Operator: Your next question comes from the line of Kannan Venkateshwar with Barclays.
Kannan Venkateshwar: Maybe one question on free cash flow. I mean the cash flow numbers are obviously very impressive for the quarter as well as the guidance for Q3. So Gunnar, could you help us understand the working capital tailwinds I mean the sources of those? And as you look beyond this year, to what extent can you keep harvesting that cash flow? And as you get to next year, you obviously have the cash cost going down of integration and then you have interest costs going down but then you have offsets potentially in the form of advertising or programming costs going up and DTC getting back to growth. So could you talk about those trade-offs as you look beyond this year in terms of free cash flow growth drivers and what they could look like in ’24?
Gunnar Wiedenfels: Sure. So let me start with the floors and I quickly went through them in my prepared remarks earlier. But again, the most important point is it’s coming in across the entire cash flow statement. And we have talked about this in the past, cash was never an objective in 3/4 of this company. And so when we went in and looked at the enormous amount of uncollected receivables, the enormous delays and even sending out invoices, the willingness to just pay our suppliers before even payments are due, it was just never a focus area. The discussion of a 10% margin business or a project, is that a good project? Could be but it could be a bad project if it takes 3 or 4 years to get the cash in after you deploy the capital.
So those are all factors. And that are reflective of a mindset shift across the company. And importantly, I do also want to point out because we sometimes get the question on the securitization facility, we’ve said a number of times we’re not intending to make that a major driver of free cash flow. It hasn’t been a factor this quarter or year-to-date. And again, we’re not expecting this to be a major driver. It might fluctuate on a quarter-by-quarter basis but it’s not included in a positive or negative way in any of our guidance. And so looking beyond 2023 into the future, you’re asking the question, how is this going to develop from here. I do think that we have multiple bites at the apple ahead still from a working capital perspective. We’re really just getting started and we’re really still working with an incomplete instrumentation from a systems perspective.
So there’s a lot more for us to do. You’ve also gone through a number of the underlying positive drivers here, cost to achieve is going to come down and, Kannan, I realize I forgot to answer your question. So we had guided to $1 billion to $1.5 billion in cost to achieve. We’re going to be, as we said before, probably tilt the upper end of it. But $1.2 billion of that is going to flow through this year and then it’s going to come down. Over time, interest is going to come down and CapEx is going to come down. We have a slightly elevated CapEx level as part of our transformation focus here, putting new systems in place, supporting JB’s development, Max platform, et cetera. So that’s going to be a positive driver as well. And then we’ll see how we do on the P&L.
Again, we’ve put ourselves in a position to really get behind all 3 of our businesses. and we’ll update you as we get through to 2024. But there’s definitely enormous opportunity and I do not view this as sort of a onetime bump. We’re changing the way we’re operating the company and we’re changing the cash generation profile of this company. By the way, fully in line with what we’ve always said, longer term, we should be operating at a 60% cash conversion rate.
Operator: Your next question comes from the line of Brett Feldman with Goldman Sachs.
Brett Feldman: And thanks for some of the help in terms of how to think about DTC segment EBITDA as we move ahead. I was hoping you could spend a little time talking about how we should be thinking about revenue in that segment. In particular, the key puts and takes around the net add volumes as you sort of move past the U.S. launch and start to move into international markets. And I’d also be curious for your updated thoughts on the balance between driving growth through pricing and ARPU versus focusing on volume.