would now like to turn the conference back to Michael Kasbar for closing remarks. Sir? Well, thank you everyone for listening this afternoon, this evening. Appreciate the interest and look forward to speaking to you next quarter.

Operator: Be safe, take care, bye bye.

Michael J. Kasbar: This concludes today's conference call. Thank you for participating. You may now disconnect. ?? ?? ?? ?? ?? Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? Thank you for standing by, and welcome to World Kinect Corporation's second quarter 2024 earnings conference call.

Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.

Speaker Change: Be safe, take care, bye-bye.

Speaker Change: This concludes today's conference call. Thank you for participating. You may now disconnect.

Speaker Change: [inaudible]

Speaker Change: Music Music Music Music Music Music Music Music Music

Operator: ¶ ¶ ¶ ¶ ¶ ¶ ¶ ¶ ¶ ¶ ¶ ¶ ¶ ¶ ¶ ¶ Christian.

Speaker Change: Thank you for standing by and welcome to World Kinect Corporation's second quarter 2024 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session.

Michael J. Kasbar: At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star-one-one on your telephone. To remove yourself from the queue, you may press star-one-one again.

Speaker Change: To ask a question during the session, you will need to press star 11 on your telephone.

Operator: I would now like to hand the call over to Elsa Ballard, VP, Investor Relations and Communications. Please go ahead. Good evening, everyone, and welcome to World Kinect's second quarter 2024 Earnings Progress Call, which will be presented alongside our live slides at this time. Today's presentation is also available via webcast on our Investor Relations website. I'm Elsa Ballard, VP of Investor Relations and Communication. With me on the call today are Michael Kasbar, our Chairman and Chief Executive Officer, and Ira Birns, our EVP and Chief Financial Officer. Before we get started, I'd like to review our safe harbor agreement.

Speaker Change: To remove yourself from the queue, you may press star one one again. I would now like to hand the call over to Elsa Ballard, VP, Investor Relations and Communications. Please go ahead.

Certain statements made today, including comments about our expectations regarding future plans and performance, are forward-looking statements that are subject to a range of uncertainties and risks that could cause actual results to materially differ. Factors that could cause results to materially differ can be found in our most recent Form 10-K and other reports filed with the Securities and Exchange Commission. We assume no obligation to revise or publicly release the results of any revisions to these forward-looking statements in light of new information or future events.

Elsa Ballard: Good evening everyone and welcome to World Kinect's second quarter 2024 Earnings Progress Call, which will be presented alongside our live slide presentation.

Elsa Ballard: Today's presentation is also available via webcast on our Investor Relations website. I'm Elsa Ballard, VP of Investor Relations and Communication.

Speaker Change: With me on the call today is Michael Kasbar, our Chairman and Chief Executive Officer, and Ira Birns, our EVP and Chief Financial Officer. Before we get started, I'd like to review our St. Barbara Statement.

Speaker Change: Certain statements made today including comments about our expectations regarding future plans and performance are forward-looking statements that are subject to a range of uncertainties and risks that could cause actual results to materially differ.

Speaker Change: Factors that could cause results to materially differ can be found in our most recent Form 10-K and other reports filed with the Securities and Exchange Commission. We assume no obligation to revise or publicly release the results of any revisions to these forward-looking statements in light of new information or future events.

This presentation also includes certain non-GAAP financial measures. A reconciliation of these non-GAAP financial measures with their most directly comparable GAAP financial measures is included in our press release and can be found on our website. We will begin with several minutes of prepared remarks, which will then be followed by a Q&A period. I would now like to introduce our chairman and chief executive officer, Michael Kasbar. Thank you, Elsa, and good evening, everyone.

Speaker Change: This presentation also includes certain non-GAAP financial measures.

Speaker Change: A reconciliation of these non-GAAP financial measures, their most directly comparable GAAP financial measures, is included in our press release and can be found on our website. We will begin with several moments of prepared remarks, which will then be followed by a Q&A period.

Speaker Change: I would now like to introduce our Chairman and Chief Executive Officer, Michael Kasbar. Thank you, Elsa, and good evening, everyone.

While we face challenging market conditions in our land business this quarter, we remained focused on increasing our percentage of core recurring revenue activities and driving improved operating efficiency to deliver our medium-term targets, which we shared with you at our recent Investor Day. As I've highlighted over the prior few quarters, our management team's focus is on building a more rateable and leverageable business model across all of our businesses. Aviation is a great example of this.

Speaker Change: Well, we face challenging market conditions in our land business this quarter.

Speaker Change: We remained focused on increasing our percentage of core recurring revenue activities and driving improved operating efficiency to deliver our medium-term targets, which we shared with you at our recent Investor Day.

Speaker Change: As I've highlighted over the prior few quarters, our management team's focus is on building a more rateable and leverageable business model across all of our businesses.

Our aviation business continued to deliver strong performance and has excellent momentum heading into the second half of the year. Our optimized scale platform provides consistently high operating margins, and we continue to demonstrate our value to customers around the world in both business and commercial aviation. It generated a very strong operating margin in the second quarter and continues to be a model of efficiency.

Speaker Change: Aviation is a great example of this.

Speaker Change: Our aviation business continued to deliver strong performance and has excellent momentum heading into the second half of the year.

Speaker Change: Our optimized scale platform provides consistently high operating margins, and we continue to demonstrate our value to customers around the world in both business and commercial aviation.

Speaker Change: Aviation generated a very strong operating margin in the second quarter and continues to be a model of efficiency.

