MMP - Earnings call transcript Q2 2019 | Magellan Midstream Partners, L.P.

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Operator

Greetings, and welcome to the Second Quarter Magellan Midstream Partners Earnings Call.

During the presentation, all participants will be in a listen-only mode. Afterwards, we will have a question-and-answer session. [Operator Instructions] As a reminder, this conference is being recorded today, Thursday, August 1, 2019.

And now it's my pleasure to turn the conference over to Mike Mears, Chief Executive Officer. ahead. go Please

Michael Mears

you. us Thank results. and you thank All to Good discuss joining today financial Magellan's for right. afternoon, second quarter

Before defined remind making we Exchange I'll management get be will Commission. you forward-looking the by that as Securities and statements started,

are be judgments the Such materially could different. based factors but Magellan, our performance future the of on actual that current statements regarding impact outcomes could

opinions in about review You future form factors our discussed filings risk information and with the should your other own Magellan's performance. SEC the and

We quarter track this of that record higher year morning of segments each the operating business reported with ago earnings second continued period. margin than solid Magellan’s financial our generating results

from incremental as well In Texas This or a we commodity pipelines X%. adjustments, EPU revenue crude pricing was oil favorable per the addition, higher normalization exceeded due primarily from commodity unit after environment. beat our our to mark-to-market from benefit guidance usual as our by $X.XX

turn second call CFO, I'll I'll to now to outlook the to discuss larger detail. the of questions. expansion our opening financial for be Jeff? our in quarter review before projects Then back status latest your our more Holeman Jeff and results XXXX to the call over Magellan’s

Jeffrey Holeman

you, Thank Mike.

making During cash operating non-GAAP margin comments flow. references and I my will financial today, be distributable certain to metrics, including

GAAP their have We reconcile that included exhibits to measure. nearest release metrics to our these earnings

$X.XX per reported of $X.XX a quarter morning, second or for of on Earlier million quarter unit reported second we or basis income XXXX. the this unit $XXX.X compared net diluted diluted per million to $XXX.X

the our Distributable flow higher quarter results was million, of of unit driven earnings strong in current the quarter for the in each quarter, $XXX.X of was XXXX operating second million $X.XX. activity diluted cash the Excluding mark-to-market our the impact $XX.X the $X.XX, reported exceeded segments. which for of million by per quarter than $XXX.X guidance in adjusted

an segments. product period. segments, second of discuss in Refined with million of operating over increase $XXX.X $XX.X performance margin starting of the our Refined million now the of products each of will the XXXX, those generated I quarter XXXX

terminals portion. favorably revenue primarily million of implemented and of the and year were transportation by the quarter impacted product the last increased in $XX.X Transportation July on segment increase haul rates. portion by longer well the system Mid-Continent Rates higher current X.X% as tariff volumes as lower of driven for in South our on Texas average shipments Refined the by

of shorter-haul to system versus decrease rates portion volumes on about the in Texas more system and part in of from year products the XXXX distillate overall our lower of Volumes push contributed lower the our barrel mix a Texas lower Refined our on volumes rate, overall the product previously to a average X% rate aviation than volumes higher South well as tariff so in described Texas volumes as fluctuations as of prior of have portion movements these much saw overall move quarter gasoline which system, South our at as volumes These we average period. the second supply cause tariff South as our our lower increase. of per

Refined system unchanged. our relatively South across Excluding demand Texas, was products

flooding second quarter. number we'd an the during asking of of a experienced impact in the received have questions many We markets whether from occurred our that

to overall our that were While minimize operations with the our solution commercial, system were we engineering develop of our declines to result leverage did some markets, potential quickly the ineffective. revenues the able essentially and experienced teams to impact flexibility in isolated

our XXXX as as butane primarily to in higher well higher period. costs compared second reduced Product a increased XXXX Operating current of due million gasoline the gain, operating sales quarter the asset integrity margins result product expenses products increased lower the expense. periods for between of butane Refined million and as segment which margin on quarter to the blending in prices spending $X.X to business lower cash $XX.X the due both higher primarily

continue for Refined a product higher As hedge the the to expect margins moment, the Michael losses decreased million to market year. second our Powder persist of of to XXXX, we remainder equity $X.X in – venture. these approximately joint quarter mark positions primarily discuss due in versus earnings on Springs

