Archer Aviation (ACHR) Q2 2025 Earnings Call August 11, 2025 05:00 PM ET Company ParticipantsEric Lentell - Chief Legal & Strategy OfficerAdam Goldstein - Founder, CEO & ChairmanTom Muniz - Chief Technology OfficerPriya Gupta - Interim CFOMackenzie Holleran - Equity Research AssociateEdison Yu - DirectorSavanthi Syth - Managing DirectorAustin Moeller - Director - Equity ResearchBill Peterson - Equity ResearchConference Call ParticipantsAndres Sheppard - MD & Senior Equity AnalystAmit Dayal - Managing Direct ...

Financial Data and Key Metrics Changes - Q2 revenue was $194 million, representing a 21% year-over-year growth, with 210,000 vehicles sold, marking a 13% increase despite market deceleration [7][19]. - Adjusted EBITDA was $19 million, at the midpoint of guidance, with a margin improvement of 520 basis points year-over-year [20]. - Non-GAAP net income was also at the midpoint of guidance, with a margin increase of 430 basis points year-over-year [20]. Business Line Data and Key Metrics Changes - Auction and assurance revenue accounted for 57% of total revenue, growing 20% year-over-year, reflecting 13% unit growth and an average revenue per unit (ARPU) of $523, which grew 6% [20]. - Marketplace services revenue comprised 39% of total revenue, growing 25% year-over-year, driven by record revenue for ACV Transport and ACV Capital [21]. - SaaS and data services products made up 4% of total revenue, with revenue approximately flat year-over-year [21]. Market Data and Key Metrics Changes - The company observed a 300 basis point year-over-year increase in trade retention rates, indicating dealers are keeping more vehicles for retail purposes [87]. - The overall market is expected to be flat to slightly down for the full year, influenced by macroeconomic factors and dealer behavior [65][87]. Company Strategy and Development Direction - The company focuses on three pillars for long-term shareholder value: growth, innovation, and scale [8]. - The strategy includes leveraging AI across solutions to enhance pricing accuracy and improve dealer engagement [8][14]. - The company is expanding its addressable market through new product offerings and partnerships, including a commercial platform and greenfield locations [17][118]. Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving strong top-line growth of at least 20% year-over-year despite macroeconomic challenges [5][25]. - The company trimmed its 2025 revenue guidance by $5 million at the midpoint, now expecting revenue in the range of $765 million to $775 million [25]. - Management noted that conversion rates improved in July, indicating a potential recovery in market conditions [24][38]. Other Important Information - The company ended Q2 with $305 million in cash and cash equivalents and $187 million in debt, reflecting a strong capital structure [23]. - The company is investing in its remarketing center strategy and commercial platform, expecting operating expenses to grow approximately 11% in 2025 [22][26]. Q&A Session Summary Question: Clarification on unit growth headwind - Management clarified that the 500 basis point unit growth headwind was due to lower conversion rates than anticipated, not solely due to higher retention rates [31][34]. Question: Competitive dynamics in the marketplace - Management indicated that the slight dip in conversion rates was consistent across the industry, with both macroeconomic factors and company initiatives influencing performance [37][39]. Question: Progress on pricing engine and auction liquidity - Management reported significant progress in their pricing engine, with guaranteed sales accounting for 15% of units sold by the end of Q2, indicating strong auction liquidity [44][47]. Question: Outlook on Amazon partnership and AI solutions - Management stated that while they are investing in partnerships and AI solutions, they do not expect material contributions to revenue this year, focusing instead on long-term benefits [55][57]. Question: Organic growth rate excluding acquisitions - Management noted that the recent acquisition contributed about 1% to dealer unit growth in Q2, with other acquisitions prior to Q2 last year not affecting organic growth [114]. Question: Commercial opportunities and greenfield locations - Management expressed excitement about their greenfield strategy, with the first location in Houston going live and plans for additional locations in the future [116][118].