Advancing our objective of sharpening the portfolio, the strategic divestiture of the Avanade business within the quarter further enhanced our liquidity and created economic value well beyond what we were able to achieve by retaining the business in our portfolio. This was followed by a tuck-in acquisition in business aviation that we signed today. This transaction will expand our bulk fuel distribution at work by adding nearly 300 customers, including 100 FBO locations. Our market-leading business aviation distribution platform will be able to bring additional supply and solution capabilities to these locations, as well as outstanding customer service and comprehensive operational support. Well, not initially a significant earnings contributor, this acquisition is an example of the type of synergistic and strategically complementary deals we will continue to see. We're not at the rateability of aviation.

Speaker Change: Advancing our objective of sharpening the portfolio, the strategic divestiture of the Avanade business within the quarter further enhanced our liquidity and created economic value well beyond what we were able to achieve by retaining the business in our portfolio.

Speaker Change: This was followed by a tuck-in acquisition in Business Aviation that we signed today. This transaction will expand our bulk fuel distribution at work by adding nearly 300 customers, including 100 FBO locations.

Speaker Change: Our market-leading business aviation distribution platform will be able to bring additional supply and solution capabilities to these locations, as well as outstanding customer service and comprehensive operational support.

Speaker Change: Well, not initially a significant earnings contributor, this acquisition is an example of the type of synergistic and strategically complementary deals we will continue to seek.

And while results were down year over year, our marine platform remains highly efficient and working capital light. Because marine is more of a spot business, it can deliver outsized results when market conditions are favorable but creates value even in less beneficial environments. It is a consistent cash generator with minimal capital requirements and significant potential upside. We continue to appreciate the diversification and return profile of this business. Land is clearly where we are highly focused on building similar efficiencies.

Speaker Change: Well, not at the rateability of aviation, and while results were down year over year, our marine platform remains highly efficient and working capital light.

Speaker Change: Because Marine is more of a spot business, it can deliver outsized results when market conditions are favorable, but creates value even in less beneficial environments.

Speaker Change: It is a consistent cash generator with minimal capital requirements and significant potential upside. We continue to appreciate the diversification and return profile of this business.

Speaker Change: Land is clearly where we are highly focused on building similar efficiencies.

Unfortunately, in the second quarter, we experienced an unusual situation in which a number of our market forces negatively impacted several parts of the land business. Ira will cover this in more detail in his comments. We are actively working to grow and scale those parts of the land business that we believe are more rateable, have a better return, are less susceptible to market conditions, and provide the best platform for increased operating leverage. Last week, I participated in a two-day management offsite with 50 of our key leaders.

Speaker Change: Unfortunately, in the second quarter, we experienced an unusual situation in which a number of our market forces negatively impacted several parts of the land business.

Speaker Change: Ira will cover this in more detail in his comments.

IRA: We are actively working to grow and scale those parts of the land business that we believe are more rateable, have a better return, are less susceptible to market conditions, and provide the best platform for increased operating leverage.

IRA: Last week, I participated in a two-day management offsite with 50 of our key leaders. We focused exclusively on accelerating the transformation of our core US land business.

We focused exclusively on accelerating the transformation of our core U.S. land business. There is little doubt in my mind that we have assembled and organized the best team we've ever had, with a clear focus on flexing the capabilities we have across the company and a sense of urgency to install the processes and tools necessary for growth and operating leverage. Before I return the call to Ira, I want to stress that we believe that improvements in our land business remain a critical element of meeting our medium-term financial targets.

IRA: There is little doubt in my mind that we have assembled and organized the best team we've ever had with a clear focus on flexing the capabilities we have across the company and a sense of urgency to install the processes and tools necessary for growth and operating leverage.

IRA: Before I return the call to Ira, I want to stress that we believe that improvements in our land business remains a critical element of meeting our medium-term financial targets.

The land result this quarter was clearly a disappointment, but it in no way alters our commitment to attain our investor day objectives or impacts the confidence in our ability to achieve these objectives. In fact, the result underscores the need to move more quickly.

IRA: The land result this quarter was clearly a disappointment, but in no way alters our commitment to attain our Investor Day objectives or impacting the confidence in our ability to achieve these objectives. If anything, the result underscores the need to move more quickly.

To reiterate, we are committed to consolidating our offers and reallocating capital to improve operating leverage. This is our number one management priority, and we will be updating progress towards this objective quarterly. Now I'd like to thank our fantastic global team for their consistent dedication to our business. Your passion for what we do shows, and in a certain world, our customers, suppliers, and partners know that they can rely on us, as they have for nearly 40 years. Thanks for listening. And now, Ira will give a financial and detailed business update. Thank you. Thank you, Michael, and good evening, everyone.

IRA: To reiterate, we are committed to consolidating our offers and reallocating capital to improve operating leverage. This is our number one management priority, and we will be updating progress towards this objective quarterly.

Speaker Change: Now I'd like to thank our fantastic global team for their consistent dedication to our business. Your passion for what we do shows, and in an uncertain world, our customers, suppliers, and partners know that they can rely on us, as they have for the nearly 40 years.

Speaker Change: Thanks for listening. And now Ira will give a financial and detailed business update.

IRA: Thank you. Thank you, Michael, and good evening, everyone.

Before I begin, please note that our second quarter non-GAAP results reflect approximately $88 million of pre-tax adjustments. This is primarily due to a $96 million pre-tax gain on the sale of Avanode, which was completed in early May, offset in part by certain restructuring costs and a single investment related impairment. The after-tax gain on the Avanode sale was approximately $87 million, contributing $1.45 to GAAP diluted earnings per share for the quarter.

IRA: Before I begin, please note that our second quarter non-GAAP results reflect approximately 88 million dollars of pre-tax adjustments.

