Financial Data and Key Metrics Changes - The company reported second quarter net sales of $219 million, down 16% in constant currency, which was in line with expectations [20] - Gross margin expanded by 480 basis points year-over-year, reaching 57.4%, marking the third consecutive quarter of gross margin improvement [21] - Adjusted operating income for Q2 was positive $4 million, compared to a loss of $17 million a year ago, resulting in an adjusted operating margin of 1.7% [25] Business Line Data and Key Metrics Changes - The wholesale channel showed continued improvement, with strong comparable sales trends in Fossil retail stores despite reduced promotional activity [5] - Traditional watch sales in the Americas increased by double digits in Q2, while India also showed strong momentum across brands and channels [13] - The company closed six underperforming retail locations in Q2, bringing total closures to 34 year-to-date, with plans to close 45 to 50 locations by year-end [24] Market Data and Key Metrics Changes - Performance in key markets such as the U.S., India, Germany, and the UK improved, while China remained under pressure due to the macro environment [12] - The company noted a resurgence in interest for traditional fashion watches among younger consumers, particularly in India and the Americas [48] Company Strategy and Development Direction - The company is focused on three key pillars: refocusing on core brands, rightsizing the cost structure, and strengthening the balance sheet [4][17] - A new Fossil brand platform is being developed to enhance design and storytelling, with a recent website redesign aimed at improving customer engagement [8] - The company is investing in upper funnel marketing initiatives and collaborations to drive brand awareness and cultural relevance [10][11] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to navigate a complex environment and emphasized the importance of operational and financial rigor [18] - The full-year guidance was raised, expecting breakeven to slightly positive adjusted operating margins, reflecting gross margin expansion and significant cost reductions [29] - Management highlighted the importance of maintaining strong relationships with wholesale partners and the positive feedback received from them [41] Other Important Information - The company successfully refinanced its revolving credit facility and entered into a transaction support agreement with bondholders to extend bond maturities into 2029, improving liquidity [26][27] - Year-to-date SG&A savings reached $48 million, with a target of $100 million for the full year [24] Q&A Session Summary Question: Impact of changes in promotional activity and price increases on gross margins - Management noted that the shift to a full-price model has led to improved gross margins, with consumers willing to pay for perceived value [34][35] Question: Trends and initiatives in the wholesale channel - Management highlighted strong relationships with wholesale partners and investments in store presentation and marketing activities [40][41] Question: Strength in the younger consumer category and collaboration initiatives - Management confirmed a resurgence in traditional watches among younger consumers, with successful limited edition collaborations driving brand momentum [46][48]

Financial Data and Key Metrics Changes - In Q2 2025, the company reported revenue of $800.4 million, a decline of 0.7% compared to $806 million in the prior year quarter. Adjusted EBITDA was $155.5 million, with an adjusted EBITDA margin of 19.4%, down from 20.5% in Q2 2024 [21][23][24] - Free cash flow for Q2 was $73.3 million, exceeding expectations, and the company is on track to meet its free cash flow guidance for FY 2025 [6][24] Business Line Data and Key Metrics Changes - The Sleep Health segment saw net revenue increase by 0.9% to $334.7 million, with 128,000 new setups, the highest in two years [22][23] - The Respiratory Health segment's net revenue increased by 5.6% to $170.5 million, with a record oxygen census of 329,000 patients [22][23] - The Diabetes Health segment experienced a decline of 4.1% in net revenue to $145 million, although there are signs of recovery in new starts and resupply retention [22][23] - The Wellness at Home segment's net revenue decreased by 7.2% to $150.3 million, impacted by the sale of certain non-core assets [22][23] Market Data and Key Metrics Changes - The company is gaining momentum in non-acquired revenue growth, particularly through a new capitated agreement expected to generate over $1 billion in revenue over five years [7][27] - The new partnership is projected to elevate capitated revenue to at least 10% of total revenue, increasing the mix of recurring revenue [7][27] Company Strategy and Development Direction - The company is focused on three strategic levers: accelerating non-acquired revenue growth, enhancing profitability, and strengthening the balance sheet [6] - A standard operating model is being rolled out to improve labor productivity and operational consistency across regions [11] - The company is actively engaged in policy advocacy and preparing for potential impacts from upcoming CMS competitive bidding rules [16][18] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating the competitive landscape and emphasized the