Q3 2024 Quad/Graphics Inc Earnings Call
Speaker Change: Good morning and welcome to Quad's A3rd Quarter 2024 Conference Call. During today's call, all participants will be in the Listen-only mode. Should you need assistance at any time, please signally conference specialist by pressing the star key followed by zero.
Speaker Change: A slide presentation, a company's today's webcast and participants are invited to follow along and be answering the slides themselves.
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Speaker Change: and I'm Dr. Aftard today's presentation. There will be an opportunity to ask questions.
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Speaker Change: I will now turn the conference over to Katie Krebsbach, Quad's Investor Relations Manager. Katie, please go ahead.
Katie Krebsbach: Thank you, operator and good morning, everyone. With me today are Joel Quadrachi, Quadrachi Chairman, President and Chief Executive Officer, and Tony Staniak, Quadrachi Financial Officer.
Katie Krebsbach: Joel Lee today's call with a business update and Tony will follow with a summary of Quad's third quarter and year to date 2024 financial results followed by Q&A.
Katie Krebsbach: I would like to remind everyone that this calls being webcast and forward-looking statements are subject to safe harbor provisions as outlined in our quarterly news release and in today's slide presentation on slide 2.
Katie Krebsbach: The financial results are prepared in accordance with generally accepted accounting principles. However, this presentation also contains non-gap financial measures, including adjusted EBITDA, adjusted EBITDA, margin, adjusted diluted earnings per share, free cash flow, net debt, and debt leverage ratio.
Katie Krebsbach: We have included in the Fide Presentation Reconciliation of these non-gap financial measures to get financial measures. Finally, a replay of the call will be available on the investor section of quad.com shortly after our call concludes today. I will now hand over the call to Joel.
Joel: Thank you, Katie and good morning, everyone. Our third quarter results were in line with our expectations.
Joel: Third quarter, Net Sales declined versus prior year due to lower paper and agency solution sales. However, we achieved improvements in both adjusted EBITDA and adjusted EBITDA margin, with adjusted EBITDA margin increasing by 54 basis points to 8.7%.
Joel: We also continue to be a strong cash generator using these funds to pay down debt, strengthen our balance sheet, and return capital to shareholders through a quarterly dividend.
Joel: Despite full year 2024 Net Sales trending toward the higher end of decline in our guidance range, we are maintaining the mid-boins of our guidance for adjusted EBITDA and free cash flow.
Joel: We are also reducing anticipated urine net debt leverage from approximately 1.8 times to 1.5 times, pending the sale of the majority of our Medier P and Operations by year and.
Joel: As an outspel last week, we entered into a definitive agreement with Katma, a Germany-based private capital investment management firm, to sell our European print operations for an enterprise value of approximately $45 million. Operations that represent just 5% of our total net sales.
Joel: is proposed sale supports quad's ongoing strategic focus to optimize our business portfolio for growth as a marketing experience or MX company.
Joel: We will continue to maintain state-of-the-art print operations and locations that support our MX offering, including the Americas with North America comprising our largest base of operations.
Joel: The transaction is expected to close by the end of the year, pending customer regulatory clearance as another closing conditions.
Joel: As a company founded on creating a better way, we continue to use every tool at our disposal to improve the marketers experience.
Joel: Our solutions we've shown on slide three helps brands enhance their marketing experience by removing friction wherever it appears across the marketing journey from creative production and media to everywhere in between.
Joel: Supported by State of the Art Technology and Data Driven Intelligence, our solutions are scalable and flexible, operating together to provide clients with integrated service excellence.
Joel: Our focus as an MX company includes accelerating our position and market value, leveraging ingenuity and innovation, relentlessly solving marketers' biggest challenges across industries and building on our strong cultures in MX company.
Speaker Change: I'm slide four, we are excited to share the momentum behind Instor Connect by Quad. Our Instor Retail Media Networks solution that elevates the shopping experience by bringing the best elements of digital commerce and physical store environments.
Speaker Change: During the quarter, the SAVEMAR companies, the largest private regional grosser on the West Coast, activated our solution in 15 stores and an initial results are promising with participating brands all registering a positive sale of lift.