IRA: This is primarily due to a $96 million pre-tax gain on the sale of Avanode, which was completed in early May, offset in part by certain restructuring costs and a single investment related impairment.

IRA: The after-tax gain on the Avanode sale was approximately $87 million, contributing $1.45 to GAAP diluted earnings per share for the quarter.

Congratulations again to our team for successfully completing this transaction during the second quarter. Reconciliations of our non-GAAP measures are available on our investor relations website, as well as in today's webcast presentation. So now getting into the second quarter detail. Consolidated results were clearly impacted by weaker than expected performance in our land segment, which was offset in part by solid results in aviation. Despite the underperformance in land, our expenses again declined year over year, our tax rate was lower than anticipated, and we generated strong cash flow, which contributed to a further reduction in interest expense.

IRA: Congratulations again to our team for successfully completing this transaction during the second quarter. Reconciliations or non-GAAP measures are available on our investor relations website as well as today's webcast presentation.

IRA: So now getting into the second quarter details.

IRA: Consolidated results were clearly impacted by weaker than expected performance in our land segment, which was offset in part by solid results in aviation.

IRA: Despite the underperformance in land, our expenses again declined year-over-year, our tax rate was lower than anticipated, and we generated strong cash flow, which contributed to a further reduction in interest expense.

I'll now provide more color on the second quarter segment-by-segment results. Starting with aviation, where, as a reminder, results were modestly impacted by the Avanade sale, which we completed on May 1st. However, aviation volume was down slightly year over year.

IRA: I'll now provide more color on the second quarter segment-by-segment results.

IRA: Starting with aviation, where as a reminder, results were modestly impacted by the Avanade sale, which we completed on May 1st.

This was principally related to a reduction in low margin activity over the past 12 months, including a 100 million gallon per quarter reduction in bulk activity that we discussed last quarter, offset by volume growth in much of our core aviation activity. Our efforts to improve returns in aviation contributed to a near-record 53% operating margin for the quarter. Aviation gross profit was generally flat year-over-year, with the benefit of margin improvements generally offset by the impact of the Avenotes.

IRA: Aviation volume was down slightly year over year. This was principally related to a reduction in low-margin activity over the past 12 months, including a hundred million gallon per quarter reduction in bulk activity that we discussed last quarter, offset by volume growth in much of our core aviation activities.

IRA: Our efforts to improve returns in aviation contributed to a near-record 53% operating margin for the quarter.

IRA: Aviation gross profit was generally flat year-over-year with the benefit for margin improvements generally offset by the impact of the Avanade sale.

Just to note, since Avanode was a service business with no underlying volume, the divestiture will impact unit margins in aviation by approximately a half a cent per gallon going forward. As we look to the third quarter, if we exclude the impact of the Avanote sale, gross profit should be up meaningfully year over year, reflecting improved operating leverage from our growing global supply network. One of the numerous examples of year over year growth would be an expected incremental contribution from the Paris Olympics as we added Paris Vachery Airport to our network earlier this year.

Speaker Change: Just to note, since Avanode was a service business with no underlying volume, the divestiture will impact unit margins in aviation by approximately a half a cent per gallon going forward.

Speaker Change: As we look to the third quarter, if we exclude the impact of the Avanote sale, gross profit should be up meaningfully year over year, reflecting improved operating leverage from our growing global supply network.

Speaker Change: One of numerous examples of year-over-year growth would be an expected incremental contribution from the Paris Olympics as we added Paris-Vaterie Airport to our network earlier this year.

And looking towards the fourth quarter, we expect the aviation tuck-in transaction that Mike discussed earlier to be a strong strategic fit for our business aviation sector. While not a significant earnings contributor on day one, this transaction will be modestly accretive, and we expect it to close in the fall subject to customary closing conditions. In our land business, while commercial and industrial retail and natural gas volumes actually increase year over year, overall volumes decrease slightly, principally driven by unfavorable market conditions in our North American Wholesale Act.

Speaker Change: And looking towards the fourth quarter, we expect the aviation tuck-in transaction that Mike discussed earlier to be a strong strategic fit for our business aviation segment.

Mike: While not a significant earnings contributor day one, this transaction will be modestly accretive and we expect it to close in the fall subject to customary closing conditions.

Mike: In our land business, while commercial and industrial retail and nat gas volumes actually increase year over year, overall volumes decrease slightly, principally driven by unfavorable market conditions in our North American wholesale activities.

The percentage of land volume associated with our nat gas and power business was 33% in the second quarter, down from 41% in Q1 and modestly up from 31% in the second quarter of last year. While values were generally flat, Lance's second quarter was quite weak from a margin perspective, resulting in a 28% year-over-year decline in gross profit. The principal drivers of this decline were unfavorable supply dynamics in the renewable fuels market, principally on the West Coast; an oversupplied natural gas market where inventories were 20% above the previous five-year average at the end of June, driving near-record low prices and virtually no market volatility during the quarter.

Mike: The percentage of land volume associated with our nat gas and power business was 33% in the second quarter, down from 41% in Q1, and modestly up from 31% in the second quarter of last year.

Mike: While values were generally flat, Land's second quarter was quite weak from a margin perspective, resulting in a 28% year-over-year decline in gross profit.

Mike: The principal drivers of this decline were unfavorable supply dynamics in the renewable fuels market, principally on the West Coast.

Mike: An oversupplied natural gas market where inventories were 20% above the previous five-year average at the end of June , driving near-record low prices and virtually no market volatility during the quarter.

