Hello. My name is Victor, and I’ll be your operator this morning. I would like to welcome everyone to the Garrett Motion Conference Call. This call is being recorded and a replay will be available later today. After the company’s presentation, there will be a Q&A session. I would now like to hand the call over to Paul Blalock, Garrett’s Vice President, Investor Relations.

Thank you. Good day, everyone, and welcome to the Garrett Motion Second Quarter 2021 Financial Results Conference Call. Before we begin, I’d like to mention that today’s presentation and earnings press release are available on the Garrett Motion website at garrettmotion.com, where you will also find links to our SEC filings along with other important information about our company. Turning to Slide 2. We note that this presentation contains forward-looking statements within the meaning of the Securities Exchange Act. We encourage you to read the risk factors contained in our filings with the SEC, become aware of the risks and uncertainties in our business and understand that forward-looking statements are only estimates of future performance and should be taken as such. The forward-looking statements represent management’s expectations, only as of today, and the company disclaims any obligation to update them. Today’s presentation also includes non-GAAP measures to describe the way in which we manage and operate our business. We reconcile each of these measures to the most directly comparable GAAP measure. And you are encouraged to examine those reconciliations, which are found in the appendix to both the press release and the slide presentation. Also in today’s presentation and comments, we may refer to light vehicle diesel and light vehicle gasoline products by using the terms diesel and gasoline only. With us today is Olivier Rabiller, Garrett’s President and Chief Executive Officer; and Sean Deason, Garrett’s Senior Vice President and Chief Financial Officer. I will now hand it over to Olivier.