Speaker Change: Tamara Patterson, Chief Digital Officer at the Savemark Companies, echoed our enthusiasm for our solution saying what was most compelling to us was the capabilities around targeting, around activation and around analytics that came with this solution.
Tamara Patterson: We are really excited about what we're seeing not only from an in-store activation perspective, but from the excitement with the supplier community. As we rolled out the initial testing phase at 15 stores, we haven't been disappointed. We are excited for the future.
Speaker Change: In addition, the same are companies to the same are companies, to other large regional grocery chains, including Oklahoma-based homeland stores. In the process of testing our end-store connections solution and through which we expect to have activations in approximately 30 more stores by year end.
Speaker Change: While Martin was building not only with supermarket chains, but department stores home improvement stores and convenience stores too.
Speaker Change: Moving on to slide five, I'm proud to share how we're continued to enhance our media intelligence solutions through the power of a proprietary, also based data stack.
Speaker Change: Comprised more than 3 billion data points that are revalidated weekly, our data stack represents more than 20,000 attributes from approximately 97% of the adult U.S. population.
Speaker Change: We are leveraging this robust data set to power our body and targeting solutions and helps clients optimize customer acquisition efforts and creating engaging content for their existing customers.
Speaker Change: In September, we announced our next step in monetizing our data stack through an exciting partnership with Google Cloud.
Speaker Change: By leveraging Google Clouds' artificial intelligence optimization capabilities and large language models, we are creating new AI-driven solutions that tap into our data and seamlessly connect it with clients' creative and media.
Speaker Change: In addition to streamlining access to Quad's audience targeting capabilities, these combined solutions will provide highly personalized content app scale across multiple marketing channels by image generation, content creation, layout design, translation, and more.
Speaker Change: We plan to roll out our Duay Driven Offerings in the coming months.
Speaker Change: Next, I'd like to spotlight two client examples that showcase the measurable benefits of our MXLUTION suite. Advancing to slide six, Nicholas Children's Hospital, a nationally ranked children's health care system in Miami, partnered with our RISE Media Agency to revise its marketing strategy.
Speaker Change: The focus of our work was to maintain reach while adhering to new guidelines for healthcare markers related to heightened privacy regulations.
Speaker Change: With our help, the hospital implemented a refreshed campaign strategy that ensured compliance while increasing engagement.
Speaker Change: are work included a complete creative refresh to its various ad formats, including increased usage of video content.
Speaker Change: are refined, paid media strategy that enhanced add relevancy and increased web traffic, and it updated SEO strategy that improved the hospital's metadata and identified an address content gaps.
Speaker Change: These integrated efforts led to a 93% higher click through rate and a 375% higher engagement and paid social media ads year over year and 68% growth in website traffic.
Speaker Change: The client is extremely pleased with his results from our ongoing partnership and we look forward to supporting continue growth for this client as its media agency of record.
Speaker Change: On slide 7, we show our work for consolidated communications. A $1 billion broadband and business communications provider serving customers across more than 20 states.
Speaker Change: Through a multi-channel direct marketing campaign, we helped enhance customer acquisition efforts and new regions covered by Fidium fighter Fiber. The clients rapidly expanding consumer broadband service.
Speaker Change: Specifically, we applied our prepared-term household-based data stack and advanced analytics to identify and reach high potential audience targets.
Speaker Change: Designed to optimize creative content for both online and offline channels, and designed a printed direct mental to drive online conversions with flow code technology.
Speaker Change: The campaign combined the power of digital and print by supplementing mail pieces with targeted social media and website ads, as well as re-marketing web-based consumer leads with personalized mailings.
Speaker Change: The results of the campaign included high engagement and email open rates, reinforcing the value of well-conceived and connected multi-channel marketing campaigns.
Speaker Change: Before I turn the call over to Tony, I would like to take a moment to thank Ermpleys during our season, seasonly busiest time of the year for the continued hard work and commitment to providing the highest levels of service for each of our clients. I'm proud of our team and our future is at Mx Company and with that I will now turn the call over to Tony for the Financial Review.
Tony Staniak: Thanks, Joel, and good morning, everyone. On slide 8, we show our diverse revenue mix.