And even Brazil, where exponential growth in cargo imports, which started impacting us in the first quarter, has further driven down local market prices, resulting in further pressure on margins. And finally, while up sequentially, gross profit from our core sustainability-related offerings declined year over year, we are seeing growing opportunities for the second half of the year and beyond in many parts of this exciting business throughout the world. One example for the second half relates to renewable credits, where demand generally strengthens in the latter part of the year when customers firm up their carbon requirements before closing out their fiscal year. In summary, LAND's second quarter was clearly a bump in the road.

Mike: And even Brazil, where exponential growth in cargo imports, which started impacting us in the first quarter, has further driven down local market prices, resulting in further pressure on margins.

Mike: And finally, while, up sequentially, gross profit from our core sustainability-related offerings declined year over year, we are seeing growing opportunities for the second half of the year and beyond in many parts of this exciting business throughout the world.

Mike: One example for the second half relates to renewable credits, where demand generally strengthens in the latter part of the year when customers firm up their carbon requirements before closing out their fiscal years.

Speaker Change: In summary, LAND's second quarter was clearly a bump in the road. We had made it clear that the work necessary to achieve our medium-term targets for LAND, specifically, would not be a straight upward arrow.

We had made it clear that the work necessary to achieve our medium-term targets for LAND, specifically, would not be a straight upward arrow. So while we certainly aren't pleased with the second quarter outcome, we are confident in our ability to achieve these targets, and we remain very much committed to doing so. What are we doing here?

Speaker Change: So, while we certainly aren't pleased with the second quarter outcome, we are confident in our ability to achieve these targets, and we remain very much committed to doing so.

We remain focused on continuing to sharpen our portfolio of activities in land and significantly improving operating efficiency, with the continued goal of migrating more and more of the business to higher margin, higher return, more leverageable, and rateable activities, such as our card lock and retail distribution network. We also have the ability to utilize a strong liquidity position to capitalize on a growing pipeline of synergistic investment opportunities in these areas of our business, which should enable us to accelerate profitable growth and returns on the land business over time.

Speaker Change: What are we doing here? Well, we remain focused on continuing to sharpen our portfolio of activities in land and significantly improving operating efficiencies.

Speaker Change: With the continued goal to migrate more and more of the business to higher margin, higher return, more leverageable and rateable activities, such as our card lock and retail distribution networks.

Speaker Change: We also have the ability to utilize a strong liquidity position to capitalize on a growing pipeline of synergistic investment opportunities in these areas of our business, which should enable us to accelerate profitable growth and returns in a land business over time.

In the short term, while we are currently seeing a reversal of some of the unfavorable trends that impacted the second quarter, which should result in overall sequential improvement in land, third quarter gross profit is still expected to be down when compared to an extremely strong third quarter in 2023. However, we should return to year-over-year gross profit growth in the fourth quarter while remaining focused on driving greater opportunities for growth and increasing returns in 2025 and beyond. Moving on to marine, while volumes were essentially flat year over year, gross profit decreased about 13%, driven principally by lower market volatility than experienced in the prior year period.

Speaker Change: In the short term, while we are currently seeing a reversal of some of the unfavorable trends that impacted the second quarter, which should result in overall sequential improvement in land, third quarter gross profit is still expected to be down when compared to an extremely strong third quarter in 2023.

Speaker Change: However, we should return to year-over-year gross profit growth in the fourth quarter while remaining focused on driving greater opportunities for growth and increasing returns in 2025 and beyond.

Speaker Change: Moving on to Marine. While volumes were essentially flat year-over-year, gross profit decreased about 13 percent, driven principally by lower market volatility than experienced in the prior year period.

While we anticipated a sequential margin decline heading into the second quarter, the actual decline was a bit more than had been anticipated. As Mike mentioned earlier, while marine profitability is down from the highs of 2022, it remains an extremely efficient capital model and allows for strong returns and contributions to cash flow each quarter. As we look to the third quarter, we expect Marine Gross Profit to be effectively flat when compared to the third quarter of 2023, as year-over-year volatility comparisons finally seem to be normalized. To help better frame our comments,

Speaker Change: While we anticipated a sequential margin decline heading into the second quarter, the actual decline was a bit more than had been anticipated.

Speaker Change: As Mike mentioned earlier, while marine profitability is down from the highs of 2022, it remains an extremely efficient capital model and allows for strong returns and contributions to cash flow each quarter.

Speaker Change: As we look to the third quarter, we expect Marine Gross Profit to be effectively flat when compared to the third quarter of 2023, as year-over-year volatility comparisons finally seem to be normalizing.

Unexpected Year-over-Year Gross Profit Performance, Segment-by-Segment. We have decided to begin providing color on consolidated gross profit for the third quarter and going forward. With the backdrop of the related segment gross profit comments I've just shared, we expect consolidated gross profit to be in the range of $265 to $274 million in the third quarter. Hopefully, this will be helpful for modeling purposes going forward.

Speaker Change: To help better frame our comments on expected year-over-year gross profit performance, segment-by-segment, we have decided to begin providing color on consolidated gross profit for the third quarter and going forward.

Speaker Change: With the backdrop of the related segment gross profit comments I've just shared, we expect consolidated gross profit to be in the range of $265 to $274 million in the third quarter. Hopefully this will be helpful for modeling purposes going forward.

Now let's go to consolidated operating expenses. That was $192 million in the second quarter, down 7% from the second quarter of 2023 and below our guidance range provided last quarter. Second quarter expenses were lower than anticipated, principally due to reduced variable compensation, but also lower G&A expenses, serving as evidence of our ongoing efforts to carefully manage all cost categories across the entire business. The elimination of Avenode-related expenses was already reflected in the expense guidance we provided last quarter, so the Avenode sale did not contribute to our expenses being lower than forecasted for the second quarter.