Thanks, Paul and welcome everyone to Garrett’s second quarter 2021 conference call. I will begin my remarks on Slide 3, where we provide our Q2 highlights. During the second quarter, we continued to benefit from the strong demand for Garrett’s differentiated technologies, and also our share of demand gains. As we discussed on our previous call, business activity has rebounded significantly since the middle of the COVID-19 crisis in the second quarter of last year. Our reported net sales for the quarter total $935 million, a Q2 record. At constant currency, our net sales increased by 83%, outpacing global auto production by approximately 32 percentage points. Obviously, our year-over-year comparison is challenging given the unprecedented work stoppage resulting from the COVID-19 pandemic as many plants were shut down throughout Europe and North America in Q2 of 2020, while China was in the process of reopening. However, if we compare our results to Q2 2019, our reported net sales increased 16.6%. We believe this strong revenue growth demonstrates Garrett’s ongoing ability to develop and deliver the advanced technologies needed by our customers as they continue to focus on reducing CO2 emissions. The 2021 second quarter was not without its challenges as our volumes of 3.4 million units, while up 84% year-over-year, were impacted by the well-documented semiconductor shortage and other component supply disruptions, which caused many major OEMs to slow or idle production. The supply-demand imbalance also contributed to rising commodity prices and other costs. Although we believe these global supply chain issues are of a temporary nature, the long lead times for components suggest the current constraints would extend throughout the second half of the year before stabilizing in early 2022. We will discuss our outlook in more detail later on this call. Additionally, the COVID-19 pandemic is not over as many places around the world struggle with vaccination efforts, adding another layer of complexity. Our top priority remains ensuring the health and safety of our employees while maintaining our ability to deliver for our customers. For the second quarter, we generated adjusted EBITDA of $168 million, representing a margin expansion of 480 basis points to 18%. Our success in preserving robust industry-leading margins in a volatile macro environment reflects our highly valuable cost structure, matched global footprint, and advanced supply base management. All of these elements enable our company to adapt quickly to short-term market disruptions and ensure our production levels are in line with any changes in customer activities. Our Q2 margin also reflects the efforts we have made in controlling our costs and offsetting some of the temporary government support programs last year in response to the COVID crisis. I want to thank all of our employees worldwide for their tireless efforts in maintaining a high level of performance in such a volatile environment. Their hard work and dedication are directly related to Garrett’s success in continuing to meet its customer commitments and deliver superior service. Going forward, we will continue to build upon our long-standing track record of operational excellence to optimize our performance across the globe and further distinguish Garrett in meeting the current macro headwinds. Finally, I am pleased to announce that we completed our Chapter 11 restructuring, a critical achievement for Garrett. While Sean will review our financials later, we emerged from this seven-month process with a significant improvement in our balance sheet, with less debt. The restructuring also increased our financial and strategic flexibility by eliminating materially restrictive covenants, enhancing our position to pursue organic and inorganic growth opportunities. We also listed our new common shares on the NASDAQ Exchange, effective May 3, under our historical ticker GTX. We are pleased our financial restructuring is now behind us and believe our new capital structure and sponsorship will support our long-term viability. On Slide 4, we outline our technology growth strategy as we continue to execute in the near-term while investing and preparing to lead the market with differentiated solutions as the automotive industry evolves. Globally, light vehicle turbo production volumes are expected to grow at an annual rate of approximately 6% from 2020 to 2025, according to IHS. With higher overall turbo penetration rates, particularly in gasoline and hybrid platforms, combined with the new business win rate in light with previous years, we remain well positioned to improve our share of demand in the growing industry. For 2021, we have adjusted our schedule of new product launches to reflect the slower ramp-up due to lower expected volumes in light of the current macro environment, but so far we have not been informed of any material launch delays. This includes our E-Turbo, which remains on track to start mass production in the first quarter of 2021, while deliveries to Mercedes AMG are set to commence next year for their premium hybrid vehicles. Our first market E-Turbo is rooted in Formula 1 technology and we are proud that Garrett’s E-Turbo was named a finalist for the Automotive News PACE Awards. This prestigious award program recognizes suppliers for cutting-edge technologies that deliver superior innovation, technological advancement, and business performance. We are honored by our nomination, Garrett’s first in electrification. As demand for alternative energy sources continues to grow, we have also experienced increasing momentum for our fuel cell technology. This is consistent with the growing interest in hydrogen-powered vehicles worldwide. In the second quarter, we received an important new business award for our GEN II e-compressor for fuel cells in China with production starting in 2023. Additionally, we plan on delivering prototypes of our fuel cell compressor technology to over 10 additional customers in 2021, representing a diverse mix of traditional passenger cars and commercial vehicle OEMs, as well as fuel cell specialists. In terms of software, we recently launched our embedded model-based predictive control technology with Hyundai. The launch is an important step in bringing this technology to the masses. Our unique expertise in handling multi-variable controls in increasingly complex vehicle systems in real-world conditions provides OEMs with a differentiated solution for energy management and powertrain optimization. Importantly, our technology is applicable for all types of powertrains and can address a number of new emerging challenges we face in rolling out new energy vehicles. We believe the growth in our core business, coupled with the increasing traction in our new electrical and software technologies, combined with our impressive financial performance and improved capital structure, positions us to play a key role in the transformation of the powertrain industry. With that, I will now turn it over to Sean to provide more details on our Q2 results.