Financial Data and Key Metrics Changes - FFO excluding certain expenses was approximately $87 million or $0.33 per share for Q2 2025, with a notable increase in NOI for the go forward portfolio centers by 2.4% compared to 2024 [29][30][31] - Net debt to EBITDA at the end of Q2 was 7.9x, nearly a full turn lower than at the outset of the Path Forward Plan [32] Business Line Data and Key Metrics Changes - Year-to-date leasing volume reached 4.3 million square feet, significantly higher than the same period in 2024, with a 40% increase in lease signings and 75% more square footage [20][21] - Trailing twelve-month leasing spreads remained positive at 10.5%, marking 15 consecutive quarters of positive leasing spreads [19] Market Data and Key Metrics Changes - Traffic through the portfolio increased by 1.6% year-over-year, with the go forward portfolio traffic up by 2.1% [18] - Occupancy at the end of Q2 was 92%, down 60 basis points from the previous quarter, primarily due to the closure of Forever 21 stores [18] Company Strategy and Development Direction - The Path Forward Plan focuses on simplifying the business, improving operational performance, and reducing leverage, with a target of 4 million square feet of leasing in 2025 and 2026 [7][10] - The acquisition of Crabtree Mall is seen as a strategic move to enhance the portfolio and drive shareholder value, with plans to increase occupancy from 74% to closer to 90% by 2028 [14][15] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the leasing momentum and the ability to achieve targets ahead of schedule, despite macroeconomic uncertainties [66][67] - The retail environment remains strong, with many national retailers actively seeking new spaces [25] Other Important Information - The company has made substantial progress on asset sales, with over $800 million in mall sales completed to date, and a clear path to achieving a $2 billion disposition target [35][36] - The Snow Pipeline has grown to $87 million, with expectations to exceed $100 million by year-end [13][27] Q&A Session Summary Question: Can you provide more background on the Crabtree acquisition? - Management highlighted the unique market position of Crabtree and its potential for NOI growth, emphasizing the need for leasing efforts and capital to enhance the merchandising mix [40][43] Question: What benchmarks need to be hit before reinstating guidance? - Management indicated that asset sales are crucial, and they prefer to focus on executing leasing and sales without being constrained by guidance numbers [51] Question: How is the bad debt trending? - Bad debt has decreased year-over-year, with the watch list at an all-time low, and management is confident in re-leasing spaces previously occupied by Claire's [52][54] Question: Can you discuss the tenant improvement (TI) expenses in the quarter? - Management noted that TI expenses have increased due to new leasing activity, with expectations for continued increases as they address vacant anchor stores [59][61] Question: How does the Crabtree acquisition impact external growth activities? - Management expressed confidence in pursuing additional acquisitions, citing strong leasing momentum and the potential for significant NOI growth from Crabtree [66][67] Question: What is the rationale for keeping South Plains Mall in the portfolio? - Management is currently negotiating with lenders for an extension, believing that with the right terms, they can create NOI lift at South Plains [103][105]

Financial Data and Key Metrics Changes - The company reported non-GAAP adjusted operating expenses of $51.7 million for Q2, up from $44.9 million in Q1, reflecting a quarter-over-quarter increase of $6.8 million due to higher general and administrative costs and engineering services costs [27][28]. - Capital expenditures for 2025 were approximately $323 million, significantly higher than $124 million in 2024, driven by increased spending on satellite materials and launch contracts [29][30]. Business Line Data and Key Metrics Changes - The company has completed assembly of microns and phased arrays for eight Block II Blue Bird satellites, in addition to six currently operational satellites, with plans to complete approximately 40 satellites by early 2026 [7][8]. - Gateway equipment bookings reached $14.9 million in Q2, indicating strong demand ahead of the rollout of SpaceMobile services [19][20]. Market Data and Key Metrics Changes - The company is preparing to deploy nationwide interim service in the U.S. by the end of the year, with plans to expand to the UK, Japan, and Canada in Q1 2026 [12][13]. - The company has established agreements with over 50 mobile network operators (MNOs) globally, representing nearly 3 billion subscribers, indicating a robust network of potential service consumers [12][19]. Company Strategy and Development Direction - The company aims to build the first global cellular broadband network in space, focusing on direct connectivity with unmodified mobile devices, supported by a strong IP and patent portfolio [5][6]. - The strategy includes leveraging partnerships with MNOs and utilizing their existing low-band spectrum to create a competitive advantage [15][16]. Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's direction and strategy, highlighting significant advances in commercialization initiatives and regulatory progress [6][16]. - The company anticipates revenue in the range of $50 million to $75 million for the second half of the year, contingent on successful satellite launches and government contract milestones [32][33]. Other Important Information - The company has over $1.5 billion in cash on the balance sheet, positioning it well to fund operational plans and capital investments [34][35]. - The company is expanding its organizational capabilities to better serve U.S. government contracts, indicating a commitment to growing its government business [23][24]. Q&A Session Summary Question: Is the current funding runway sufficient to reach initial commercial revenue? - Management confirmed that the current balance sheet and opportunities for government and commercial inflows are sufficient to achieve their satellite deployment strategy [37][38]. Question: How does the recent achievement of native voice call differ from past achievements? - Management clarified that the recent achievement allows for native calling directly from the phone dialer without requiring modifications, marking a significant milestone in service capability [40][41]. Question: What is the current monthly production rate for Block II satellites? - Management indicated that they are on track to achieve a production rate of six satellites per month, with plans for multiple launches every 45 to 60 days [45][48]. Question: Can you elaborate on the types of use cases targeted in the government sector? - Management expressed optimism about government applications, highlighting contracts with multiple branches of the U.S. government and the potential for significant revenue growth in this area [66][68]. Question: What is the plan for the S band spectrum acquired? - Management stated that the S band spectrum will be utilized on a country-by-country basis, complementing existing low-band and L-band strategies [89][90].

Financial Data and Key Metrics Changes - In the second quarter, the company reported high-speed data (HSD) revenue of $104.8 million, a slight year-over-year decrease [8] - Total revenue for the second quarter decreased by 9.2% to $144.2 million, primarily due to declines in video and telephony revenue, which dropped by 39% and 10.3% respectively [13] - Adjusted EBITDA increased by 0.4% year-over-year to $70.3 million, with an adjusted EBITDA margin of 48.8% [13][14] - The company ended the quarter with total cash of $31.8 million and total outstanding debt of $1.05 billion, resulting in a leverage ratio of 3.5 times [15] Business Line Data and Key Metrics Changes - The traditional video business saw a significant decline, with subscribers dropping to 42,500, a 40.6% decrease from the previous year [11] - The company maintained a strong penetration rate of 16% in its greenfield markets, passing an additional 15,500 homes during the quarter [7][8] - The 2025 Edge Out vintage increased its penetration rate to 28%, while the 2024 vintage reached 45.8% [9] Market Data and Key Metrics Changes - The company reported a record high average revenue per user (ARPU) of $75.3, reflecting a 4.9% year-over-year increase [10] - 76% of new HSD connections were for speeds of 500 megabits or higher, a 4% increase year-over-year [10] Company Strategy and Development Direction - The company announced a definitive agreement for acquisition at $5.2 per share, representing a 37.2% premium to the unaffected price prior to the offer [5] - The focus remains on executing the business effectively while navigating the necessary approvals for the acquisition [19] - The company plans to continue its greenfield and edge-out expansion initiatives without changes to the current CapEx plan [24] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the momentum of greenfield expansion and the effectiveness of pricing strategies, which have led to improvements in subscriber trends [11][10] - The company will not provide guidance for the third quarter due to the ongoing acquisition process [16] Other Important Information - The company has amended its revolving credit facility, extending it for six months beyond the current term, with further extensions conditional on the acquisition closing [6] Q&A Session Summary Question: What is the plan for greenfield builds or edge outs going forward? - Management indicated that the focus is on running the business well while going through the necessary approvals for the acquisition, leaving future plans to the acquiring