Good day and thank you for standing by. Welcome to the World Kinect Corporation Second Quarter Earnings Conference Call. At this time, all participants are in listen-only mode. After the presentation, there will be a question-and-answer session. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your host today, Elsa Ballard, Vice President of Investor Relations. Please go ahead.

Good evening, everyone, and welcome to World Kinect's second quarter 2023 earnings conference call, which will be presented alongside our live slide presentation. Today's presentation is also available via webcast on our investor relations website. I'm Elsa Ballard, the new VP of Investor Relations, here on the call for the first time. I am thrilled to be here. With me on the call today is Michael Kasbar, Chairman and Chief Executive Officer, and Ira Birns, Executive Vice President and Chief Financial Officer. Before we get started, I would like to review our safe harbor statement. Certain statements made today, including comments about our expectations regarding future plans and performance, are forward-looking statements that are subject to a range of uncertainties and risks that could cause actual results to materially differ. Factors that could cause results to materially differ could be found in our most recent Form 10-K and other reports filed with the SEC. World Kinect assumes no obligation to revise or publicly release the results of any revisions to these forward-looking statements in light of new information or future events. This presentation also includes certain non-GAAP financial measures; a reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measures is included in our press release and can be found on our website. We'll begin with a few minutes of prepared remarks, which will then be followed by a Q&A period. At this time, I'd like to introduce our Chairman and Chief Executive Officer, Michael Kasbar.