Thanks, Olivier, and welcome everyone. I will begin my remarks on Slide 5. In the second quarter, Garrett reported net sales growth of 96% on a reported basis and 83% at constant currency. This impressive performance for the quarter reflects higher gasoline and diesel volumes across Europe and North America, but it is primarily driven by the recovery from the COVID-19 crisis, which peaked in Q2 2020. As Olivier mentioned earlier, global auto production came to a virtual standstill for a significant number of weeks in Q2, 2020 due to COVID-19, with the exception of China, which experienced a similar trend in Q1 2020. On a sequential basis, our reported net sales were down 6.2% due to lower volumes driven by the semiconductor shortage. Adjusted EBITDA for Q2 2021 increased year-over-year by 167% from $63 million to $168 million, which equates to an adjusted EBITDA margin of 18%. In Q1 2021, our adjusted EBITDA and adjusted EBITDA margin were $176 million and 17.7%, respectively. Like many in the industry, our performance in the quarter was impacted by lower sequential volumes, inflationary pressures, and higher logistical costs associated with the global supply chain disruptions. In response to these issues, we flexed our organizational cost structure and worked closely with our more than 400 suppliers worldwide to help them remain agile as part of our advanced supply base management. In Q2, our adjusted free cash flow was $121 million, representing a 134% adjusted free cash flow conversion rate, which we define as adjusted free cash flow over adjusted net income, as we maintain our focus on robust cash conversion. Lastly, we reported adjusted net income, which excludes reorganization items, unhedged debt exposure, restructuring costs, and stock-based compensation for the second quarter of 2021, of $90 million. This compares to an adjusted net income of $21 million, which excludes the Honeywell Indemnity obligation expenses and litigation expenses, restructuring costs, and stock-based compensation in the second quarter of 2020. In Q1 2021, adjusted net income was $98 million. Overall, Garrett’s strong Q2 performance across all key financial metrics demonstrates our ability to grow while adapting to a volatile macro environment. Turning to Slide 6. We illustrate our net sales by region and product line. In Q2, we increased our volumes and net sales year-over-year across all regions. However, on a percentage basis, the year-over-year challenges are an outlier due to the impact of COVID-19 and they’re not an accurate representation of the normal course of our business. As a result, we added on this slide, the sequential changes from Q1 2021. You see the percentage of net sales in Asia remained the same at 32% of net sales, while Europe and North America each changed marginally by 1 percentage point to 52% and 15%, respectively. On the product side, we show the percentage of net sales from gasoline was 37% in the second quarter, down 2 percentage points from Q1 2021. Notably, the limited chip supply has forced OEMs to prioritize essentially placing greater emphasis on producing larger, more profitable vehicles, which require a larger turbo with greater content and generate higher margins. This trend, while we believe to be temporary, led to the delivery of fewer products for smaller gasoline engines in Q2 and an overall lower margin percentage of our total sales in the quarter. The sequential drop in gasoline was more than offset by an increase in commercial vehicles and aftermarket product sales, both of which are higher margin businesses. Diesel products declined sequentially by 1 percentage point, as this business was also affected by the semiconductor shortage. On Slide 7, we provide our net sales bridge for the second quarter. Overall, our strong top-line performance in the quarter enabled Garrett to post net sales growth of 83% at constant currency, representing a 32-point outgrowth over the industry. This follows our outperformance of 15 percentage points in Q1 2021 when we generated net sales growth of 26% at constant currency. All of our product lines increased year-over-year as expected, primarily due to the impact of the pandemic in 2020. Gasoline products were up $144 million, representing an increase of 85% at constant currency over the same period last year, and diesel products in the quarter increased $138 million or 111% at constant currency. Additionally, commercial vehicles increased year-over-year by $82 million or 81% at constant currency, and our aftermarket sales improved by $28 million or 40% at constant currency. The overall FX impact of $64 million in Q2 was primarily driven by a higher Euro to Dollar exchange rate versus Q2 of 2020. On a sequential basis, gasoline and diesel products declined 12% and 9%, respectively, at constant currency as discussed on the previous slide. Commercial vehicles and aftermarket sales increased sequentially by 3% and 13%, respectively, at constant currency, which had a positive impact on our Q2 sales mix, as these businesses have shown signs of recovery following the softer market conditions going back to 2019. On Slide 8, you see adjusted EBITDA walk for Q2 2021 as compared to Q2 2020. For the quarter, Garrett’s adjusted EBITDA of $168 million was up significantly compared to the same period last year, mainly due to higher volumes in Europe and North America. In the second quarter, we sold 3.4 million units, an increase of approximately 84% from Q2 2020 and down sequentially by approximately 10.5%. Our adjusted EBITDA margin in the quarter of 18% represented a year-over-year improvement of 480 basis points. On a sequential basis, our adjusted EBITDA margin improved 30 basis points. In addition to volumes, we benefited from a positive sales mix in the quarter due to temporary component shortages, as OEMs are placing greater effort into producing their larger, higher margin vehicles, as I mentioned earlier. So even though our sequential volumes were down along with our adjusted EBITDA, we improved our margin largely due to the mix impact. We also maintained our focus on productivity in the quarter as rising commodity prices led to higher raw material costs, particularly for nickel, aluminum, and steel. We recovered a majority of the increase