companies [19] Question: Are there any potential regulatory concerns that could delay the acquisition? - Management stated that there are no known concerns at this time, with an estimated closing timeframe of late this year or early next year [20] Question: Can you provide more details on the strategic review process? - Management referred to the thorough process conducted by a special committee of the board, which unanimously recommended the acquisition offer [22][23] Question: Will the CapEx plans for this year change? - Management confirmed that there will be no changes to this year's CapEx plans, continuing with the current strategy [24] Question: What percentage of homes passed are directly fiber to the home? - Management noted that all 91,100 homes passed in the second quarter are fiber to the home, with additional fiber within the legacy footprint [25]

Financial Data and Key Metrics Changes - Operating revenue for Q2 2025 was $115.5 million, up 21.4% from the previous quarter and 8.4% higher than Q2 2024 [14] - Units delivered reached 631,426, representing a 28% increase compared to the previous quarter and a 24% increase from Q2 2024 [14] - Adjusted operating income for Q2 was greater than the prior three quarters combined, indicating operational improvements [8] Business Line Data and Key Metrics Changes - The OEM contract business generated approximately 93% of total transportation revenue in the quarter, up from 91% in the previous quarter [15] - Revenue from dedicated fleet service was $3.8 million, down from $4.3 million in Q1 and $7.3 million in Q2 2024 [16] - Revenue from spot opportunities comprised only 2.7% of total revenue, continuing a trend from the last four quarters [17] Market Data and Key Metrics Changes - The market strength experienced at the end of Q1 continued into April, with revenue and unit volumes up 1325% year over year [7] - The auto SAAR slowed to an average of around 15,500,000 units in May and June, but July saw a stronger performance with a SAAR of 16,400,000 [8][10] - For the combined May and June months, volume finished up 24% year over year, while revenue was up nearly 14% compared to the same period in 2024 [7] Company Strategy and Development Direction - The company remains focused on long-term objectives, including increasing market share and effective integration of merged operating companies [10] - The integration of Brothers Auto Transport has gone smoothly, with all operating companies now using a common accounting platform [12] - The company aims to control costs in a weaker market and is advancing targeted cost savings initiatives [13] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism regarding the economic impacts of tariffs and policy changes, viewing the resolution of policy uncertainty as a positive for the near term [10] - The company expects a sequential revenue decline of 25% in August compared to the previous quarter, but anticipates maintaining adjusted operating ratios [19] - For the full year, the company expects top-line growth year over year between 5% and 10% [19] Other Important Information - The company had approximately $13.6 million in cash and equivalents at the end of Q2, up from $10.9 million at the end of the previous quarter [17] - Aggregate debt balances at quarter end were approximately $90.2 million, with net debt of $76.6 million [18] - Total common shares outstanding increased to 27.7 million, up from 27.1 million at the end of the previous quarter [19] Q&A Session Summary Question: Cost Control Measures - Management indicated that there are incremental opportunities for cost reduction focused on procurement, facility consolidation, and personnel synergies [22][23] Question: Market Share Opportunities - Management noted that there is meaningful opportunity for margin improvements through organic growth and cost reduction initiatives [26] Question: Price and Yield Concerns - Management clarified that the sequential deterioration in yields per VIN was primarily due to customer mix rather than core rate weakness [34][35] Question: Bid Market Dynamics - Management confirmed that there is potential for market share gains as OEMs are looking to optimize their transportation supply chains [38][39] Question: Free Cash Flow Projections - Management stated that expected free cash flow from operations will be between $30 million and $35 million after CapEx, representing a 20% cash return on the current market cap [18][41] Question: Additional M&A Opportunities - Management is continuously exploring M&A opportunities but indicated that there are no imminent deals [52][54]