to our oil now Moving segment. crude

venture transportation export quarter at between of and periods million following volumes $XX.X a of being million increase higher the increased at quarter by driven XXXX. of Crude Seabrook XXXX. was the operating terminal $XXX.X $X.X associated than margin joint million, significant funnel, growing with August the our terminals capabilities of storage by Second part addition second fees of and revenue dock oil in

increased Our the period the volumes system the of large current higher also our transportation with part crude oil from resulting significantly Seabrook higher Houston volumes in activity. mentioned increase to in do most and previously distribution

at driver in our the shipments, as lower primary in we to a of a contract the in rate Longhorn result our the average the pipeline periods lower for crude renewals in significant tariff distribution Longhorn moved wholly-owned with which decline of This rate was oil year. rate average of system, Houston reported the decrease between increase in also October assets, average contributing last volumes, tariffs on

compared averaged in to second XXX,XXX barrels per a Longhorn the barrels day XXX,XXX XXXX. of quarter day on little approximately Volumes per over

system for excellent and teams. entire operations demand continued saw the essentially for spot our near shipments or we performance on quarter. Thanks capacity the engineering Longhorn As ran at by to and the

recall quarter's and to continuing quarter above Houston that last second tariff annualized spot The may on we the through our Midland Longhorn and barrels. XXX,XXX remain volume increased noted call, between approximately our our expectation. You market would differential

scenario Permian continued as encourage shipments spot have capacity of differential additional to-date, While expect we to differentials online. the takeaway out comes

shipments into day a year, this translate XXX,XXX of a are beyond As would as currently whole. spot the for approximately quarter we barrels third forecasting result, which not throughput of per XXXX

and primarily to million increased dock expense related a as result splitter. maintenance as to our services paid higher fees well higher as storage operating $X for segment Corpus Christi Crude lease of expenses oil Seabrook

a by unrealized the mark-to-market co-owner's XXXX, oil, an contemporary million this the venture entering affiliate valuation entered $X.X agreement that transportation agreement into venture. Crude joint services with and second primarily expense recently other of We basis operating we with with easily in was into intrastate affiliate. entered the co-owner's joint derivative driven agreement quarter

from West cash The valuation this Coast. agreement from making related oil between agreement Gulf provide this and of adjustments terms crude Houston excluded for payments or receiving Mark-to-market are to flow. of on differentials counterparty the current distributable or based Texas calculation our the

volumes, XXX,XXX barrels slightly approximately equity approximately barrels per Saddlehorn increased XXXX earnings periods. at compared per to earnings day equity oil Crude between Saddlehorn in XX,XXX the were day higher averaged period.

contractual result tariffs from to step barrels Primarily uncommitted of as higher per up in September day incentive arrangements and approximately joint tariff of volumes committed is XX,XXX well volumes XXXX. as and

will higher by Higher compared driven same These volumes per year XXXX at the the per noted current day approximately barrels increases XXX,XXX XXX,XXX between BridgeTex Seabrook equity volumes. increased, lower interest facility our earnings the by average to BridgeTex period last period. in were offset period volumes also previously. the offset lower in by ownership day of approximately barrels in

shipped the to regarding barrels on result expect an could annual assumes annualized continue our spot per per the that BridgeTex of third of average in annual with of Longhorn, volumes Longhorn are fourth the quarter, committed about volumes projection remarks end this Consistent on figure for This only spot which in like XXX,XXX now volume average BridgeTex day. through barrels year. our quarter we

to segment. by the discussion of wrap Finally, up our performance

which current of generated $XX margin million Marine over quarter, million $X.X about the period. operating Our is XXXX in increase of segment an the

joint timing to accruals of higher in tax work pure These by due period. ramp earnings service this slightly primarily for also venture thanks as operations quarter Revenues for higher were that first were revenues of current is second are of recent and the or Equity terminals higher the to continue the in offset maintenance phase higher up. partially of segment and XXXX quarter. property the were Pasadena out

year's depreciation $X quarter recently on service. to other and due increased amortization million into assets largely to expense XXXX, out placed the quarter. impairment Moving to to last of commencement compared Depreciation, second of variances

As well development in negatively the impact which of period, write million costs, related the approximately to downs as current DCF. $X.X higher asset write-down including project

flat due compared to rate essentially interest the million XXXX. period in quarter, period. in expense $X.X average Net in XXXX to the versus lower primarily debt remained interest expense lower G&A same the outstanding current was XXXX a and