from our customer pass-through agreements, especially for nickel, and continue to actively manage our supply base and cost recovery mechanisms to minimize the impact of materials cost inflation. SG&A increased by $4 million; however, these year-over-year results similar to our mix are clouded by the pandemic. In Q2 of 2020, we took a number of temporary cost control and cash management actions totaling approximately $30 million, about one-third of which was under SG&A to combat the COVID crisis. Despite these significant and highly unusual pandemic-related savings, our SG&A only increased slightly compared to the prior year period as we remain focused on ensuring an efficient cost structure. The pricing offset of 3.3% in the quarter reflects the higher volumes in Q2 2021 as well as lower price reductions in Q2 2020 due to the pandemic. We expect pricing to return to more normalized levels of approximately 2% in the second half of the year. Finally, our year-over-year incremental margin in the second quarter was 23% driven by our strong volume leverage and productivity gains in the quarter. The sequential decremental margin was just under 13%, which largely reflects the supply chain disruptions and related slowdown in global auto production, as mentioned earlier, partially offset by the mix benefit in Q2. Turning to Slide 9, we ended the second quarter with available liquidity of $662 million, including $401 million in cash and cash equivalents and approximately $261 million of undrawn commitments under our new $300 million revolving credit facility upon our emergence. Total gross debt, excluding cash, was $1.25 billion as of June 30. This compares to $1.57 billion as of June 30, 2020. Our net debt totals $846 million as of June 30, a reduction of $587 million from $1.43 billion as of June 30, 2020. It is important to note, total gross debt and net debt exclude the Series B preferred stock. As a reminder, we issued Series B preferred stock to Honeywell upon our emergence from Chapter 11. The Series B shares are not convertible into common stock and serve as a settlement with our former parent, restructuring our financial obligations to them into fixed annual payments that we can call in full at any time at a present value based on a discount rate of 7.25%. The present value of the Series B was $585 million as of June 30 or $835 million at face value. Additionally, Honeywell has a put option to redeem the full amount at the same discount rate, which would go live in the event our LTM adjusted EBITDA exceeds $600 million for two sequential quarters. Honeywell may have the right to redeem the Series B preferred stock in accordance with its terms as soon as the fourth quarter of 2021. We have ample liquidity to meet all of our financial obligations and are prepared should the Honeywell put option go live and be exercised later this year. As of June 30, 2021, our net debt to consolidated EBITDA ratio was 1.37 times or 2.73 times, including the Series B preferred stock. This compares to a net debt to consolidated EBITDA ratio of 4.08 times as of June 30, 2020. Also in emergence, we issued approximately $1.3 billion of new Series A preferred stock totaling approximately 248 million shares. These shares are convertible into common stock at a conversion price of $5.25 per common share and are currently trading over the counter under the ticker GTXAP. During the second quarter, we accrued $24 million for a quarterly preferred dividend. The preferred A stockholders are entitled to an 11% dividend per annum; however, we are not permitted under our new credit agreement to make any cash payments through December 31, 2022. Also on this slide, we show our improved debt maturity profile upon emergence. In all, our restructuring enabled Garrett to considerably increase its financial flexibility, reduce its future liabilities and payment obligations, as well as enhance its strategic flexibility following the removal of materially restrictive covenants that existed prior to our Ch. 11 filing. Going forward, Garrett’s improved balance sheet and increased strategic flexibility combined with our resilient financial results support our ability to create substantial value for the long-term benefit of the company and its shareholders. Turning now to Slide 10, we provide our current forecast for the full year 2021. Although the demand for new vehicles remains high and inventory levels remain at historic lows, in certain regions, we remain cautious in our outlook for the second half of the year, given the high degree of uncertainty surrounding the ongoing semiconductor shortage and other component supply disruptions to fully meet this demand. We also expect higher commodity and logistical costs stemming from these global supply chain challenges to persist in the second half of the year. It is too soon to tell if the mix benefit from Q2 will carry over into Q3 and Q4. This is all in addition to the risk of production downtime due to ongoing COVID-19 related concerns. In light of the current volatility in the macro environment, our industry outlook remains fluid. But for planning purposes, we currently anticipate global light vehicle auto production to grow between 10% and 11% for the year, and global commercial vehicle production is expected to grow between 3.5% and 4.5%. As of today, we anticipate 2021 reported net sales to range between $3.7 billion and $3.9 billion. This would represent an increase of 18% to 23% at constant currency, supporting a high-single-digit or low double-digit industry outgrowth. Adjusted EBITDA for the year is expected to range between $590 million and $640 million with an implied margin of 16% to 16.4%. Our RDE and CapEx budgets as a percentage of net sales are fairly consistent with our targets from previous years, and our effective tax rate is expected to be in the low 20% range. Finally, we anticipate adjusted free cash flow, which excludes reorganization items related to the Chapter 11 filing and repositioning charges, to be between $300 million and $400 million, positioning Garrett to further de-leverage and provide opportunities for shareholder value creation. We continue to track global macro events along with industry trends, and we’ll provide an update to our forecast on our Q3 call.