Financial Data and Key Metrics Changes - Cannae's stock closed at $19.88, trading at a 26.6% discount to NAV per share, which is the narrowest discount in over three years, compared to a near 40% discount when the strategic plan was announced [7][8] - Total operating revenue for the first quarter was $110,000,000, a 6.6% decrease from the prior year [27] - Alight reported total revenue of $528,000,000 for 2025, a 2% decrease from 2024, with a net loss of $1,000,000,000 primarily due to a non-cash impairment of goodwill [24][25] Business Line Data and Key Metrics Changes - Cannae repurchased 7,600,000 shares, approximately 12% of outstanding shares, returning $150,000,000 to shareholders at an average price of $19.71 per share, which is a 30% discount to NAV [12] - Alight's adjusted EBITDA was $127,000,000 for 2025, a 21% increase compared to the prior year quarter [24] - Walk-ins delivered mid single-digit growth in net sales and high single-digit growth in EBITDA compared to the first six months of 2024 [26] Market Data and Key Metrics Changes - AFC Bournemouth finished ninth in the Premier League with 56 points, a club record, and saw match day and commercial revenue increase by 81% since acquisition [16][17] - BKFC completed a $130,000,000 capital raise, with Cannae committing $50,000,000, and plans to renovate the Vitality Stadium, increasing capacity from over 11,000 to approximately 17,000 [15][20] Company Strategy and Development Direction - Cannae's strategic plan focuses on rebalancing the portfolio away from public company investments, investing in attractive companies, and returning capital to shareholders [7][11] - The company aims to close the stock price to NAV gap and deliver long-term NAV growth through share buybacks and dividends [12][13] - Cannae plans to acquire an additional 30% stake in JANNA for $67,500,000, bringing total ownership to 50% [13][14] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the long-term value of the JANNA franchise and the potential for proprietary investment opportunities [39][40] - The company acknowledged challenges in the restaurant segment, particularly with O'Charley's, and is actively working on improvements [28][59] - Management remains committed to executing the strategic plan and believes there is significant upside as they position Cannae as a permanent capital vehicle [63] Other Important Information - Cannae has returned approximately $414,000,000 in total share buybacks and dividends since announcing the strategic plan [13] - The company expects to close the D&B transaction in the third quarter, which will provide significant capital for shareholder returns [9][30] Q&A Session Summary Question: Any decision on capital return related to D&B? - Management is considering options for capital return, including share buybacks and potential tender offers, with $150,000,000 already allocated for buybacks [32][33] Question: Update on public portfolio monetizations? - Management indicated that they have sold about $1,100,000,000 in public securities and are not in a rush to sell remaining public stakes [36] Question: Update on JANNA partnership and investment opportunities? - Management is optimistic about potential investment opportunities arising from the JANNA partnership and is exploring various avenues for capital deployment [39][40] Question: Motivation for continued participation in BKFC capital raises? - Cannae views BKFC as an important investment and plans to continue participating in future capital raises to maintain a significant ownership stake [42][43] Question: Any updates on the annual shareholders meeting? - The date for the upcoming annual shareholders meeting will be announced after the D&B transaction closes, expected later in the fall [45][46]

Financial Data and Key Metrics Changes - Archer Aviation closed Q2 2025 with $1.7 billion in cash and cash equivalents, marking the fourth consecutive quarter of record liquidity, nearly double that of its closest competitor in the sector [43] - The net loss for Q2 2025 was $206 million, with an adjusted net loss of $114 million, reflecting planned investments primarily in personnel [44][45] - GAAP operating expenses increased by $32 million quarter-over-quarter, totaling $176 million, driven by increased personnel costs [46] Business Line Data and Key Metrics Changes - The company is ramping up its manufacturing capabilities, with six Midnight aircraft in various stages of production, three of which are in final assembly [13][35] - The focus remains on advancing the piloted Midnight L Taxi through early commercial deployment and certification in the U.S. and UAE [43] Market Data and Key Metrics Changes - Archer has signed definitive agreements with Abu Dhabi Aviation and the Abu Dhabi Investment Office, setting up for tens of millions in revenue over the next 18 to 24 months [55] - The company is expanding its international flight testing program, with operations launched in the UAE and plans for further expansion into Asia [18][21] Company Strategy and Development Direction - Archer is committed to establishing a competitive moat through investments in top-tier talent, technology, and strategic partnerships, focusing