Our focus on inventory management, with new sales and operation planning initiatives drove a $34 million reduction in inventory year-to-date. CapEx was approximately $13 million during the second quarter of 2020, down from approximately $18 million last year. Last year’s results included $10 million in proceeds from the sale of a real estate property. Free cash flow in the second quarter was $63 million with cash conversion in excess of 100% of net income and 50% of EBITDA year-to-date. As previously announced, we completed the refinancing of our two-year term loan with a seven-year term loan that matures in 2031. We will continue to channel available cash to voluntary loan principal reductions. Year-to-date, we have made principal payments of approximately $65 million, which includes $45 million in voluntary principal payments in Q2, and we expect to continue to make meaningful voluntary payments in the back half of the year.
We ended the second quarter with a net debt-to-EBITDA ratio of 3.82 times. We remain confident in our ability to get to our targeted leverage level of 1.5 to 2.5 times by the end of fiscal 2026, despite the challenges with the calculated leverage for the back half of the year using our revised EBITDA margin guidance. We believe we will exit the year with a net debt-to-EBITDA leverage of approximately 4 times. As a reminder, our leverage covenant levels are 5.25 times through March of 2025 and reducing to 4.5 times on thereafter. Before I turn the call back over to Kim, I want to revisit the key drivers of our revised guidance on Slide 12. We now expect revenue to be down 1% to flat and adjusted EBITDA margin to be between 12% and 12.4%. From a revenue perspective, it’s important to note that lost business is not a factor in the lowering of our revenue guide.
Again, while we are absorbing losses from the prior year, current year retention is improving in line with our expectations. Pricing accounts for 250 basis points of the guidance reduction, reflecting the decision to moderate pricing in the second quarter and the back half of the year. Volume accounts for 225 basis points which represents the impact of lower-than-expected sales productivity in the year, while cross-selling has been strong, new customer wins have not met our expectations. We are expecting sales productivity in the back half of the year to be consistent with the first half of fiscal 2024. The 190 to 230 basis points decline in margin guidance is driven by the loss of leverage on lower pricing and volume in the year, partially offset by 45 months from cost performance actions as Kim previously discussed.
From a quarterly progression perspective, we expect revenues to decline sequentially from the second quarter to the third quarter. The decline is attributable to the progression of carryover losses as we move past final exit billings included in Q1 and Q2, offset by a sequential improvement in route sales. We will see direct sales decline approximately $4 million from the second quarter, which includes the impact of the lost direct sale national customer we previously disclosed. We expect Q4 revenue to be slightly higher than Q3 as the impact of net carryover losses moderate in the quarter. We expect the EBITDA margin in Q3 to decline sequentially with the loss of sales leverage. In addition, we expect incremental public company costs between $6 million to $8 million for the quarter as we near the exit of the TSA and in keeping with our estimate of $15 million to $18 million for the year.
And lastly, we expect Q4 margins will benefit from a lower level of incremental public company costs. With that, I’ll now turn the call back over to Kim for final remarks.
Kimberly Scott: Thanks, Rick. Before we open it up for questions, I also want to provide a quick update on our Chief Operating Officer search. We have engaged an external recruiting firm to support us with our search and are very pleased with the quality of candidates we have been presented and interviewed thus far. We are making progress with the search but also taking our time to ensure adequate due diligence to vet candidates and to ensure we find the right skill set and leadership style to support the advancement of our strategy and financial goals while also helping us solidify our desired performance-driven culture. Once the COO is in place, I will continue to work closely with the new leader and our commercial and operations teams to ensure no interruption in our performance as the new leader onboards and integrates into Vestis.
In closing, while today we shared that we are mobilized to address some short-term challenges that have resulted in an updated outlook for the year that is lower than expectations, we remain committed to our strategy and resolute in the opportunity to create value here at Vestis. We are building on our customer-first culture, by improving our service efficacy in order to strengthen customer loyalty and improve retention rates with our first priority aimed at protecting and growing the lifetime value of our customer base over the long-term. Our cross-sell logistics and operational initiatives are driving results. These teams are operating at a high level of performance, and we will go faster where we can to accelerate value creation in these areas.
We will continue to pursue our strategy, and we remain confident in our pathway to value creation. I want to thank you all again for joining us today, and we will now open the line for questions. Operator?
Operator: Thank you. [Operator Instructions] Our next question comes from Shlomo Rosenbaum with Stifel.
Shlomo Rosenbaum: Hi, good morning. Thank you for taking my questions. Hey Kim, could you explain to us what the service gaps are, just from a practical perspective, that are resulting in the decision to moderate the pricing? It sounds like this is a change that happened inter quarter, something was discovered that you didn’t necessarily see beforehand and significant enough that you feel that you need to make a change in the plans of pricing. Can you just give us some idea of what these service gaps are, how widespread they are? And how long do you think it’s going to take to fix them?
Kimberly Scott: Yes, hi Shlomo, thank you for your question. I appreciate you joining us today. So as we have been evaluating the lost business and really digging in to understand the root causes of that lost business, it’s led us back to service efficacy. So as we look at the causes for customer quits and the feedback that we’re receiving from them, we’re finding very specific areas we can action around. So we’re looking at on-time delivery, making sure that the load arrives to the customer at the time and on the day that it is expected. We’re implementing telematics. We’ve rolled out telematics across our fleet now, so that we can put processes in place to measure that delivery and ensure that, that delivery happens. So we expect that, that will continue to improve in the coming months, and we should see benefits from that in FY ’25 as the telematics have now been installed in the trucks, and now we’re building reporting and capability to use the insights from that data.