Our approximately outstanding weighted was average X.X% and average interest rate during second our billion. the debt $X.X quarter was

also XX, an outstanding quarter our total June approximately $X.X of paper $XXX products debt million inactive as was of on the system. than sale Refined second gain on was $X.X on borrowings Gain assets of pipeline billion. result the a of disposition million At XXXX higher commercial of terminal including long-term

result of a quarter. increased other costs $X.X the pension While as current during million expense higher settlement

and balance Moving briefly metrics the sheet liquidity.

purposes compliance approximately Our for end leverage of X.Xx the the was at ratio quarter.

we a leverage would the our interest quarter XXXX, on the of in be the our Excluding third in sale X.Xx. the game impact approximately realized ratio of portion of BridgeTex of

growth to cash Given that able and retained of low slate be flow continue our to fund expect with all we to projects current leverage debt. ratio, of excess

equity. While staying well within without limit need leverage to the Xx issue our longstanding

multi-year addition terms our maintain ensure million, a facility renewed recently flexibility financing new to to added continue We capacity term XXX and and facility facility of a programs. our $X we this in credit billion. liquidity, five-year with for growth In XXX-day of adequate

to over to discuss growth on. the I guidance some as will date year our call of turn we back the as our of Mike well balance that given are now working the for as projects

Michael Mears

results of annual have by we $X.XX for quarter year, in remainder Jeff. on for XXXX Thanks the $XX improved increased financial Based strong to billion. once outlook of DCF the guidance again another our million our

rates now systems remained mentioned, As of and these the our continue and quarter. uncommitted as Houston and differential basis Longhorn on assumes for between the a both Jeff pipeline the result guidance above Midland spot pipelines shipments BridgeTex has third we'll through the

BridgeTex. quarter benefit reminder, we estimate is a for million these $XX the that per about shipments based and both uncommitted from the on Longhorn spot rates As

continue oil our to differential As narrows. uncommitted incentive develop basis strategies marketing pipeline as to systems and crude tariff we've mentioned the before, maintain shipments on we

current expected that positive a The also especially butane prices is favorably for in our be Magellan, the to of depressed environment blending butane light activities. benefit commodity

was point, pricing for been expected year. that the season have in with margin more that about fall earlier favorable expected actively of We blending this this coming XX% pricing hedge at at locking

we $X.XX $X.XX now As result, around compared full-year expect per margins to the blending gallon a for to previously. average

blending starting we XXXX ahead, are to make hedges for our on further progress spring season as well. Looking

margin seeing by around of this our of are XXXX year. We about XX% of X% margins increasing the stated spring With our hedged. new billion gallon currently with for distributions goal XXXX in DCF $X.XX $X.XX guidance per annual

in reinvest our coverage to million $XXX very We ratio of a almost expect excess business. with to generate X.Xx flow cash healthy of generated

completion of They expansion nearing onto of barrels expanded significant docks capabilities at for are terminal dock operational five capital, combined our Moving capacity construction XXX,XXX we per marine are day projects. a on a with now Park available. now number Galena

This than project bring busy facility. to instructions, the new ship longer customers disruptions but our very critical took flexibility online we initially expected are underwater pleased at additional dock for and to provide capacity a and due to bit channel this

target nearing on begin month. remain are or completion of We this end at the operations East the pipeline and Houston-to-Hearne to

this For segment. products Refined new pipe

and million of II the expected In supporting in marine venture additional by be end to nearing X dock and infrastructure Pasadena addition, XXXX. of of joint storage barrels completion, terminal our Phase new service within is pipeline

early and are in in expected terminal Additional mid-XXXX. and to our begin now service and capabilities West pipeline expected to both pipeline XXXX Refined be expansion construction products storage and progressing Texas which operational export Midland new for are is Seabrook underway at

on future expansion you So announced tell, these pipeline. progress enhance benefit our the recently Saddlehorn and of our as will Further, that service we making we can projects offerings excellent expansion are growth.

corresponding With closing open season yesterday. the

XX,XXX are initial a moving per this at expansion time. day barrel on we Based the received, commitments with ahead