Tony Staniak: Net sales were $675 million in the third quarter of 2024, a decline of 4% compared to the same period in 2023. Primarily due to lower paper and agency solution sales, including the loss of a large grocery client.
Tony Staniak: on a year-to-date basis, and that sales were $2 billion in 2024.
Tony Staniak: A 9% decline compared to 2023, primarily due to lower paper sales and lower print volumes, including the impact from client mix and increased career volume that has a lower unit price with a higher profit margin.
Tony Staniak: as well as lower agency solutions sales.
Tony Staniak: During the first nine months of 2024, magazines and catalogs increased as a portion of our net sales mix by 2% compared to the previous year due to recent 7-share wins such as AARP, while retail answered decreased 2%.
Tony Staniak: Sidenign provides a snapshot of our third quarter 2020 for our financial results.
Tony Staniak: The Jusset EBITDA was $59 million in the third quarter of 2024, as compared to $57 million in the third quarter of 2023, and the Jusset EBITDA margin increased 54 basis points from 8.2% to 8.7%.
Tony Staniak: On a year-to-date basis, adjusted Ebeto was $161 million in 2024 compared to $160 million in 2023. And adjusted Ebeto margin increased 48 basis points. From 7.7% in the first nine months of 2023 to 8.2% in the first nine months of 2024.
Tony Staniak: The margin increase in both periods was primarily due to benefits from improved manufacturing productivity and savings from cost reduction initiatives.
Tony Staniak: During the first half of 2024, we completed previously announced restructuring actions, including plant closures and labor reductions that we expect will generate $60 million of cost savings this year.
Tony Staniak: A just-it-deluded earnings per share was 26 cents in the third quarter of 2024 as compared to 11 cents in the third quarter of 2023.
Tony Staniak: Here today, adjusted deluded earnings per share was 409 cents in 2024, compared to 28 cents in 2023. The increase in bulk period was primarily due to higher adjusted net earnings and the beneficial impact of a lower share count due to stock bybacks.
Tony Staniak: Since the 7th quarter of 2022, we have repurchased approximately 11% of our total outstanding common stack.
Tony Staniak: Squad's Board of Directors authorized a sheery purchase program of up to $100 million of our outstanding class A common stock in 2018. As of September 30, 2024, there was $77.5 million of authorized purchases remaining under this program.
Tony Staniak: Free Cash Flow is negative $92 million in the first nine months of 2024, as compared to $191 million in the first nine months of 2023.
Tony Staniak: This change was primarily due to non-recurring cash flow benefits realized in 2023 from reducing inventories, enabled by an improved supply chain environment.
Speaker Change: As we have previously shared, we will continue to generate proceeds from asset sales in addition to our strong free cash flow, as shown on slide 10. During the five-year period from 2020 to 2024, we now expect to generate over $830 million of free cash flow and proceeds from asset sales.
Speaker Change: These assets sales include investors of certain nine core portions of our business, such as the expected year and sale of the majority of our European populations for an enterprise value of approximately $45 million, as well as sales of property plant equipment from closed facilities.
Speaker Change: In September, we completed the sale of our former Sarah Tobis Springs New York 1 million square foot manufacturing facility for net cash proceeds of $41 million. And last week, we announced the closure of our Waki Island Directory Manufacturing Facility.
Speaker Change: We expect to generate further cash grosses in 2025 from the sale of the lock feed building and three additional own facilities we closed earlier in 2024.
Speaker Change: We show you the seasonality of our free cash flow and debt leverage on slide 11.
Speaker Change: Due to the seasonality of our business, we typically generate negative free cash flow in the first nine months of the year, followed by large positive free cash flow in the fourth quarter.
Speaker Change: Our seasonal production people occurs in the late 3rd quarter and early 4th quarter of the year due to the timing of how they related advertising and promotions.
Speaker Change: This leads to inventory build prior to that time and then results in higher collections from clients in the fourth quarter.
Speaker Change: In 2024, we can continue to anticipate a similar seasonal pattern. More comparable to 2022 when we generated $174 million of free cash flow in the fourth quarter.