on both commercial air taxis and defense [48] - The company aims to be the exclusive air taxi provider for the 2028 LA Olympics, which has become a national priority for showcasing air taxis at scale [10][12] Management's Comments on Operating Environment and Future Outlook - Management highlighted unprecedented support from the U.S. government for the advanced aviation sector, emphasizing a coordinated national effort to lead in this industry [8][9] - The company is focused on executing its plans efficiently to meet the demands of both commercial and defense markets, with a strong emphasis on operational execution [42][48] Other Important Information - Archer completed two strategic acquisitions in the quarter, enhancing its capabilities in defense technology and manufacturing [24][40] - The FAA has approved about 15% of compliance verification documents for the Midnight certification program, with ongoing audits and testing [37][94] Q&A Session Summary Question: When will mass production be seen? - The company is focused on achieving scale for the Olympics, with two phases of manufacturing in place, refining processes in California before scaling in Georgia [49][50] Question: What is the vision for commercialization in the UAE? - The company has launched its first edition programs in the UAE, with plans for pilot training and infrastructure preparation, leveraging existing helipads for eVTOL use [54][56] Question: What is the roadmap for the next 12-18 months in the UAE? - The company plans to grow its fleet and obtain commercial authority from the GCAA, with exhibition flights and full commercial operations expected [66][69] Question: How much of the capital will go towards defense opportunities? - The company does not separate capital allocation between commercial and defense, as the engineering team works across both sectors [71] Question: What is the status of FAA certification? - The company is still working through policy issues with the FAA, with plans to use the six aircraft currently in production for TIA testing [78][80] Question: What is the goal of the Mission Critical Composites acquisition? - The acquisition aims to enhance in-house capabilities for advanced composites, which will benefit both defense and civil applications [84]

Financial Data and Key Metrics Changes - The company reported total operating revenue of $102.9 million for Q2 2025, down from $117.8 million in Q1 2025 and up from $93.8 million in the prior year period [19] - Net income for Q2 2025 was $8.2 million, compared to $10 million in Q1 2025 and a loss of $10.2 million in the prior year period [20] - Adjusted EBITDA for Q2 2025 was $3.4 million, down from $19.3 million in Q1 2025 and a loss of $5.8 million in the prior year period [20] - Operating cash flow for Q2 2025 was $11.4 million, compared to $38.4 million in Q1 2025 and $23.5 million in the prior year period [20] - Total bank debt increased to $45 million as of June 30, 2025, from $23 million at March 31, 2025 [21] Business Line Data and Key Metrics Changes - Electric sales for Q2 2025 were $60 million, unchanged from the prior year period but down from $85.9 million in Q1 2025, primarily due to seasonal factors and a planned maintenance outage [19] - Third-party coal sales increased to $38.1 million in Q2 2025, up from $30.2 million in Q1 2025 and $32.8 million in the prior year period, driven by higher shipments [19] Market Data and Key Metrics Changes - The company expects to produce approximately 3.7 million tons of coal in 2025, with 2.1 million tons already produced in the first half of the year [16] - The average contracted sales price for coal in 2026 is projected to be approximately $4 per ton higher than in 2025 [12] Company Strategy and Development Direction - The company is focusing on securing long-term power purchase agreements (PPAs) and has expanded its discussions with multiple counterparties, including utilities [9][10] - There is an ongoing evaluation of opportunities to acquire additional dispatchable generation assets to diversify the portfolio and enhance financial profiles [10][13] - The company is considering adding natural gas capabilities at its Merrell facility to create a dual fuel configuration [10] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the current market conditions, driven by increasing demand for accredited capacity and resilient baseload power [9] - The company is encouraged by the growing policy support for coal and coal-fired generation at both federal and state levels [15] - Management believes that the shift towards intermittent renewables will create long-term imbalances and greater market volatility, increasing the value of reliable baseload assets [10] Other Important Information - The company appointed Todd Talez as the new Chief Financial Officer, bringing extensive experience in the power and utility sectors [17] - The company has secured