Thank you, Sean. Turning to Slide 11, we are proud to have launched the company’s first-ever sustainability report during the second quarter. The report outlines our commitment to robust environmental, social and governance or ESG management and highlights the mission of Garrett in enabling cleaner, safer vehicles. Our advanced global electrification and software solutions are key contributors in empowering automakers to address the industry’s most pressing issues from emission reduction to cybersecurity. We continue to support our global customers with transformative technologies to help them meet increasingly stringent environmental standards and optimize vehicle health and safety, while enhancing overall vehicle performance. Additionally, the report focuses on the two pillars that support Garrett’s core mission, namely our culture of innovation and our responsible operations. We mentioned in our previous calls that our culture of innovation has enabled Garrett to offer a wide range of cutting-edge technologies, all of which have been developed in-house. As we continue to bring differentiated technologies from the lab to the mass markets, our focus remains on drawing upon Garrett’s global talent with an emphasis on diversity and inclusion, as well as promoting a safe and engaging workplace. We also remain dedicated to operating in a responsible manner to ensure the long-term impact of our mission by implementing best-in-class policies and procedures to manage our environmental footprint and achieve regulatory compliance in the countries where we do business. This will enhance our ability to serve our global automotive customers in the decades ahead and help drive the future of sustainable mobility. Finally, the report provides our first external sustainability targets and outlines the progress we have made since going public in 2018. Our initial sustainability report represents an important milestone as we share our vision for Garrett’s societal contribution. We encourage you to learn more by reviewing the report, which is available on our website. Turning to Slide 12, I will close with some final thoughts. Although I’m quite pleased with Garrett’s performance for the quarter, our strong net sales performance for the quarter demonstrates the continued demand for our advanced technologies and ongoing share of demand gains. Q2 net sales growth of 83% at constant currency outpaced global auto production by 32 percentage points. Overall, our performance for the quarter was impacted by global supply chain disruptions and raw material inflations. We drew upon our flexible operations to mitigate these macro headwinds, which allowed us to take full advantage of the favorable Q2 sales mix as customers favored larger more profitable platforms. We also completed our financial restructuring in the quarter, creating a new foundation that best positions Garrett to achieve long-term sustainable growth and profitability. We are pleased with the outcome of this process and how the business continued to profitably grow throughout this challenging period, reflecting the commitment and perseverance of our highly talented global teams. As we move forward as a stronger, more financially sound company, we continue to focus on incubating new technologies and accelerating innovations to the market that will benefit from the electrification of powertrains and increasing interest in hydrogen fuel cell technologies. I am confident that Garrett’s extensive engineering experience and the dedication of all employees have demonstrated over the past year. We continue to drive profitable growth in a transforming industry. This concludes our formal remarks today, and I’ll now hand it back to Paul.