Speaker Change: Now let's go to Consolidated Operating Expenses. That was $192 million in the second quarter, down 7% from the second quarter of 2023, and below our guidance range provided last quarter.

Speaker Change: Second quarter expenses were lower than anticipated, principally by reduced variable compensation, but also lower G&A expenses, serving as evidence of our ongoing efforts to carefully manage all cost categories across the entire business.

Speaker Change: The elimination of Avanode-related expenses was already reflected in the expense guidance we provided last quarter, so the Avanode sale did not contribute to our expenses being lower than forecasted for the second quarter.

For the third quarter, we are expecting adjusted operating expenses to be in the range of $193 to $197 million, another year-over-year reduction, in this case, benefiting in part from the elimination of Avanote expenses. We remain focused on our medium-term consolidated operating margin target.

Speaker Change: For the third quarter, we are expecting adjusted operating expenses to be in the range of $193 to $197 million, another year-over-year reduction, in this case, benefiting in part from the elimination of Avinote expenses.

Speaker Change: We remain focused on our medium-term consolidated operating margin target.

We discussed efforts in our land business earlier, but we also focused on driving cost efficiencies across the business, including our corporate back office function. There are numerous ongoing initiatives aimed at further improving our cost structure. Interest expense was $27 million in the second quarter; that's down about 15% year over year, as our team remains focused on optimizing our working capital position and related cash flow, with additional benefit from last year's low-coupon convertible notes issuance and the cash proceeds from the sale of Aveno this past quarter.

Speaker Change: We discussed efforts in our land business earlier, but we also focused on driving cost efficiencies across the business, including our corporate back office functions.

Speaker Change: There are numerous ongoing initiatives aimed at further improving our cost structure.

Speaker Change: Interest expense was $27 million in the second quarter. That's down about 15% year-over-year.

Speaker Change: As our team remains focused on optimizing our working capital position and related cash flow,

Speaker Change: With additional benefit from last year's low coupon convertible notes issuance and the cash proceeds from the sale of Aveno this past quarter.

As we've demonstrated over the past few quarters, we've been successful at reducing our quarterly run rate of interest expense by 25% from the peak level reached in the fourth quarter of 2022. And we expect another year-over-year decline in interest expense in the third quarter to $26 to $27 million, with our full-year 24 interest expense on track to come in 10 to 15 percent below fiscal year 23. Our adjusted effective tax rate for the second quarter was only 6% as our effective tax rate was positively impacted by a discrete tax benefit realized in the second quarter, resulting in an effective tax rate significantly lower than anticipated heading into the quarter.

Speaker Change: As we've demonstrated over the past few quarters, we've been successful at reducing our quarterly run rate of interest expense by 25% from the peak level reached in the fourth quarter of 2022.

Speaker Change: And we expect another year-over-year decline in interest expense in the third quarter to 26 to 27 million dollars with our full year 24 interest expense on track to come in 10 to 15 percent below fiscal year 23

Speaker Change: Our adjusted effective tax rate for the second quarter was only 6%, as our effective tax rate was positively impacted by a discrete tax benefit realized in the second quarter, resulting in an effective tax rate significantly lower than anticipated heading into the quarter.

Based on what we know today, we expect our effective tax rate for the second half of the year to be down to approximately 19 to 22 percent, resulting in a forecasted full-year rate of 15 to 18 percent. We generated $68 million of operating cash flow and $53 million of free cash flow in the second quarter.

Speaker Change: Based on what we know today, we expect our effective tax rate for the second half of the year to be down to approximately 19 to 22 percent, resulting in a forecasted full year rate of 15 to 18 percent.

Speaker Change: We generated $68 million of operating cash flow and $53 million of free cash flow in the second quarter.

This cash flow performance was positively impacted by our continuing efforts to drive efficiencies in our working capital model, resulting in a net trade cycle at just over two days for the second quarter. And our strong cash flow performance also enabled us to reduce our net debt to $355 million and our net debt to adjusted EBITDA to below one times, returning capital through share buybacks and dividends, which as always remains an important part of our balanced capital allocation framework. And there will be no changes to our priorities going forward.

Speaker Change: This cash flow performance was positively impacted by our continuing efforts to drive efficiencies in our working capital model Resulting in a net trade cycle at just over two days for the second quarter

Speaker Change: And our strong cash flow performance also enabled us to reduce our net debt to $355 million and our net debt to adjusted EBITDA to below one time.

Speaker Change: Returning capital through share buybacks and dividends as always remains an important part of our balanced capital allocation framework and there are no changes to our priorities going forward.

To underscore that commitment, in addition to our quarterly cash dividend, we repurchased $30 million of stock, or approximately 1.2 million shares, during the second quarter. So in closing, yes, our land segment had a weak quarter due to a confluence of factors which negatively impacted an unusually large number of business activities within a single quarter. And as already stated, while this was an unfortunate bump in the road, we remain focused on improving land operating efficiencies and profitability going forward, both by continuing to sharpen the portfolio of activities in which we participate while significantly improving our cost structure, something we're focused on each and every day.

Speaker Change: To underscore that commitment, in addition to our quarterly cash dividend, we repurchased $30 million of stock, or approximately 1.2 million shares, during the second quarter.

Speaker Change: So, in closing, yes, our land segment had a weak quarter due to a confluence of factors which negatively impacted an unusually large number of business activities within a single quarter.

Speaker Change: And as already stated, while this was an unfortunate bump in the road, we remain focused on improving land operating efficiencies and profitability going forward, both by continuing to sharpen the portfolio of activities in which we participate, while significantly improving our cost structure, something we're focused on each and every day.