Speaker Change: We believe we are on track to generate 142 million to 162 million dollars of free cash bill in the fourth quarter of this year to meet our full year 2024 free cash flow guidance of 50 to 70 million dollars.
Speaker Change: and we plan to achieve net net leverage on approximately 1.5 times with net net of $330 million. Then in the completion of the European Investor Child.
Speaker Change: Side 12 includes a summary of our Get Capital Structure.
Speaker Change: At the end of the third quarter of 2024, our net debt was $490 million. Reduced $94 million from $584 million dollars one year ago at September 30, 2023.
Speaker Change: We have focused on debt reduction over the past five years and by this year, we anticipate reducing debt by over $700 million since January 1, 2020.
Speaker Change: Including interest rate derivatives are dead at the end of the third quarter was 57% loading and 43% fixed with a blended interest rate of 7.8% and our total available liquidity including cash on hand was $196 million.
Speaker Change: We are pleased with the October extension of our $690 million term loan aid and revolving credit agreement and the ongoing long term support in partnership with our premier bank group.
Speaker Change: Our next significant maturity is now $193 million due in October, 2020.
Speaker Change: We will continue to focus on debt reduction with our capital allergies.
Speaker Change: This Fed extension also provides us with additional financial flexibility to focus on the growth and development of our offerings at some marketing experience company, while also returning capital to our shareholders.
Speaker Change: We share our updated 20-24 guidance as shown on slide 13.
Speaker Change: Consistent with what we communicated in the second quarter earnings call. Our annual nest sales are trending towards the high-rend of decline in our guidance range, and we expected a decline of approximately 9% compared to the original guidance of annual nest sales declining 5% to 9%.
Speaker Change: With our flexible model, higher labor productivity and focus on discipline cost management, we are maintaining the midpoints of adjusted even to guidance at $225 million and free cash will guidance at $60 million. Free cash will include $65 million of capital expenditures the further accelerates our offerings.
Speaker Change: and finally as previously mentioned, enabled by our strong cash generation we now expect debt leverage to improve to approximately 1.5 times by the end of 2024, which is reduced from our original guidance of 1.8 times and is also below our targeted long-term debt leverage range of 1.75 to 2.25 times.
Speaker Change: Slide 14 includes our key investment highlights as we continue to build on our momentum as a marketing experience company. We believe that Quad is compelling long-term investment, and we remain focused on growing that sales and driving higher profitability through continued diversification of our revenue in clients.
Speaker Change: with our expanded offerings such as historic connects and our proprietary household-based data stack discussed earlier. There is a significant addressable revenue opportunity with both our large base of existing clients as well as new clients.
Speaker Change: In addition, our strong cash generation will continue to fuel our capital allocation priorities.
Speaker Change: These include investing in scaling our offerings for the reducing debt and returning capital to shareholders through our next quarterly dividend of five cents payable on December sixth. We also expect to continue to be opportunistic in terms of our future share rebirths.
Speaker Change: We look forward to sharing a more comprehensive update on our strategy and the growth opportunities that are upcoming investor day on November 20th in New York City. We've said, I'd like to turn the call back to our operator for questions.
Speaker Change: We will now begin the question-and-answer session. To ask a question, you may press star, then 1 on your touch-tone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star and then 2. Our first question comes from Kevin Steinke with Barrington Research Associates. Please go ahead.
Speaker Change: Morning, Kevin. Thanks. Good morning, Kevin. Good morning.
Kevin Steinke: Great. Well, I wanted to.
Kevin Steinke: I know you said you're going to be rolling that out in the coming months, but have you gathered any initial feedback or initial reaction from your client base and how they see this benefiting them?
Speaker Change: Yeah, I mean, I think one of the biggest challenges in marketing today is in finding good audience.
Speaker Change: And the other big challenge, once you find good audience, is actually having the content follow the messaging in a variable sort of way. You know, the old days of sort of shotgun blast everybody with the same message and the same content, you know, doesn't work so well. So the world expects to be more personalized.
Speaker Change: And so by adding the AI element to our very large data stack, and I'll remind you that the data stack consists of, you know, all the household personalities in the country because of our existence as a printing company.