Thanks, Elsa. Welcome to you, Elsa, and welcome to all. This is Elsa's first call, and you may notice some new elements going forward and more communications in a variety of mediums as part of our commitment at World Kinect. I would like to thank Glenn Klevitz for his work over the years in Investor Relations, and now he has the opportunity to focus on our important global treasury requirements. Thank you, Glenn, for all of your efforts over the years. It's been an exciting few months for us here at World Kinect. Importantly, I can now officially call the Company World Kinect. I want to begin my remarks with why the name World Kinect and what that means for the Company and for you as investors. For nearly 40 years, we have been providing energy, logistics, and finance solutions, creating value for both suppliers and consumers of energy. When we went public on the New York Stock Exchange over 30 years ago, we were a small reseller of petroleum products, primarily in the U.S. When we rang the New York Stock Exchange closing bell last month at our official rebrand, we were number 70 on the Fortune 100 with nearly $60 billion in sales last year, maintaining and growing an energy ecosystem of thousands of customers, suppliers, partners, and experts around the world, fulfilling energy needs in 200 countries and territories. Our mission was then and still is today: to meet our customers' energy needs in the most efficient manner possible and to provide our supply partners with a world-class distribution platform. While we are not in the business of producing or refining the energy we supply, we work every day to improve access and deliver value to our global network of customers, suppliers, and partners. The changing of our corporate name to World Kinect is part of our ongoing commitment to that mission, and it more clearly reflects our future-facing businesses that anticipate and adapt to our customers and the market's evolving requirements. One of the ongoing challenges our customers face today is the need to source and consume a diverse energy diet that is affordable, reliable, and increasingly lower in carbon to achieve their sustainability targets or satisfy regulatory requirements. At World Kinect, we are not only serving our customers' conventional energy needs today but also expanding our portfolio to provide customers with greater access to sustainably sourced energy across aviation, land, and marine. As an update on the renewable energy front, during the second quarter, we announced an expansion of our partnerships with two of the largest sustainable aviation fuel (SAF) providers, expanding our ability to supply SAF to over 40 airports in North America and Europe. Additionally, we also made a minority investment through World Kinect Sustainability Ventures in a commercial mobile EV charging company, providing charging-as-a-service to fleets and other consumers. These are all excellent examples of World Kinect's strategic evolution as we seek to leverage our extensive supply network to bring value to our partners and customers alike. While we are very focused on supporting our customers' energy transition journeys, we've recognized that this part of our business today remains small relative to our conventional energy business. However, this business has been gaining traction, growing year-over-year, and creating synergies with our conventional fuel offerings. Our commitment to growing sustainably related products and services is evidenced first by our continued investment in people supporting these activities with a headcount of 250 across the globe. We are also working to drive organic growth in related areas, including digital and technology-enabled data management for what is a relatively complex, specialized, and evolving space. Second, we have a dedicated team focused on a growing pipeline of inorganic investment opportunities. Importantly, we aren't looking to make investments for the sake of making investments but rather carefully identifying innovative future solutions that will strategically enhance our customer offerings and satisfy their requirements for today and tomorrow while driving incremental and long-term shareholder value. Furthermore, we are also selectively investing in certain early-stage ventures that show promise of delivering innovative future solutions as the market continues to evolve. One such investment is Producer's Trust, a digital platform supporting regenerative agriculture for small and medium-sized farmers in developing countries. This investment brings us closer to nature-based solutions and is a reflection of our commitment to bringing high-quality, high-impact carbon offsets to market. We will also continue to roll out technology-enabled solutions to drive value and operational integration with the marketplace, automate as many of our internal processes as makes economic sense, and continue to logically deploy AI on use cases with the best business and organizational outcomes. We are on course to be a cloud-first company by year-end, meaning all of our systems and infrastructure will be in the cloud, giving us greater security, resilience, and flexibility to expand and scale our global offerings. Finally, in the same way that we have built the world's first and largest independent green fuel services business and the most diversified independent aviation supply and services business, we will build our land, renewable energy supply, and carbon management business. While aviation and marine took longer to build, we expect these two will take considerably less time because we already have the global footprint to leverage, together with knowledgeable and experienced professionals executing with better tools. The foundational principles of return on capital, cash flow, and risk management, upon which World Fuel Services built our base businesses, will continue to govern our evolution as World Kinect. We are laser-focused on driving efficiency and returns within our global platform and improving the consistency of profit contribution from all of these activities. In summary, we believe our recent name change to World Kinect is very meaningful. While we will continue to meet the critical fueling requirements of our customers day in, day out, this change is intended to emphasize our ongoing transformation alongside that of our customers and suppliers, further solidifying our existing relationships and the trust we have built in the past with enhanced and expanded relationships in the future. Therefore, World Kinect more clearly reflects our future-facing business as we continue to anticipate and adapt to the evolving needs and capabilities of our partners in the markets we serve throughout the world. It's certainly an exciting time for us. As I turn the call over to Ira for a review of our financial results and business results, I want to conclude with a thank you to the over 5,000 members of our global team who work every day to ensure the success of our company. It is only because of their hard work that we will continue to drive our long-term growth strategy and deliver on our mission. It is truly a pleasure and privilege to work with such a talented, dedicated, and passionate group of people who make coming to the office every day an engaging and meaningful experience. Thank you very much. Ira, let's hear all the good stuff.