Thank you, Olivier. And Operator, we are now ready to open the call for questions.

Our first question comes from Hamed Khorsand at BWS Financial. Please go ahead.

Good morning or good afternoon, depending on where you are. But first off, just want to ask you on the VNT for gasoline, what kind of traction are you getting in this environment and what kind of placement are you expecting to occur this year, especially in North America?

Well, this environment is not changing the rate outlook we see for variable geometry for gasoline. We are seeing significant traction in Europe. As we said before, we expect by 2023 that more than 60% of the volumes in Europe will be variable geometry. We have also very good traction in China. We have traction in the U.S., primarily because there are a lot of engines developed outside of the U.S. that are on platforms within the U.S., but obviously we are expecting that new CO2 regulations that could be a bit more stringent than what we’ve seen in the past could boost the adoption of variable geometry in the U.S. as well. So we are seeing early signs of that. But so far, I would say, the U.S. is still not delivering what we see in the rest of the world. But the current environment doesn’t change anything to that. Car makers need to reduce CO2 emissions, and therefore, they need to work on the engines.

Okay. And my other question was, what’s the timing of your software business ramping? Why do you think that you, in this crowded space as a security, would be able to capture much of the market share or any market share really?

So, two things on that. First, let me remind you about our software offerings. We have an offering around prognostic and diagnosis. We have an offering on model-based controls, and we have an offering on cybersecurity. People are looking at the software business as a mass-market adaptation, but it’s much more fragmented than that. Let me pick up on a few points. If you look at the way today cars are managed, the issue of the engine and the calibrations of the powertrain, a lot of it is done with legacy practices of the automotive industry. We are introducing something that is quite new, model-based algorithms. You don’t need to calibrate an engine, or a powertrain for all kinds of configurations. We do that with models based on physics. This is a key differentiator, coming from outside of the automotive industry. Regarding our partnership with Hyundai, showcased about a month and a half ago, demonstrates the adoption of our technology on engine controls. Why would they introduce a new supplier like Garrett if they already had what they needed from the current incumbents? That’s the point. We are going for technology differentiation. We are bringing something new. Same for cybersecurity; we entered the market competing not just with incumbents, but established a strong credibility in the space, making significant progressive steps. We plan for our first SOP at the end of the year with a second coming next year. We see solid progress as we offer a new, differentiated solution.

Great. Thank you.

If I could add before the next question, what we are developing is extremely important for the future of the automotive industry. There are a lot of transitions going on, with new powertrains and complex vehicle architectures requiring the innovations we are developing right now. Okay. Sorry, let’s get to the next question.

Our next question comes from the line of Chris McIntyre from McIntyre Partnerships. You may begin.

Hey guys. I was wondering if you could talk a little bit about capital return policy. I mean, Honeywell is able to put it to you probably in about two months. So I understand that’s at the top of the list, but can we discuss what the plan is there? And also as a kind of secondary question, when should we expect the restricted cash to become unrestricted?

Sure. Well, I’ll start with the easier question, which is the unrestricted cash. We expect the unrestricted cash to be fully released by the end of the third quarter or very beginning of the fourth quarter, so by the end of September or early October. We have had a plan in place that’s been a focus of the entire team since we emerged; it’s a bit of a carryover from the Chapter 11 process. Regarding capital return, you may have seen we filed an 8-K; we did amend our Series A certificated designation to allow for pro-rata common dividends or a share buy-back. We did that to provide more flexibility. It doesn’t mean we will actually start to do that, but we would like to eventually reach a normalized capital structure and have conversations around capital return. However, if the Honeywell put option does indeed go live, we are in discussions with Honeywell to determine what works best for Garrett. We have ample liquidity should they choose to put the entire amount to us. After having just emerged a few months ago, we are still digesting the new capital structure, but the capital return policy is something we are actively considering. I’ll have better guidance on that at our third-quarter call when we know more about the industry and whether the put option will go live.

Okay. Great. And then could you talk about the seasonality this year? It’s been a bit unusual. Normally, you’re stronger in the first half compared to the back. But with the semiconductor issues and frankly, the COVID disruptions across various markets, I’m just curious how we should interpret that.