XXX,XXX committing levels full their this option to incremental open customers through day may increase the However, process expansion volumes a per capacity. barrels in which to have up warrant the of the commitment season future, near

with our XXXX. incremental of of pay pumping late of to Each will in the The storage full Saddlehorn we by and approximately $XX available million amount. phase capabilities to expansion be expanded that and costs achieved combination higher share proportionate capacity the would capacity a expect

to in $X.X Based projects. an on XXXX to of expect expansion the we underway, XXXX with currently in million $XXX billion progress spend these additional complete projects

spending project lower and noticed projects You capital are phase the these Saddlehorn may have estimates as offset from efficiencies estimates expansion capital spending smaller by new additions. unchanged that the are quarter spending due various on for other of last to the first

work These actively proposed opportunities long well business segments, projects season open Beyond in pipeline include to continue of our million. in Voyager each opportunities including still end list the a continues capital potential projects, of the we act oil these of expansion of expansion for totaling excess potential crude which August. $XXX the to

the fully being number Voyager, active remained projects pipeline the other process to I ever likelihood of been number our in proposed that are industry aware we’re in with of that moving and space. project. it we the pipelines of our we Specific a all What potential announced in can say of see parties is still very on interested considering with forward development the questions the discussions who has throughout

third more solution the attractive Voyager project standalone pursuing a we And target has continue or range. this the and number to attractive that as at offering We believe we assure a actively due party. you our open opportunity our across business a all either can in public units that other capital of efficient to of an EBITDA we pending multiple we are been will part discussing standard I to Xx though Xx have are as returns of service season, a with develop a even project more projects

prepared That now comments. our concludes

operator, now call to the open for ready we're So questions.

Operator

[Operator Instructions] Thank very JP Morgan. Please much. ahead. is you Jeremy from with question our And go first Tonet

Jeremy Tonet

afternoon. good Hi,

Michael Mears

there. Hi,

Jeremy Tonet

update potentially assets start into the at plays public elevated regards really with if unit cap Midstream decreasing given thoughts on that, factors buybacks could a of that and all with equation like are – and growth I to versus – equity wondering how if share versus your together your I private markets the of off kind leverage seems Xx. to buybacks was spending on falling that kind that paying it's bit under just also it valuing you to all? structure here prices more wanted capital here the seems us what for just be

Jeffrey Holeman

first cap then part address is second the part of address regarding Mike This that private regarding question the question the I'll Jeff. will structure and of equity.

up Xx, the which be closer As once will gain leverage of to I will effect off, BridgeTex be temporary mentioned, next the the quarter. rolls the

our there's really will time, in in have is our that terms at find this bit structure higher focus and that that the a little get projects the and to primary of good naturally finance, continuing with we balance to So that. returning capacity cap change is focus sheet and no

Michael Mears

are, market regards And are to that on But valuations take we anything they, when to specific we let regards and to have that your public higher than know. some tell we I they you portfolio and question private indicate you and obviously and do, recent do based determinations. evaluations our we'll equity with we that on optimize make with into can that routinely But valuations don't analyze that. address it analysis. we those transactions entire routinely cases, in I some what evaluate consideration if to

Jeremy Tonet

you. Thank helpful. That's

segment, basis oil if other agreement believe mark-to-market a co-owner. far more expand to derivative I just $X.X there? adjustments the what on you the related expense as the associated Crude the was million I JV large going a with could to as How volumes? activity are wondering Turning with is there was bit

Michael Mears

an Well, venture affiliate, what one to have with entered in shipments pipelines agreement pipeline. disclose, I of share with on don't than – of shipping public a can was our associated want in margins into the our that, an you much that I tell statements, co-owner joint we the margins probably more to

to say that's all that think prepared contract. about I we're

disclosing the day I'm contract. details XX,XXX it are at barrels a volume into prepared this go That's volume point. contract The under our on the all disclose the that or we think probably to in I is will we Q.

Jeremy Tonet

That's That's for Okay. Thanks. helpful. it me.

Operator

next Please the And ahead. from go SunTrust. question is Tristan with Richardson

Tristan Richardson

Good afternoon.