Speaker Change: So once you have that, it's sort of digging through that huge data stack to find out, for the marketer, what is the specific set of that data that works for us. And that's where AI comes into play to help us sift through that, as opposed to using a team of data scientists.
Speaker Change: the type of content that goes with the specific audience you follow.
Speaker Change: solve a problem that most of our marketing customers are dealing with today and the response so far is people are anxious to jump on and start testing the content and the data.
Speaker Change: In your back pocket here, if you feel like this is something you can go out to to the market as a differentiator to, you know, market yourself and win new business.
Speaker Change: Yeah, I have apps.
Speaker Change: Yeah, absolutely. And, you know, we've been working on this for a while.
Speaker Change: And so it's all coming together and we're combining it with our media offering and analytics offering. And we'll also remind people that our approach is to be completely transparent in what we're spending of your media dollars. That is not always the case out there.
Speaker Change: And there's a lot of murkiness as to am I spending the right dollars on the right audience.
Speaker Change: And so we believe that, you know, the hunger is there, not only for the transparency, but also the specificity of the type of audience that we can attract and go after for our clients. And then again,
Speaker Change: allowing content to follow along with it. It's very difficult for content to match your efforts on your audience when you start breaking down into, you know, significant number of different types of passions that people might have. And so yeah, I believe this will be a very large differentiator for us.
Speaker Change: Excellent. I wanted to follow up by asking about the reduction in your year-end leverage ratio target. Is that, as I understand it, being specifically driven by the European operation sale?
Speaker Change: It's a combination of, because we've had a very busy quarter, as you know, you know, we not only increased the margin that we have, but the divestitures of not just Poland, but also our very large high-quality asset in Saratoga Springs.
Speaker Change: to what we believe is a very good owner in terms of for the community. So it's a combination of all of that.
Speaker Change: Okay, and so as you think about...
Speaker Change: the targeted leverage ratio range, you expect to come in below that year end 2024. Are you sticking with the same target leverage range or is that something maybe you think about?
Speaker Change: revising in the future.
Speaker Change: So, we'll come back to you at that point, but we're going to continue to have a commitment to keeping debt low going forward, and we're happy with the low leverage because it gives us dry powder to continue to expand our offerings. Yeah, it kind of begs the questions of uses of capital, and look, I love what we've done with our balance sheet because it really gives us optionality.
Speaker Change: you know whether that's you know we whether or not we return tech capital to shareholders through the dividend or through repurchases that we've done in the past. We'll continue to be opportunistic there.
Speaker Change: but also in terms of enhancing our capabilities. So, you know, having that lower leverage range is great, but we always say that we may ebb and flow from that depending on the opportunities out there.
Speaker Change: Yeah, that makes sense. Certainly, you know, it gives you more options on capital allocation, so that's great.
Speaker Change: And just when I when I think about the again, you know, you talked about it last quarter, but the Sales trending to more like, you know, the 9% decline for the full year. I Assume the European sale is not
Speaker Change: Factored into that or is it or should I know he said you're in 2024 for the sale I just
Speaker Change: or if that's potentially before year-end.
Speaker Change: that that could, you know, affect the outlook for...
Speaker Change: sales for the full year? Yeah, with the, you know, regulatory clearances and other customary conditions, you know, we won't close the sale until, you know, in December at some point, right? So it won't have...
Speaker Change: You know, it's significant impact on the guidance if it closes, let's say, like December 15th or something like that, right? So, you should look at the minus 9% consistent with what we said in the second quarter call with how our sales were playing out over the year. And keep in mind, we talk about the loss of the large grocery client, and that's 3% of that amount. So, you know, the second half is kind of playing out, you know, as we expected.
Speaker Change: Okay, that sounds good.
Speaker Change: wanted to also just when you talk about the sales outlook maybe just get an update on what you're seeing from your clients in terms of
Speaker Change: how they're reacting to
Speaker Change: I know I hit on a lot of areas there, but just trying to get a sense of the general tone of business with regard to, you know, some of those macro factors.
Speaker Change: That being said, you know, they're going to hold off on doing what was an expected increase after the first of the year.