I think you summed it up accurately – it’s been quite uncommon this year, not just starting in 2021, but dating back to the end of last year. We had the largest quarter ever in Q4, primarily driven by China. Then, we saw Europe ramping up strongly in Q1. Then the semiconductor shortages impacted us in Q2, similar to the rest of the industry. Now we see the question marks for Q3 and Q4, thus why we are being cautious. There are conflicting signals in the marketplace; some believe improvements are coming, while others think they won't materialize until 2022. We lean towards the cautious perspective and are not having large expectations for the back end of the year, as reflected in our guidance. The critical point across all companies will be to monitor how things unfold in September. July and August typically don’t provide a clear picture for the year’s end; September will be telling.

Okay. Great. I think just one final question. When we think about the working capital, previously you ran a negative working capital model. There are many moving parts considering the last 12 to 18 months. When might we estimate returning to a more negative $200 million working capital?

Yes. Well, in the second quarter, because of the volume slowdown, we actually witnessed a negative effect on working capital. Typically, as volumes rise, we generate cash. However, with lower sales, the inverse occurred. Our accounts payable terms are much longer than accounts receivable, so we collect on the reduced sales while still paying for our higher sales volumes from several months ago. So certainly, the current inventory situation is a challenge; however, I anticipate that we're trending toward a normalized working capital position, albeit with a slowdown, which is affecting our current metrics.

It's also crucial to note that there were no negative impacts from restructuring that adversely affected our working capital. We didn’t have to impose tighter payment terms with our suppliers during the Chapter 11 process. This is an important aspect to keep in mind; the fundamentals of our working capital have remained stable.

All right. Great. Thanks, guys.

Our next question comes from the line of Rajeev Gupta from Goldman Sachs. You may begin.

Hi. Thanks for taking my question. I really had one around the capital structure, given the various moving parts here. How do you think about the leverage going forward with the Series B payment coming up? And also the ongoing payments of the Series A? How should we evaluate leverage based on your earlier descriptions?

In terms of ultimately what our target liquidity I think we would aim for a normalized capital structure that generally aligns longer-term objectives and goals. Regarding the outstanding leverage and the various Series A and B preferred stock, they each have distinct characteristics that we need to evaluate as we plan our strategic advancements. They both contribute to the overall capital structure moving forward.

Yes. And from a capital structure perspective, do you want to secure unsecured tranches moving forward, if it is secured only in terms of that?

As previously stated, we have a fairly complex capital structure. With the performance that the business is currently delivering, the put option could materialize towards the end if we hit our guidance midpoint. We need to assess the interest from Honeywell to redeem it. They have a narrow window to decide, and we will wait until the next reporting period. That is something we are looking at now; we have enough liquidity to handle it and if a redeemable option is executed, we may refinance accordingly.

Understood. Okay. Thank you. That’s it for me.

And the next question comes from the line of Brian Sponheimer from GAMCO Funds. You may begin.

Hi. Good morning, everyone and welcome back. Just a question, your restructuring was more or less a financial one; it took place under the pressures of the pandemic. I’m curious from an operational perspective, if you’re evaluating your own cost structure, without acquiring your breakeven point. Are you able to quantify the cost savings that make you functionally more profitable now than when you exited?

I would start to answer the question. I’m sure Sean will add more detail. But fundamentally, the trigger to improve our structure wasn't just the financial aspect, it was the COVID-19 impact. We used this opportunity to push forward on restructuring plans aimed at optimizing our resource distribution and technology focus, accelerating our pre-existing plans to have us out of the crisis in good shape. You can see this impact when comparing our costs this year with last. Q2 of last year was unusually beneficial as many firms saw government-supported cost mitigatives. We faced rates that highlighted our enduring effectiveness amid those cost pressures.

That is true. However, some costs expected to return in the second half compared to what we initially allocated for expenses. We plan to restart travel and the costs tied to that. It's still too early to say what aspects would provide substantial leverage in addressing current market circumstances. We will continue streamlining our cost structure and find new efficiencies.

Thank you. And just one clarification on the Honeywell put option—would that be for the entire face value of what’s remaining under the Series B? Or would this be for that present value number on your balance sheet?

It would be for the present value, discounted at 7.25%.

All right. Thank you very much. And best of luck for the remainder of the year.

Thank you.

Thank you. And this will conclude our Q&A.

Okay.

And this will conclude the conference call for today.

Thank you very much.

You may all disconnect.