XXXX, you? $XXX curious to weighted levels than of maybe and million XXXX could XXXX reasonable front is Just towards CapEx in offer see extent to could expansion large you Just with projects an even about the appear lower it of it in you opportunities portfolio guys on update opportunities XXXX? thinking the of what think the

Michael Mears

range more that discussions, those tell advanced of our them in discussions, of some they're all there Well, on pursuing a size, as cases, in project. in units some of million across is of diversity some say you smaller same $XXX less not range, just the in based and can advanced as are projects accretive and projects projects the quality be of I'll business of all wide larger the are of we're projects

be That of said, get to XXXX tell I'm I as be number I fair would those will don't can lower contracted get into those on and that to to higher is or it for spending. months whether is of really on in any not contracted projections projects start being our working how to as not determine roll to think as will spending we prepared this developing going can. those next year. give the many you or fast for that that's what me large And we six the love would and than number the we're as

But really really those. to details before of can But success they we not or are that you those actually a I one to projects understand is of get don't how many that the reasons, of what I'm them think happen going quickly make just of that substantial. important on it's all And the probability each prediction want for into transpire.

Tristan Richardson

just by million includes Saddlehorn, was on elsewhere $XXX on only that other Did phase offset follow-up $XX one million in the Fair projects. entirely I that one efficiency XXXX, right? And phase capital of then in enough. that, get

Michael Mears

we our that of so Saddlehorn, at million our this a a it's of – clear, be we're we're that partial owner portion capital of that point, owner is Yes. Saddlehorn and XX% That's XX% $XX million. in correct. share But don't in to $XX

Tristan Richardson

Right, Thank guys you very perfect. much.

Operator

Please question our Gershuni And ahead. next with is Shneur from go UBS.

Shneur Gershuni

to first Are little in Hi, the Longhorn press bit shopped? you a here. clarify, good afternoon, a able you question fact data Is there just that can reports guys. on any And maybe comment potentially that. with Is respect about that give accurate? open? being Jeremy's room to Just color to

Michael Mears

I cannot all before, with will we towards assets which our I've our I as – to of reiterate I a mind what reports. optimizing those is evaluate on mean comment portfolio. said

which clear really BridgeTex of evaluate we a last portion As assets report we was And effort think routinely. year, – all you we part. on comment recall, do and I of a sold that I our on our can't optimization specifically.

Shneur Gershuni

Okay.

can't You room open? a data even if confirm there's

Michael Mears

No.

Shneur Gershuni

Okay. butane I'm both if questions blending has strong just moving can about some onto trends. wondering trends. blending as fairly and the you order, I year. as well some been shipments about spot this talk Butane was

You the for so next year forth. in talked hedging environment favorable about already for and

goes Is the it at competing new come of the you just a some your or to away ripe spot pipes. down volumes on function volumes, comes you expect of do the from capacity and is it little are out Permian point and better? And then that spot once running normalizes business secondly, a ultimately environment the

spot opportunistic Just kind on of as curious come those why, for those away. we be go in and opportunity spot think do and about XQ year you or volumes expect has there should been XQ, this an to volumes pipes

Michael Mears

All questions right, lot a of there.

optimize blending, the I We all, try one constantly made time pool. of our say But, me. me worked at butane. incremental them. we've get blend improvements butane to gasoline end, blending remind our and to first I through improve regards will the can Let with of into just to volume to over If miss we

make in that's every and strides constant we So year. incremental that a process

The and in drivers. gasoline, reality and not drive current different that's differential happening is between both in both the their which and which the what's markets, driver. But have the obviously, pricing. supply driver They they're by market, fluctuates regards separate demand driven butane with to

And so that that margin fluctuates.

two was time are with ago has that. year-ago expanded and benefiting period where versus we're where We of margin years or in a the a it

Margins right they now than been. are substantially lower have

of a back years bounces so number a If ago, number quite you bit. around that go

has because, to be on price they we're predict on I'm commodity they're in trend driver of second not the So are beyond butane to a of going quarter pricing. primary upward what in business reduction that going the next an been but projections, not and year the

the we're And pricing so as now we as so can. locking we're seeing and that much that like we in

movements Texas to remain and On over next expected of margins the a the with year, clearly and differentials narrow are levels on pipelines, remainder our the of then spot coming spot or pipeline the drop online. course this new lower year capacity the at

have you accepting that. can that That no volumes. we're I we mean in spot forecast, tell assumed doesn't our