Thank you, Mike. Good evening, everyone. As Mike noted, I'm about to share all the good stuff. It's clearly been an exciting several weeks for us, considering the World Kinect name change and the recent convertible offering. Now, we'll get into some of the details specific to the second quarter. For starters, as always, I'd like to note that our non-GAAP results for the second quarter reflect limited adjustments to GAAP results with no EPS impact this quarter, which is consistent with last quarter. However, the comparative prior year numbers do exclude the impact of certain non-operational items, which are highlighted in our earnings release. To assist you in reconciling the results published in our release, the breakdown of last year's non-operational items could be found on our website and also in today's webcast presentation. On a consolidated basis, while our total volume of 4.47 billion was down slightly year-over-year, consolidated gross profit increased 11% to $282 million from last year's second quarter when we experienced the impact of extreme backwardation in our aviation segment. Speaking of aviation, as I mentioned last quarter, we have been laser-focused on driving efficiencies and solid returns in the face of the current elevated interest rate environment. While we experienced organic growth in many parts of the aviation business, including international passenger activity and business in general aviation, these volume gains were offset in part by weakening cargo demand. We also made a conscious decision to reduce our exposure to certain working capital-intensive activities, which, while resulting in some volume reduction, contributed to overall margin improvement as well. Considering all this, aviation volume of 1.85 billion gallons in the second quarter was only up slightly year-over-year. However, second quarter aviation gross profit of $128 million was up significantly when compared to the second quarter of '22, which was materially impacted again by inventory losses driven by significant price volatility and extreme backwardation. Again, we also benefited from our heightened focus on margins and returns during this year's second quarter. As we look to the third quarter for aviation, we expect a traditional summer seasonal increase in aviation gross profit, with an anticipated further improvement in margins benefiting in part from our recent contract renewals. Now, turning to our land segment, volume was just over 1.5 billion gallons down slightly year-over-year, driven in part by some lingering weakness in our North American commercial and industrial activity, offset in part by a further increase in volumes associated with our natural gas and power trading activities. Consistent with last quarter, approximately one-third of total reported land volume relates to these natural gas and power activities. From a profitability standpoint, the land generated $111.5 million of gross profit in the second quarter, down approximately $11 million or 9% year-over-year. As forecast on last quarter's call, the principal portion of this year's year-over-year decline relates to our UK operations where prior year results benefited from significant market volatility. We also experienced the year-over-year decline in profitability in our North American commercial industrial business, offset in part by an increase in gross profit from our sustainability related service offerings. As we look to the third quarter for land, we expect a modest year-over-year improvement in volume and gross profit driven principally by a somewhat stronger summer driving season in North America, aided by a significant year-over-year decline in fuel prices at the pump as well as continued year-over-year growth in our sustainability related service offerings. Lastly, our marine segment volume of 4.2 million metric tons was down approximately 14% from the second quarter of last year, driven primarily by declines in activity in the container market. In terms of profitability, marine gross profit was $42 million in the second quarter, down from a record $78 million in the prior year, when bunker prices were approaching record highs and market volatility was quite significant. While year-over-year results were down as expected, marine margins remain well ahead of historical averages. As I mentioned during my aviation commentary, we also remain focused on ensuring we generate margins in marine, which enable us to maintain acceptable returns in the current interest rate environment. For the third quarter, while marine gross profits should be generally flat sequentially, gross profit will again be down year-over-year, similar to the year-over-year decline we experienced in the second quarter. Moving on to expenses, consolidated operating expenses were $205 million in the second quarter, which is at the lower end of last quarter's guidance. As we look ahead to the third quarter, we expect operating expenses to be in the range of $214 million to $218 million, which will be up sequentially, principally driven by seasonality, but will be down year-over-year. In the face of what remains an uncertain macroeconomic environment as well as persistent inflationary conditions, one of our primary priorities is vigilant expense management with heightened scrutiny on areas such as hiring and travel, as well as all other expense categories. Our primary objective is to deliver the best possible outcome for both our valued employees and shareholders this year. Looking beyond the third quarter, we reiterate our commitment to further enhancing operating efficiencies, reaffirming our operating margin target of 30% or higher by 2025. This target relates