Our aviation business performed well as our team continues to deliver on a strong value proposition globally, and we see strong momentum heading into the second half of the year. We generated $68 million in operating cash flow and $53 million of free cash flow in the second quarter, plus approximately $200 million from the Avanode sale, further strengthening our liquidity profile. Interest expense again continued to decline from peak levels of interest in late 22, and we were once again able to reduce operating expenses year-over-year by remaining laser-focused on cost control.

Speaker Change: Our aviation business performed well as our team continues to deliver on a strong value proposition globally, and we see strong momentum heading into the second half of the year.

Speaker Change: We generated $68 million in operating cash flow and $53 million of free cash flow in the second quarter, plus approximately $200 million from the Avanode sale, further strengthening our liquidity profile.

Speaker Change: Interest expense again continued to decline from peak levels of interest in late 22 and we were once again able to reduce operating expenses year over year by remaining laser focused on cost controls.

We repurchased approximately 2% of our outstanding shares, demonstrating our continued commitment to returning value to our shareholders. And finally, we remain focused on driving our EBITDA and operating margin towards our 2026 stated goals, which should deliver increasing levels of cash flow and an improvement in our overall return on capital. Nothing has changed there.

Speaker Change: We have purchased approximately 2% of our outstanding shares, demonstrating our continued commitment to returning value to our shareholders.

Speaker Change: And finally, we remain focused on driving our EBITDA and operating margin towards our 2026 stated goals, which should deliver increasing levels of cash flow and an improvement in our overall return on capital.

We remain equally committed to achieving those goals. There's lots of work to be done, but our team remains relentlessly focused on driving towards these critical goals over the next several months and quarters. Thank you. I'll now turn the call back to our operator to open up the Q&A session. As a reminder to ask a question, you will need to press star 11 on your telephone. To remove yourself from the queue, you may press star 11 again.

Speaker Change: Nothing has changed there. We remain equally committed to achieving those goals.

Speaker Change: There's lots of work to be done, but our team remains relentlessly focused on driving towards these critical goals over the next several months and quarters to come. Thank you. I'll now turn the call back to our operator to open up the Q&A session.

Speaker Change: As a reminder, to ask a question, you will need to press star one one on your telephone. To remove yourself from the queue, you may press star one one again. We ask that you please limit yourself to one question and one follow-up. Please stand by while we compile the Q&A roster.

We ask that you please limit yourself to one question and one follower. Please stand by while we compile the Q&A roster. Our first question... comes from the line of John Royall of JPMorgan. Hi, good evening.

Speaker Change: Our first question comes from the line of John Royall of J.P. Morgan.

Thanks for taking my question. So my first question, my first question is on land. Can you talk a little more about the headwinds in renewable fuels on the West Coast that Ira spoke about for one, for 2Q, and then what you're seeing in terms of the recovery there into the third quarter? Yeah, thanks.

John Macalister Royall: Good evening, thanks for taking my question. So my first question, my first question is on land. Can you talk a little more about the headwinds in renewable fuels on the West Coast that Ira spoke about for 2Q, and then what you're seeing in terms of the the recovery there into the third quarter?

There have been, you know, what I would best describe as logistics-related issues, which have both impacted our ability to push through volume on the West Coast and push it through as economically as we would like to. What does that mean? Pipeline terminals have effectively been slow to convert to renewable diesel. So in many parts of the region, we're forced to move more product through, you know, rail and truck, and that's not as cost efficient.

Speaker Change: Thanks for the question, John .

Speaker Change: To try to answer it in a simplest way possible.

Speaker Change: There have been, you know, what I would best describe as logistics related issues, which have both impacted our ability to push through volume on the West Coast and push it through as economically as we would like to. You know, what does that mean? There, you know, there have been

Speaker Change: Pipeline terminals have effectively been

Speaker Change: Slow to convert to renewable diesel. So in many parts of the region were forced to move more product through You know rail and truck and that's not as cost-efficient So that that impacted us

So, that impacted us from a volume perspective and a bit from a margin perspective as well. What does that mean going forward? I, you know, there are discussions and activities going on each and every day, which hopefully will enable us to create more efficiencies in that network, but it's probably going to take a couple months or so before we see any significant change there. But there are, you know, opportunities for that, for that to improve.

Speaker Change: from a volume perspective and a bit from a margin perspective as well.

Speaker Change: What does that mean going forward?

Speaker Change: Discussions and activities going on each and every day, which hopefully will enable us to.

Speaker Change: create more efficiencies in that network. But it's probably going to take, you know, a couple months or so before we see any significant change there. But there are you know, there are opportunities for that.

There are some new refineries that have come online that have impacted the market. So, there's a bunch of factors that when put all together had a meaningful enough impact on us for us to mention that as a factor in the second quarter. It's really helpful.

Speaker Change: for that to improve. There's some new refineries that have come online that have impacted the market. So there's a bunch of factors that when put all together had a meaningful enough impact on us for us to mention that as a factor in the second quarter.

Thanks. And then my follow-up question is just a housekeeping question: I don't think we have the 10 Q yet. Can you talk about what's been received in cash on the Avanode sale and when the tax bill will be paid if it hasn't already? And should we think about the tax portion of it as just the 87 million gain times tax rate?

Speaker Change: It's really helpful. Thanks. And then

Speaker Change: My my follow-up is just a housekeeping question is I don't think we have the the 10q yet Can you talk about what's been? received in cash on the Avanade sale and When the tax bill will be paid if it hasn't already and should we think about the tax portion is just The 87 million gain times tax rate

Actually, the tax on that transaction is, you know, for all sorts of reasons, it's a relatively small number. So, for starters, almost exactly $200 million is what came in in May. You'll see that on the cash flow statement. And the related tax that would go out the door, I would say most likely in Q3, is only about $9 million.