importance of scale in responding to economic pressures [16] - The company anticipates a ramp-up in revenue from the new capitated agreement starting in 2026, with expectations of at least $200 million in annual revenue [27][30] Other Important Information - The company reduced its debt by $150 million in Q2 2025, with a total reduction of $345 million over the last six quarters [13][25] - The tax law changes are expected to significantly reduce cash taxes and improve free cash flow over the next few years [17] Q&A Session Summary Question: Details on the $200 million revenue from the new capitated deal - Management confirmed that revenue will ramp up starting in Q1 2026, with full service expected by 2027, and the agreement is structured on a per member per month basis [33][36][40] Question: Impact of EBITDA guidance change - The $20 million reduction in adjusted EBITDA guidance is primarily due to the timing of payer rate negotiations and the need for infrastructure investments to support the new contract [46][48] Question: Market growth and share performance - The company reported a 3% increase in new starts, with expectations for continued strength in the second half of the year as operational changes take effect [50][52] Question: Competitive bidding and pricing dynamics - Management indicated that they are well-positioned to handle potential pricing pressures due to their scale and ongoing operational improvements [55][58] Question: M&A environment and opportunities - The company is seeing increased inbound opportunities and remains disciplined in evaluating potential acquisitions that align with its core competencies [65][66]

Financial Data and Key Metrics Changes - Consolidated sales decreased by 29% to $121.7 million compared to the prior year period [21] - Adjusted EBITDA decreased by 46% to $21.8 million, primarily due to lower gross profits [25] - Adjusted earnings per common share declined to $0.36, while operating cash flows increased by nearly 82% to $44.7 million [6][26] - Gross profit decreased by 31% to $43.3 million, with gross margin declining by 120 basis points to 35.6% [23] Business Line Data and Key Metrics Changes - Branded Spirits segment sales decreased by 4%, while the Premium Plus portfolio posted a 7% growth [21][6] - Distilling Solutions segment sales declined by 45%, primarily driven by a 49% decline in brown goods sales [21] - Ingredient Solutions sales decreased by 26%, impacted by supply challenges and decreased sales volume of specialty wheat starches [22][15] Market Data and Key Metrics Changes - The overall American whiskey category is experiencing a production decline, with total whiskey production down 4% for the full year and down 15% in the last three months of 2024 [14] - The company is seeing a shift in consumer behavior, with more consumers opting to drink what they have at home rather than purchasing new products [98] Company Strategy and Development Direction - The company is focusing on fewer but more attractive growth opportunities within its Branded Spirits portfolio [7] - Key initiatives include stabilizing the brown goods business, repositioning branded spirits for growth, and enhancing productivity [5][4] - The company is taking proactive actions to strengthen partnerships with customers in the Distilling Solutions segment [12] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the proactive steps being taken to stabilize the business and improve performance throughout the year [5] - The company reaffirmed its 2025 guidance, expecting net sales in the range of $520 million to $540 million and adjusted EBITDA between $105 million and $115 million [20] - Management noted that while the current environment is challenging, there are early signs of stabilization across all three segments [29] Other Important Information - The company has made substantial progress in fortifying its balance sheet, including upsizing its credit facility and extending its private placement shelf [19][27] - The company is prioritizing strong cash generation by managing working capital and reducing barrel inventory put away [25] Q&A Session Summary Question: Visibility into the outlook for Distilling Solutions - Management confirmed that discussions with 100% of contracted customers have led to modifications in orders and pricing, providing greater visibility for 2025 [34][35] Question: Outlook for the Distilling Solutions segment - Management expects sales for the Distilling Solutions segment to be down 50% for the year, with gross profit down 65% [39] Question: Quantification of new distillate negotiations - Management indicated that they expect to conclude negotiations with the remaining 25% of customers soon, with no negative feedback affecting their guidance [45][46] Question: Optimism for Ingredient Solutions - Management highlighted operational improvements and upcoming projects that are expected to enhance performance in the Ingredient Solutions segment [49][50] Question: Impact of anticipated tariffs on customer demand - Management stated that they have not seen any significant impact on customer demand related to anticipated tariffs [76] Question: Performance of the Penelope brand - Management noted that the Penelope brand performed better than expected, leading to an increase in contingent liability on the balance sheet [66][80]