Speaker Change: over the past three years continues to have some impact.
Speaker Change: We hope people will start to
Speaker Change: built back volumes, as they see, you know, improvement with the consumer, from a interest rate standpoint, and we don't necessarily see the direct correlation or hear that from our customers other than we saw.
Speaker Change: sort of in the CPG space some softness and what I'm hearing from CPGs
Speaker Change: is if you're at the lower end of the economic, you know, sort of ladder.
Speaker Change: That whole group has really been hit hard, or the hardest.
Speaker Change: and they've seen some pullback and spend on higher end items and really pivoting towards the need to have, well, maybe the middle tier and the higher tier are still spending quite well.
Speaker Change: So, you know, I think how that plays out is a little bit, you know, we've obviously got a big election coming.
Speaker Change: and we'll see what comes after that, but right now...
Speaker Change: with sort of a, I don't know, maybe a little bit negative to neutral in our view.
Speaker Change: you know, trends there in terms of business and kind of that's, you continue to view that as a core part of your portfolio in the Americas.
Speaker Change: Yeah, so I'll start with our Mexico operations, you know, that's a natural extension.
Speaker Change: of our U.S. print platform. We export quite a bit of volume out of Mexico into the United States.
Speaker Change: Okay, thanks for all the good commentary. I will turn it over, thanks.
Speaker Change: Thanks, Kevin. Operator?
Speaker Change: And the next question comes from Barton Crockett with Rosenblatt. Please go ahead.
Speaker Change: Good morning, Byrden.
Barton Crockett: Good morning, guys.
Barton Crockett: Thanks for taking the question. I just I guess a little bit about the numbers here to make sure I understand.
Barton Crockett: implicit I think in your 9% full year guide if I'm doing the math right would be about an 8% decline in the fourth quarter you know is that right and why would it be you know a little bit more pressured than the third quarter is that maybe just the mix from the grocery client you lost or is there something else going on?
Speaker Change: so that's one question I think I think knowing so yeah for first off your first part on fourth quarter yeah eight to nine percent decline in the fourth quarter to get us to that approximately nine percent for the year
Speaker Change: And you will see ebb and flow depending on how, you know, volumes come out, in particular, retail inserts. We saw, for instance, in the third quarter, July of 2023 was a pretty low quarter for us, so we had a favorable comparable there in 2024, and that can happen on a monthly basis going forward. So, again, we're saying we're consistent with the negative 9% we gave for the year starting, you know, late last quarter that we talked about.
Speaker Change: Yeah, and I'd probably add that if there was a soft spot, would be maybe from that in the previous questions that we answered in the CPG space, impacting a little bit more on packaging in the corner. So, you know, there's a little bit of that going on.
Speaker Change: Okay, all right. Now in terms of the sale of the majority of your European operations...
Speaker Change: Is there any bigger-than-a-bread-basket sizing you can give us for, like, the cash flow impact of that? I think you guys have reported, like, Europe overall is about 5% of revenues, and I assume that's the majority, but if you could, you know, give us a little bit more color on that, it'd be great. Yeah.
Speaker Change: Yeah, I can talk to some of that. So first, you know, the wording on the majority of the European operations, so we have a very important shared services center in Poland, 400 people strong, that supports our U.S. admin operations as well as our clients.
Speaker Change: and we're retaining that going forward, right? So it is, that stays with us. Then the revenue generating operations, the 5% that you saw in the pie chart.
Speaker Change: that is what we are selling to CapMod, you know, as part of the transaction. So again, 5% of revenue. And think part of a, you know, typical print EBITDA multiple on that 45 million enterprise value, and you can kind of get to the, you know, approximate EBITDA range. And then when you think about, you know, that our debt leverage ratio.
Speaker Change: is half of the EBITDA multiple. You can see how this is nicely deleveraging for us as we put these proceeds towards debt reduction.
Speaker Change: Okay, I'm sorry, you said the leverage range is half of the EBITDA, did I hear you correctly when you what you just said? You did, yeah, so our leverage, you know, ratio is as you see, you know, 2.16x right around there and then that's, you know, half of, you know, roughly what, you know, typical print multiples are.