As we at underway space a things I the and of lower spot mentioned, in continue fill to have quarter beyond. fourth have volumes number to differentials the

that XXXX. put not just this at have forecast for We into our point

Shneur Gershuni

just Okay. was And kind if a to one of follow-up final talking which question may Tristan about. I

of you've you're basically basically the talked you're consensus that kind expectation point in you've sort working low this terms XXXX of so So and I fear completion I of on $XXX million at XXXX. for an for the CapEx mean, is of FID'ed what about forth. but several CapEx too saying setting different of now, projects right

down you ones line sort sort or get are you're XXXX if it of avoid minimum of of that's now, just where adjust something you any around to spends because wondering will not? a across sort risk I down differently? Do than think we some like from a give it which from kind if right year, of finish of kind XX% bare color its out at about obviously setting you lot of more mean, shake expectations that, talking this can magnitude you have

Michael Mears

saying by record is that start year a me capital us. for XXXX let Well,

And guidance versus record capital so or you're forward benchmarking on XXXX a looking year.

FID tend I projecting distinction mean, I be answer direct able to not. we going a we're to to going were in regards you that be to not give with which the be projects highlight unfortunately and question. not actually to just We're conservative ones reaching So I'm what I'll successful before answer.

development as think actually to I I could projects number are us many we predict to of real have year. those though danger successful can And capital there's mentioned going the a under I tell be big. number you what try next how is and range to of for the earlier, even be

mean, not early as to XXXX predictions for some and in it approved going make may those we might, get XXXX and hesitate We grow have to we that. doesn't might I'm a regards them the much of hope. we number But I as number don't can then delay in good that until with say capital again, to XXXX. just and

Shneur Gershuni

Thank today. right, All you perfect. very much guys. color Really appreciate the

Operator

next ahead. The is Merrill from Coleman, question Dennis Please Lynch. go

Dennis Coleman

can sort Yes, it side? afternoon, see buy my you're about when if of that really there? these this CapEx? talk you release, about is taking that one of question. opportunities the What thanks is can the questions bit answering Good a M&A little big range you everyone. you on in And part My start, you about out I ways the guess talking because you're or press I for singled single other the that out question question, and

Michael Mears

participate and just the market We're about every space. in market, our always M&A active in the hits we that that's in process

include M&A. to any been for overpaying I development. too few As is based the I talk that equity the away our I've being to valuation Everything is said, regards not successful does destroying actually you not not we've And from thing. that's assets organic backlog when just When That view. about our high, discipline by of with of great projects, price in over there not value a risk perspective, run know, on past think referencing bad been our years. it the and walk gets

Dennis Coleman

trying Okay. look of Mike, backlog, as does is And it in prior it today, think again, was to maybe as ago? the compare mean, still year mean, about size. big it of to I opportunity you another terms years take it and set? a get a to swing it just as gauge bit at sort of I on two

Michael Mears

Yes.

Dennis Coleman

Okay. That's I all Thanks. have.

Operator

is from Keith Stanley next [Operator ahead. with Instructions] Wolfe Our Go Research. question

Keith Stanley

Harbor Hi, Corpus good at on an wondering you in export if was facility I update interest give Island. afternoon.

are with where on Just that? any things color

Michael Mears

Well, evaluating backlog would I we on those that That the to fall were rather project actively are regards that a with not being that much mentioned That mostly projects on an earlier. Christi standalone be development in independent the facility. other Corpus But be of to We're working we down a than of number Island. clear developing with under opportunities said, are Harbor developing is Corpus would a working opportunities list. third-parties – project independently project further our at Island.

Keith Stanley

Okay. And that's fill separate Red on in a if might another you about if question, talking about capital efficient third-party alternatives. specifically say mentioned that prepared one with as your you to be the pipeline a were you voyager to of remarks option capital that efficient third-party you Can more the Oak ups solutions? or it's talking

Michael Mears

as But to that who comment is. that think on point But comment a can't this this I is. there's we make at work. who something I with can't that real potential third-party to

Keith Stanley

you. Thank Okay.

Operator

those I Mears. call turn the moment. are for all have back the over And gentlemen, Mr. we the will questions to

Michael Mears

Well, Magellan great have and and interest in time are those all questions. I everyone's afternoon. Great. appreciate good a

Operator

rest our have of We conclude participation. your thank great conference does that for And you a Everyone for your day. call today.

may line. your disconnect You

Magellan Midstream Partners (MMP) 1 Aug 192019 Q2 Earnings call transcript