a $35 million prepaid firm energy sale with delivery scheduled throughout 2025 and 2026, which will enhance operational flexibility [6] Q&A Session Summary Question: Are you open to multiple agreements to avoid customer concentration? - Management indicated that they are open to multiple agreements and have been encouraged by the aggressive bids from utilities [26] Question: Should we expect the end user to fund the co-firing upgrade? - Management stated that some customers are interested in co-firing, while others are not, and the decision will depend on the offers received [29] Question: What are your thoughts on liquidity management? - The CFO mentioned opportunities to execute on prepays and refinance the existing capital structure [33] Question: What is the status of the larger scale PPA? - Management noted that while the pricing curve has dropped slightly, the capacity markets have strengthened, leading to competitive conversations [36] Question: Are you actively looking for acquisitions? - Management confirmed they are having conversations and are positioned to take advantage of potential acquisitions in coal-fired assets [41] Question: Will you provide economics around the co-firing opportunity soon? - Management indicated that they are gathering information but will not disclose costs until the project becomes more actionable [48] Question: What is your appetite for reentering exclusivity with counterparties? - Management expressed no current appetite for exclusivity, preferring to gather as much information as possible from various parties [52]

Financial Data and Key Metrics Changes - Revenue for the second quarter was $59.5 million, a decrease of 19% year-over-year and down 13% sequentially from the first quarter [8][9] - Operating cash flow generated in the second quarter was $3.9 million, with a year-to-date debt reduction of $6.6 million [7][14] - SG&A expenses were $9.3 million, a decrease of $2.1 million sequentially from the first quarter [12] Business Line Data and Key Metrics Changes - Gross profit dollars were $11 million, showing a slight increase from the first quarter despite a decrease in revenue [9][10] - The decline in revenue was primarily attributed to the industrial end market and the sale of the mall-related business [8][9] - New clients added over the past eighteen months contributed to modest sequential growth in revenue [9] Market Data and Key Metrics Changes - The industrial end market continues to show weakness, impacting client volumes and revenue [11][25] - The food and grocery sectors are performing well, providing some offset to the industrial sector's challenges [34] Company Strategy and Development Direction - The company is focused on improving operations, changing its culture, and laying the groundwork for sustainable profitable growth [6][8] - There is an emphasis on expanding share of wallet with existing clients and adding new clients, with a robust pipeline of new business [20][21] - The company is committed to maintaining a solid balance sheet, prioritizing debt repayment while also investing in technology and automation [27][55] Management's Comments on Operating Environment and Future Outlook - Management expressed caution regarding the outlook due to uncertainty in client volumes, particularly in the industrial end market [11][25] - Despite near-term headwinds, management remains confident in resuming sequential growth in the fourth quarter [11][26] - The company is optimistic about the long-term potential of its asset-light model and the ability to generate cash flow [26][109] Other Important Information - The company has made significant changes to its organization and operational approach to address inefficiencies [6][8] - Improvements in cash cycle times and vendor communications have been noted, contributing to better cash flow management [14][18] Q&A Session Summary Question: Revenue decline and industrial space outlook - Management indicated that the industrial sector will continue to follow general economic trends, with uncertainty impacting volumes [33][34] Question: Margin pressure and renewals - Margin pressure is not isolated to the industrial sector but is more pronounced there; renewals are part of a normal cycle [37][38] Question: Confidence in cash flow and DSOs - Management expressed confidence in cash flow generation and the ability to lower DSOs, with ongoing improvements expected [67][72] Question: New business wins and onboarding costs - Onboarding of new customers is complete, and the focus is now on service optimization [58] Question: Client attrition and retention rates - Most attrition has been related to the divested mall business, with high retention rates noted for existing clients [60][62] Question: Revenue growth opportunities - Management highlighted significant opportunities for growth through share of wallet initiatives and new client acquisitions [96][97]