to our adjusted income from operations as a percentage of gross profit. This strategic focus is expected to contribute positively to overall returns and drive incremental earnings per share progressively over time. We've talked a lot about interest expense over the past year, and we continue to focus on managing working capital and capital expenditures, generating positive cash flows, and optimizing the terms and conditions of our liquidity facilities. These efforts have been paying off with second quarter interest of $32 million, down $2 million sequentially and down more than $3 million from our peak quarterly interest expense in the fourth quarter of last year. Looking ahead to the third quarter, we expect interest expense to decline again to the range of $28 million to $30 million, with a further reduction principally related to the benefit of the lower interest rate associated with our recent convertible note offering, which I will talk more about in a few moments, and also, outstanding amounts under our liquidity facilities have been trending lower. Our adjusted effective tax rate for the second quarter was 24%, which is a bit higher than expected. However, we continue to believe that our 2023 full-year tax rate will remain generally consistent with 2022, at approximately 20%. On cash flow, after delivering very strong operating cash flow in the first quarter, we generated an additional $44 million of operating cash flow this quarter, driven by carefully managing all related balance sheet levers. That brings year-to-date operating cash flow to $186 million, keeping our liquidity profile strong and positioning us well to continue pursuing growth opportunities while maintaining solid financial flexibility and enabling us to focus on opportunities to drive incremental profitability. More specifically, as we often receive questions about capital allocation, I wanted to quickly touch on our flexible capital allocation framework and remind you how we make decisions about our uses of capital. Our guiding principle remains supporting the growth of our business while carefully managing balance sheet leverage, all with an eye on delivering incremental shareholder value. In the growth bucket, our primary focus is on organic growth and accretive M&A, which could include opportunities like the Flyers acquisition last year, which expanded the breadth and depth of our North American land business, as well as opportunities to continue building our sustainability-related product and services platform, where we continue to make good progress organically, thanks to our growing and talented team focused on this part of our business. On the balance sheet side, we prioritize low leverage through prudent capital management and work to maintain ample liquidity throughout our business cycles, and on shareholder returns, we want to remain an attractive holding for our investors, which is why we have consistently returned capital to our shareholders through both buybacks and dividends. Speaking of buybacks and dividends, we have returned $67 million to shareholders year-to-date, paying $17 million in dividends and repurchasing $50 million of stock in conjunction with our recent convertible offering. Just to note for your models, our recent $50 million buyback reduces our share count by approximately 2.2 million shares or 3.5% going forward, effectively starting with Q3. We have now repurchased more than 10 million shares over the past 5 years. As mentioned earlier, we issued $350 million of convertible notes maturing in July 2028 at the end of the second quarter, which diversifies our capital structure and immediately reduces our annual run rate of interest expense by approximately $10 million. Again, this is one of the many opportunities being focused on to reduce interest expense in this elevated interest rate environment. As we entered into a series of related bond hedge and warrant transactions simultaneously with the convertible offering, it is important to note that there is no equity dilution related to the convert upon conversion, unless our stock price exceeds $40.14. Whatever the value may be created when our stock price exceeds this conversion price can be settled in cash or shares, or a combination of both at the Company's option. This was a very successful transaction for us, and we are very happy to welcome so many new investors to the World Kinect story. With the maturity of our bank facility recently extended to 2027 and the new convertible notes maturing in 2028, we have significantly strengthened our financial position, with our liquidity well secured for an extended period of time. In summary, despite a tax rate a bit higher than anticipated going into the second quarter, we delivered solid overall results. We delivered additional cash flow contributing to strong year-to-date operating cash flow and free cash flow. We diversified our capital structure with our first-ever bond offering. We continue to find ways to reduce interest expense with sequentially lower interest for the second consecutive quarter. We repurchased $50 million worth of stock reducing our share count by approximately 3.5%, and we should deliver strong results in our seasonally strong third quarter while remaining intently focused on driving profitable growth and carefully managing expenses to ensure we deliver strong results for the full year 2023 and into 2024. Finally, as Mike mentioned earlier, we remain proud of our team and are excited about the continued evolution of World Kinect and the growing opportunities that lie ahead. Thank you. I'd like to now turn the call back over to Liz, our operator, to begin the Q&A session.