Speaker Change: Actually, the tax on that transaction is...

Speaker Change: You know, for all sorts of reasons, it's a relatively small number. So for starters,

Speaker Change: Almost exactly $200 million is what came in in May.

Speaker Change: You'll see that on the cash flow statement. And the related tax that would go out the door, I would say most likely in Q3 is only about $9 million.

Great, thanks very much. So, you know, net nettle, you know, has a positive after tax benefit from a cash perspective of about $190 million. Great, thank you. You're welcome. Thank you. Our next question comes from the line of Ben Nolan on Steve. Thanks. A couple.

Speaker Change: Great, thanks very much. So, you know, net nettle, you know, has a positive after tax benefit from a cash perspective of about $190 million.

Speaker Change: Great, thank you.

Speaker Change: You're welcome. Thank you.

Speaker Change: Our next question.

Speaker Change: Comes from the line of Ben Nolan of Stifel.

First, just quickly, you talk about the tuck-in acquisition on the aviation side. Any context on how the capital outlay for that? Thanks for pushing me to talk about the capital outlay for that.

Benjamin Joel Nolan: Thanks. A couple, first just quickly you talk about the the tuck-in acquisition on the aviation side. Any context on how the capital outlay for that?

Is that the question? Yes, right. Yeah, the total purchase price was around 45 million dollars, of which several million dollars are deferred for a period of time. So it's somewhere around 40 million dollars that will go out the door when we close that transaction somewhere around the end of the third quarter. Okay, perfect. And I was going to also dig in a little bit on the land side. It did seem like some of these factors should have been; we should have seen them in the first quarter as well.

Speaker Change: Thanks for the question. I mean, is there a capital outlay for that? Is that the question? Yes. Right. Yeah, it's about a total purchase price was around $45 million of which several million dollars is deferred for a period of time. So it's

Speaker Change: Somewhere around $40 million that will go out the door when we close that transaction somewhere around the end of the third quarter.

Speaker Change: Okay, perfect.

Speaker Change: And I was going to also dig in a little bit on the land side. It did seem like some of these factors should have been...

I'm curious whether that's the West Coast fuels or Brazil or any of the handful of things that you laid out there. I'm curious what changed from sort of how you were thinking about the business when you last reported and as compared to how it played out over the quarter and maybe how it was in the first quarter versus how it was in the second quarter. Sure. So, you know, great question.

Speaker Change: We should have seen them in the first quarter as well. I'm curious whether that's the West Coast fuels or Brazil or any of the handful of things that you laid out there. I'm curious what changed from sort of how you were thinking about the business when you last reported.

Speaker Change: and as compared to how it played out over the quarter and maybe how it was in the first quarter versus how it was in the second quarter.

Thanks. So in the first quarter, you know, thinking back, the largest, you know, year over year variance really related to weather issues that impacted both the UK, which had a weaker quarter year over year, and our NAICS business. So we highlighted those.

Speaker Change: Sure. So, you know, great question. Thanks. So, in the first quarter, you know, thinking back, the largest, you know, year-over-year variance really related to weather issues that impacted both the UK, that had a week or quarter year-over-year, and our NatGas business.

On something like Brazil, we did have an impact on the first quarter, but in terms of the overall year-over-year variance, it wasn't quite as significant. That situation deteriorated a bit further this quarter, and it became meaningful enough to call it out. But we were impacted by that one in Q1 as well.

Speaker Change: So we highlighted those. On something like Brazil, we did have an impact on the first quarter, but in terms of the overall year-over-year variance.

Speaker Change: It wasn't quite as significant. That situation deteriorated a bit further this quarter and it became meaningful enough to call it out. But we were impacted by that one in Q1 as well. We weren't impacted as much.

We weren't impacted as much on that renewable piece of the puzzle that I just described to John. And in terms of NatGas, we called NatGas out last quarter and this quarter. So I think those are the principal moving parts.

Speaker Change: on that renewable piece of the puzzle that I just described to John . And in terms of NatGas, you know, we called NatGas out last quarter and this quarter, right. So I think those are the

So again, the biggest factors last quarter were the weather impacts in Europe and the U.S. And this quarter, you had more significant impacts, and a little bit of sustainability this week. Yeah, and then, and then in this quarter, it's just, you know, there are sustainability-related products and services, as I alluded to, were off a little bit. So, you know, we mentioned that as well, but, you know, but, you know, not. Yeah, somewhat different than what we experienced in the first quarter.

Speaker Change: Principal Moving Parts. So, you know, again, biggest factors last quarter were the weather impacts in Europe and the U.S. In this quarter you had, you know, more significant impacts.

Speaker Change: a little bit of sustainability this week. Yeah, and then and then in this quarter, it's just, you know, our sustainability related products and services, as I alluded to, were off a little bit. So, you know, we mentioned that as well. But, you know, but, you know, not

Speaker Change: Yeah, somewhat different than what we, what we experienced in the first quarter.

All right, I appreciate it, thank you guys. Thank you. Once again, to ask a question, please press star 11 on your telephone. Again, that's star 11 on your telephone to ask a question. Our next question comes from the line of Graham Price of Raymond James. Hey, good afternoon, guys.

Speaker Change: All right. I appreciate it. Thank you, guys.

Speaker Change: Thank you. Once again, to ask a question, please press star 11 on your telephone. Again, that's star 11 on your telephone to ask a question.