Speaker Change: Okay, all right. And in terms of
Speaker Change: The outlook for the start of next year, you know, you're slowing down here in the fourth quarter. You've got a postage hiatus, but the cumulative impacts of CPG weakening.
Speaker Change: Any early sense? I mean, do things feel any better at the start of next year? Is it too early to say? Any comments about the revenue trajectory for next year that you can give us?
Speaker Change: Yeah, I'd say it's probably too early to say because our clients are still in the busy season here, and so they're, you know, entering into the planning segment. And so we get some early reads, but not much. It usually starts playing out, you know, as we get closer to the end of the year.
Speaker Change: You guys have called out, I think, asset sales book so far of $113.7 million.
Speaker Change: You know, I think your statement of cash flow shows proceeds from asset sales are like 46 million.
Speaker Change: and, you know, I know Europe's Tacoma is probably in there, but there's probably a little bit more in there. Could you give us a sense of what else is in that number? And also, I know you've got some other assets that are on the block. Could there be some other things that flow in that are increments to that number this year, or is it all kind of pushed to next year?
Speaker Change: So for the for the cash flow statement, there's a couple line items on there that roll up into our total proceeds You picked up the asset sales in the 40 millions Which is primarily the Saratoga sale that hit in the third quarter Saratoga building sale There's also a line item for the sale of our Manipal investment in India that we did in the second quarter of the year another 22 million dollars
Speaker Change: So if you add those two numbers together, and then the Europe sale is not yet in the statement of cash flow because the deal isn't closed, it is signed, but we have to work through these closing conditions. And so when that comes in, that gets you to the $114 million in total, just to give you that bridge.
Speaker Change: and then you know as far as items the rest of this year you know we do have buildings for sale right now but I'm not anticipating them to sell yet in the end of 2024 so I would think about that more as 2025 proceeds
Speaker Change: So if the full 60 is realized, yeah, now you have a little bit more of tailwind as you're pointing out going into 2025 because some of the plant closures we still had people on for the first part of the year and so you could see an incremental, you know, 15 to 20 as you get into the next part of the year.
Speaker Change: I think that's up 20-25.
Speaker Change: Okay, now you've talked about your net, you know, your debt reduction and you did get did a ninth amendment so you've changed some of the terms a little bit. How should we think about your interest expense trajectory from here?
Speaker Change: So yeah, with the new debt deal, you know, the spread on that increased by 50 basis points.
Speaker Change: but you will, you know, we expect as everyone else does in the market to see the variable interest rates come down. This is variable rate debt.
Speaker Change: So, you know, with where our debt is at and how it's a, the interest rate varies based on the debt leverage range that we're at. With all the good work we've done on debt leverage, you know, we could be at an interest rate of 7% relatively quickly, and then on a lower amount of debt, right, so the interest costs could come down quite a bit.
Speaker Change: Okay.
Speaker Change: Then one final question here, just harkening back to the Google AI arrangement. When do you expect that to start to be in the market and something that's impacting your business at a level that matters?
Speaker Change: I'd say that we expect to, you know, sort of roll it out in a live format towards the end of the year, but really rolling into next year.
Speaker Change: And so it will start to come online through that. And it really sort of impacts the overall experience with our customers. Because once we bring them in, trying to find audience, we expect that it starts to spill over to other services. So it's revenue from sort of the whole stack that starts to accumulate.
Speaker Change: But I expect that, you know, we'll probably see some early stage, you know, reaction from existing clients to start with.
Speaker Change: Okay, all right, great. That's it for me. Thank you, guys.
Speaker Change: Operator, this concludes our question and answer session. I would like to turn the conference back over to management for any closing remarks.
Speaker Change: All right, well, thanks everyone for joining today's call and I want to close by reiterating that our integrated marketing offering continues to be a competitive differentiator and key driver behind our ongoing evolution as an MX company.
Speaker Change: By providing a better experience for our clients, they can focus on best customer experience for their clients. And I'd like to remind investors of our November 20th Investor Day in New York City, where you can learn more about the MX experience. With that, thank you again and have a great day.
Speaker Change: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.