Our first question comes from Ben Nolan with Stifel.

Hi guys, Ben Nolan from Stifel. I have just a couple of questions. The first, I think I already mentioned on the aviation side that you reprice contracts and I think that's usually something that happens around this time of the year. Can you maybe talk about how those are being repriced both with respect to the trajectory or the incremental pricing and how those conversations are going, what portion of the business is price-sensitive or not?

Sure. Well, hey, Ben, thanks for joining us today. So, no simple straight-line answer to that question. So, I'll try to give you a broad one to help as much as possible. Considering the current interest rate environment, I probably keep repeating myself about the fact that we're focused on meeting our hurdle rates that have increased considering the environment that we're in. With that in mind, as we've gone through some of our contracts renewed in the spring, many of them renewed on July 1st at the beginning of the third quarter. That's a factor that the very well-experienced team that's been doing this forever takes into serious account when deciding their strategic position with each and every account. You have to take into account the interest rate environment, competition in the market, and certain markets being stronger than others, etc. So, the easiest way to answer your question is to say that some business that didn't necessarily meet those hurdle rates, which I alluded to in my prepared remarks, will result in a little bit of volume decline versus the organic growth that we've seen in the areas that I mentioned. But also, in many cases, we've seen a bit of an increase in our margin compared to the contracts that were expiring in the spring or at the end of June. That's one of the reasons I mentioned that we should see an even stronger margin in the third quarter than we did in the second because we should have some uplift there. It's not massive, but the teams did a great job in finding whatever opportunities possible to bring those margins up. So, we'll have several million dollars of annual incremental benefit from those margins, net of anything that we may have given up.

And changing gears, as it relates to the buyback, the $50 million buyback. I'm curious, for you guys, buybacks have been sort of episodic. Would you characterize that as just sort of a one-off or are you thinking about something a little bit more continual with respect to your buyback activity?

So, episodic, I'll remember that word. We've actually bought back on average, a couple million shares a year quite regularly over the last several years, while I mentioned on the call, 10 million shares over five years. We targeted a number very similar to the number that we wound up buying back in conjunction with the convert, as that's a number that ensures that we're at least at a minimum offsetting the dilutive impact of employee-related equity awards. So, that's an amount we probably would have purchased anyway. There was a strategic value to doing that in conjunction with the convert because it helped reduce the volatility some companies would often see when issuing a convert before closing the deal, and it actually worked very well for us as our stock only moved about 4% on the day that we were in the market. That's considered pretty immaterial compared to other transactions. So, it's unusual that we get it all done in one day. It was kind of efficient to do it that way. It all got done at the same price. But going forward, we'll be going back to the same rationale. We've always had of trying to combine that with our dividend to return $60 million to $70 million a year to shareholders between those two items. There are times we've bought back a bit more defending our stock when it got beaten up to levels that really disappointed us. But I would say generally, the $50 million number is a good metric to think about going forward, plus or minus for future years.

So in other words, an annual number of $50 million is a good annual number?

That's right.

Our next question comes from the line of Pavel Molchanov with Raymond James.

You talk about sustainability kind of expanding within the revenue mix. Can you maybe put some specific numbers, kind of Q2 contribution versus previous year or any historical comparisons along those lines?

If you look at everything that we historically defined as World Kinect, which includes our natural gas power and sustainability related services businesses, it's grown to about 10% of revenue. And that's progressively increased year-over-year by a few percentage points. But second quarter year-to-date, our full-year expectation is somewhere around almost exactly 10% of gross profit.

Yes. Just to clarify, did you mean 10% of top-line or 10% of EBITDA?

I'm talking about 10% of net revenue. The EBITDA contribution is also very similar to that number. So, it's pretty close to 10%.

Okay. And maybe kind of zooming in on one aspect of that. You guys recently announced a sustainable aviation fuel deal with Neste, and I think you said that your SAF volumes will be up 20x in 2023 versus last year and obviously from a pretty small base. But just talk about what you are seeing as you talk to airlines about their interest in SAF?

Yes, Pavel, all of the airlines have commitments that they have to meet. And I think it's pretty well known that the demand far exceeds the supply. There's a feverish pitch of a lot of folks looking to build manufacturing and production. The truth of the matter is that it's willfully inadequate for the amount of demand. This will continue to support in terms of the LCFF, and you will see the cost of that being distributed. But there is going to be a slow burn. We are participating in it. Particularly in any of the businesses that are sustainability-related and using the same infrastructure, we are going to participate fully. So drop-in fuels are a beautiful thing, and we will invest in projects that we think make sense. We started this journey in 2011, well before anybody was really talking a whole lot about it, and we have just continued to accelerate it. It requires a certain amount of logistics capability, which is right in our wheelhouse, and we will continue to do that. That's our commitment. We are following what our customers are looking for and helping them achieve their targets and their goals. We will invest in projects to help make it happen, but it's going to take a little bit of time.