Graham Price: Our next question comes from the line of Graham Price of Raymond James. Okay, good afternoon, guys. Thanks. Thanks for taking the question.

Speaker Change: Our next question comes from the line of Graham Price of Raymond James.

Thanks. Thanks for taking the question. Maybe firstly on aviation, given that we've seen a lot of problems in the airline industry with outages and whatnot, just wondering if there's any impact from that that you're seeing on Q3 guidance specifically. So far, none.

You know, we know some of the airlines that got impacted. Obviously, capacity is a little bit more than what is optimum. And there are some adjustments being made, but really, no impact. And, you know, our network continues to increase and expand. So being able to grab market share as the locations increase is a favorable development for us, but no, no impact. We're not expecting an impact. And if there is one, we're not expecting it to be disruptive.

Michael Kasbar: Maybe, firstly, on aviation, given that we've seen a lot of problems in the airline industry with the challenges and what not, just wondering if there's any impact from that, the year seen on Q3 guidance, specifically. So for none, you know, we know some of the airlines that got impacted. Obviously, capacity is a little bit more than what is optimum, and there are adjustments being made. But, really, no impact. You know, our network continues to increase and expand. So being able to grab market share as locations increase is a favorable development for us. But, no impact; not expecting an impact.

Graham Price: Okay, good afternoon, guys. Thanks. Thanks for taking the question.

Graham Price: Maybe firstly on aviation, given that we've seen a lot of problems.

Graham Price: in the airline industry with outages and whatnot. Just wondering if there's any impact from that that you're seeing on Q3 guidance specifically.

Speaker Change: So far, none. You know, we we know, some of the airlines that got impacted. Obviously, capacity is a little bit more than what is optimum. And there's adjustments being made.

Speaker Change: But really no impact, you know, our network continues to increase and expand.

Speaker Change: So being able to grab market share as the locations increase is a favorable development for us.

Speaker Change: But no, no impact, not expecting an impact. And if there is one, we're not expecting it to be impactful. So I think it's steady as she goes. And

Michael Kasbar: And if there is one, we're not expecting it to be impactful. So I think it's steady as she goes and will, you know, we'll sort of ride that. You know, a lot of our business there is contractual. We do have a good amount of ad hoc, is what we call it in the aviation market. So there's always the possibility, obviously, but that's not presently in our forecast. It's the opposite. Great. Good to hear there.

So I think it's steady as she goes. And we'll, you know, we'll sort of ride that. You know, a lot of our business there is contractual. We do have a good amount of ad hoc, is what we call it in the aviation market. So there's always the possibility, obviously, but that's not presently in our forecast.

Speaker Change: we'll sort of ride that

It's, it's the opposite. Great, good to hear from you there. And then just a housekeeping question for my follow-up.

Speaker Change: You know, a lot of our business there is contractual, we do have a good amount of ad hoc is what we call it in the aviation market. So

Speaker Change: There's always the possibility, obviously, but that's not presently in our forecast. It's the opposite.

What was the second quarter percentage of EBITDA from low carbon energy, I guess, the Kinect businesses? In the second quarter, Graham, the number I usually give Pavel is GP. Actually, the percentage of that part of our business was about 8%. The EBITDA percentage this quarter was much lower, principally on the back of a much weaker performance on the NatGas side.

Ira Birns: And then just a housekeeping question for my follow-up. What was the second quarter percentage of EBITDA from low carbon energy? I guess the the connect businesses.

Speaker Change: Great, good to hear there. And then just a housekeeping question for my follow up. What was the second quarter percentage of EBITDA from low carbon energy, I guess the Kinect businesses?

Ira Birns: In the second quarter gram, the number usually gets the values is GP. Actually, the percentage of that part of our business was about 8% the EBITDA percentage. This quarter was much lower on the back of principally of the much weaker performance on the NACS side. But it was about a percentage of profit. Okay, and that GP number, that 8% compares to, I think you told us 12% last quarter. That's right. Okay. Got it. Thank you. You're welcome, Bill. Thank you.

Speaker Change: In the second quarter, Graham, the number I usually give Pavel is...

GP: Hypothesis, GP actually the percentage of that part of our business was about 8%, the EBITDA percentage this quarter was much lower on the back of, principally of the much weaker performance on the NatGas side.

But it was about 90% of gross profit. Okay, that GP number of 8% compares to, I think you told us, 12% last quarter. That's right. Okay, got it.

Speaker Change: But it was about 90% of gross profit.

Speaker Change: Okay, that that GP number that 8% compares to I think you told us 12% last quarter. That's right.

Thank you. You're welcome, Graham. Thank you. I would now like to turn the conference back to Michael Kasbar for closing remarks. Sir, I appreciate the interest and look forward to speaking to you next quarter. Be safe. Take care. Bye bye. This concludes today's conference call. Thank you for participating. You may now disconnect.

Speaker Change: Okay, got it. Thank you.

Graham Price: You're welcome, Graham.

Michael Kasbar: I would now like to turn the conference back to Michael Casper for closing remarks. Thank you, everyone, for listening this afternoon. This evening, I appreciate the interest and look forward to speaking to you next quarter.

Graham Price: Thank you.

Graham Price: I would now like to turn the conference back to Michael Kasbar for closing remarks. Sir. Well, thank you everyone for listening this afternoon, this evening. Appreciate the interest and look forward to speaking to you next quarter.

Operator: Be safe, take care. Bye-bye.

Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.

Speaker Change: Be safe. Take care. Bye-bye.

Speaker Change: This concludes today's conference call. Thank you for participating. You may now disconnect.

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