Okay. Last question for me. I hope you can give your kind of macro perspective on this. In the last four weeks, we have seen pretty notable escalation in oil prices, still lower than a year ago but certainly the steepest increase in oil year-to-date. Is there any resulting demand impact that you have observed since the beginning of July?

Well, I'm not sure it's directly related to price. I think there are probably larger macro issues at play that may be just more fundamental economic trends and cycles. In fact, on the retail and gasoline side, we feel that we will probably benefit from the relatively lower comparative price. I think some of the drop-off in demand in shipping and in some of our land-based sectors has occurred despite the fact that you're seeing an increase in demand, certainly on the international long haul, which is beneficial. So, there are a lot of swirling trends, and I don't think you can really pinpoint any one thing. But I wouldn't say that price is really driving behavior so much right now. It's not a meaningful enough move to have impacted consumer or commercial activity.

And Pavel, just to add to that, it is our seasonally strongest quarter. You've got that impact, which maybe you would have a negative somewhere, but it's being masked by the fact that you're seeing growth because it's the summer, especially in commercial passenger activity and cruise and areas like that that are more consumer-oriented. We're not seeing any significant headwinds to that seasonal pattern that we expected going into the quarter.

Our next question comes from Ken Hoexter with Bank of America.

Just want to talk about the sustainability of aviation gross margins, which is obviously pretty key here. So maybe you could talk about that a little bit.

You know, Ken, I think it's been a pretty wild ride. Nobody knows this better than you; you've been following us for quite some time. If you go back from 2014 to 2022, from the implosion of the energy complex to the recovery in 2019 to COVID, and then the Ukraine and disruption of the oil supply market and what that meant in terms of the pricing profile, it's been quite extraordinary. The mix of our business, I think our aviation team should be extraordinarily proud of what they've been able to accomplish, both in commercial and business aviation. We've got a material business aviation practice now, which is sort of exemplary. It's a combination of both the business mix and I think tremendous discipline on the team. As Ira commented earlier, from interest rate hurdle rates and really being more discerning in terms of where we show up. All supply is local and some local supply was rather expensive, long transit times, difficult to manage when you've got all sorts of whipsawing market pricing. It's been a combination of things. I think that volume growth, obviously and some of our services growth is something that we want to focus on. I'm not sure that if you look at historic norms, it would be prudent for us to continue to think that we can flex on some of these items, because we're at reasonably healthy levels. Going back to Ira's comments, what we are really focused on is the efficiency of the organization and bottom-line returns and working on cost and the way we spend money, what we're doing on headcount, and just taking a closer look at those areas.

Yes. Just to add a little bit to that, Ken. If you go back to pre-COVID, this is kind of a thank you to our phenomenal team in the aviation business. You'll remember we had a lot of government-related business. It was obviously higher margin. You would think it would be hard to achieve the unit margin we had back then considering those dynamics, which are now all gone. Over the last few years with some COVID-related interruptions, our mix of business has really changed. We've got a growing business aviation business that Mike mentioned. We bought UVair 20 minutes before COVID started. Now, a couple of years later, that's really returned to where we expected it to be and beyond. Our business that's now five, six, seven years old, principally in Europe on airport, the business that really started out from the acquisition from Exxon, which is a bit more physical, higher margin business, has been boosted as travel has come back in Europe, and that has become a bigger piece of the pie. Of course, just on our core commercial business, as Mike mentioned, there's greater focus on margins. What's pretty remarkable to answer your question? I think the general zip code where we're at today is sustainable. It's better than where we were in 2019 with the dynamics that have been absent for the last couple of years. There's some seasonality, right? So, our margin always peaks in the third quarter. It will probably be lower in the fourth quarter than the third quarter, but these levels are sustainable. We don't have a short-term blip in an apples-to-apples comparison. The overall mix of all the contributing factors and Mike even mentioned some non-fuel offerings that have grown to contribute to our margin. It's just a great job, and we're at levels now that we should be able to retain.

Ira, would you break it down into buckets in terms of passenger versus small private jets versus other? Is it a mixed shift that's occurring within that, or just culled different business that you…

Absolutely. If you go back a few years, or three, four, five years, I would say that the business in general, the private jet market as you would call it, was maybe 20% to 22% of the business. Now it's closer to 50%. That's a big shift. We had zero, five, six, seven years ago; the type of business we have at over 100 airport locations today, that was zero. We weren't at any. That's just because of the nature of the beast where we are on the ground with the truck and the driver and the fuel and the tanks; that's a much higher margin business as well. So, now that's a bigger piece of the mix. Yes, you have had a mix shift. You lost the government piece, but those two pieces that were relatively small back then have become much bigger pieces of the pie that have arguably more than offset what went away.

And then just one on land, right? You talked about 30% is natural gas related. Maybe talk about how that is priced versus what we know on a per gallon diesel methodology? It sounds like that part is growing faster. How do we think about that and margins there?

Great question. They are both different, natural gas and power. There's more natural gas volume than power volume. It's still, I know it's grown as a bigger piece of the pie. It's about 30%. If you convert it to kind of a gallon equivalent margin, which makes sense in the ounces you're trying to do, the natural gas volume is much lower than our average volume. But it's at a much lower cost to serve because that's a very small tight, not fantastic industry, but small. We don't spend a lot of money to generate that profitability. The power related volume is much smaller; that number is actually higher than our average land margin. But I would say, if you split the natural gas and power volumes, 75% to 80% of it is natural gas, and only about 20% of it is power. So, that has arguably a bit of a negative impact on our average margin; if that outgrows our fuel business, that could have an impact. But again, it's still dropping to the bottom line because of the extremely efficient cost structure that exists in that business. So, it's a good question.

Thanks for that. Last one for me, just given all the movement on the debt. Talk about the balance of debt off-balance sheet receivables versus your long-term debt, what got paid off. Can you just abbreviate that real quick?

The only thing that really changed at the June 30th date at the end of the second quarter is we took the $350 million minus all the associated costs of that deal and the $50 million buyback, and those net proceeds just repaid our revolver. That’s really all that happens. You have lower revolver borrowings. Now you have a convert on average. The other part of your question on receivable sales, since that remains our most expensive cost of capital today, the average outstanding amounts on that are coming down, which is one of the things that's contributing to reduced interest expense. So, somewhat lower receivable sales, somewhat lower revolver borrowings, and then Glen, who Mike mentioned at the beginning of the call, is now our full-time treasurer as opposed to being treasurer 80% of the time. He has done a great job renegotiating some of those deals. Even the receivable sales that are outstanding are coming with a somewhat lower coupon than they were back in the first quarter.

If I can just sneak a quick one in there, just the last couple of downturns, we know that delinquencies are a small part of your business; they are so negligible. But you manage that business really well. I just want to understand from an economic point of view, from your perspective, is anything shifting here? Are we getting closer to the end on that, or is it just too small part, just given how your risk department works well?

Yes. So, if I understood your question correctly, I would say we went through the horrors of COVID and managed through that very well. There were a few bankruptcies; most companies, whether through governmental support or otherwise, did a really good job and have rebounded phenomenally well. Obviously, the market is really strong, but I would say, I wouldn't set off the fire alarms, but certainly there's a lot more focus today on certain parts of the business where customers' balance sheet strength may have weakened a little bit. I don't think it's anything alarming, but we're paying close attention to certain elements of the market and customers. Knock on wood, there are no issues on the horizon that we're aware of. Our team has done a great job avoiding a couple that could have become problematic, which is something we've repeatedly done well for decades. Overall, I would say 90% of the portfolio is just as strong as it was a year ago. The other 10% has weakened a little bit, and we're looking at it very carefully. But as you can see from our results, again, we have very limited write-offs.

The portfolio continues to get better. If you look at our service offering, we now speak to the largest and best companies. That obviously has its own benefit. That wasn't always the case going back quite some time ago, but the portfolio is significantly better, and that's where we do our business.

No, I know. Yes. I was just trying to see if you had a more macro view, and after the Company stuff that, but perfect. I appreciate the time and the answers. Yes, just thanks, Mike and Ira.

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