John Wiley & Sons, Inc.

Good morning and welcome to Wiley's third quarter fiscal 2023 earnings call. As a reminder, this conference is being recorded. At this time, I'd like to introduce Wiley's Vice President of Investor Relations, Brian Campbell. Please go ahead.

Thank you and welcome, everyone. Joining me today are Brian Napak, Wiley's President and CEO, and Christina Van Tassel, Executive Vice President and CFO. A few notes to start. Our comments and responses to your questions reflect management's views as of today and will include forward-looking statements. Actual results may differ materially from those statements. The company does not undertake any obligation to update them to reflect subsequent events or circumstances. Also, Wiley provides non-GAAP measures as a supplement to evaluate underlying operating profitability and performance trends. These measures do not have standardized meanings prescribed by U.S. GAAP and therefore may not be comparable to similar measures used by other companies, nor should they be viewed as alternatives to measures under GAAP. Unless otherwise noted, we will refer to non-GAAP metrics on the call, and variances are on a year-over-year basis and will exclude the impact of currency. Additional information is included in our filings with the SEC. A copy of this presentation and transcript will be available on our Investor Relations webpage at investors.wiley.com. I'll now turn the call over to Brian Napak.

Hello, everyone, and thanks for joining us. First, I'll state the obvious. Wiley's Q3 results and revised full-year outlook are simply not what we expect to deliver to our shareholders. As you know, we've been navigating a mix of unpredictable macro and market-specific headwinds. High inflation, low consumer confidence, a tight job market, and ongoing geopolitical disruption have all taken a toll. And in our markets, we've seen demand pressure in education driven by lower consumer spending in university enrollment. Our results in research were challenged unexpectedly this quarter by our decision to pause publishing in a high-growth part of Hindawi, which I'll talk about later. All of these dynamics contributed to our revenue and earnings underperformance. Absent the pause in Hindawi, Wiley's core growth engines of research and talent remain strong. For the quarter, research revenue, excluding Hindawi, was up 2.4%. Our strategies remain tightly aligned with the trends driving the knowledge economy, and we're making good progress in executing them. We continue to see good demand for our transformational publishing models, and each quarter, we're adding dozens of corporate partners to our research solutions network. We're also seeing strong upsell demand from our existing solutions partners validating the overall research strategy. We will see this revenue opportunity begin to materialize in fiscal 24. Looking ahead, we're targeting substantial improvement in our performance and profit by reducing the drag of our own complexity and by improving our cost structure. We've made steady progress on simplification and optimization, including realigning our segments, restructuring parts of the organization, streamlining key processes, and reducing real estate. The actions we've taken already this year will yield run rate savings of over $60 million annually, and we're accelerating these efforts. We've talked in past calls about how a simpler Wiley is a better Wiley, and today Christina will talk about some of the things we're doing to address this. Notably, we've just divested the test prep business. It was non-strategic for Wiley and subscale, so we made the choice to exit. This was a small transaction, but it was a key step in our ongoing work to simplify the portfolio and focus our attention on our strategic growth areas. There's no sugarcoating it. Q3 was a disappointing quarter in a challenging and unpredictable year. We need to deliver better results and accelerate the operational improvement work already underway. I'm fully confident in our future and why we will continue to make the moves needed to drive consistent performance and increasing profitability. As we reported last quarter, we've now realigned our education segments around the customer. The new segments, academic and talent, replace the former academic and professional learning and education services segments. The goal of this realignment is to better serve the customer. and to do so more efficiently by aligning product development, go-to-market, and infrastructure. This will help us to unlock synergy while eliminating overlap and redundancy in our processes and in our systems. Our new academic segment consists of two business lines, academic publishing and university services. Overall, academic is focused on helping universities succeed by leveraging Wiley's full suite of content, platforms, and services. Academic generated an 18% EBITDA margin year-to-date, which is down from last year's 23% due to the effect of market headwinds on revenue. Also, Academic derived 62% of its revenue year-to-date from digital products and tech-enabled services. The talent segment includes our talent development and corporate training areas. In talent, Wiley is focused on helping employers succeed by delivering all of Wiley's training, sourcing, and upskilling solutions. Year to date, talent's EBITDA margin was 21% and 97% of its revenue came from digital products and services. Our research segment is unchanged. In research, we were already aligned with the customer, serving researchers and universities with research publishing, and serving corporations and other players in the research ecosystem with research solutions. Overall, research reported a 34% EBITDA margin year to date, and 95% of its revenue came from digital products and services. Okay, so let's turn to the detail of our third quarter performance, which was affected by two significant issues that we will talk about in detail. These are the continuing headwinds in academic and the pause of a Hindawi publishing program known as Special Issues. The publishing delays caused by this pause significantly impacted Q3 results and our Q4 growth expectations. As we review our financials, please note that, as always, variances exclude currency impact. Wiley's revenue for the quarter decreased by 2% due to the declines in our academic publishing, university services, and research publishing lines for the reasons discussed earlier. Christina will provide further details on our segment level performance. Our GAAP EPS was a loss of 129, mainly due to a non-cash goodwill impairment to our former education services segment and current university services line, totaling $100 million. This is $1.69 per share. This charge reflects the continued enrollment headwinds we're seeing in higher ed, rising interest rates, and lower market multiples. The gap loss also reflected restructuring charges related to the closure of our tech center in Russia. Adjusted EBITDA declined 3%, mainly due to revenue performance, offsetting corporate expense savings of $14 million. Our adjusted EBITDA margin for the quarter was 19.9% compared to 19.3% in the prior year. Adjusted EPS declined 9%, primarily due to revenue performance and $7 million of additional interest expense compared to prior year. Let me speak to the year-to-date headwinds in the academic market, which has been a struggle to predict this year. There are several components. First, academic publishing has been challenged all year by the pullback in discretionary consumer spending, notably affecting demand for our professional publishing. but also affecting academic content and courseware. Within academic, professional publishing was particularly challenged in Q3. It is our most consumer dependent line of business. Second, we've continued to see key online retailers adjusting their inventory practices, abruptly lowering their inventory levels at different times during the year. This is a typical, albeit unpredictable response by retailers in challenging economic moments. Third, higher education enrollment continues to be challenged by the continuing strength of the labor market, as would-be students gravitate directly to jobs rather than going to school for a degree. This factor has been persistent through the year, affecting both our university services and academic publishing lines. As the economy slows, much of this should reverse, but there is historically a 12- to 18-month lag between the start of a recession and a material increase in university enrollment. Finally, you may know that universities are now under significant financial stress due to issues with enrollment and funding. This has put pressure on the pricing of revenue share agreements and the demand for fee-for-service work. We continue to work with our long-term partners to solve for their challenges, and internally we're tailoring our offerings and right-sizing our cost structure to ensure healthy returns. Nonetheless, these pressures have impacted our year-over-year performance. We are confident that most of these headwinds are cyclical and thus temporary. Now, let's talk about the unexpected event at Hindawi, the open research publisher we acquired in January of 2021. In Q3, we temporarily suspended a fast-growing publishing program at Hindawi known as Special Issues. Special Issues are topic-specific issues of research journals. At Hindawi, these Special Issues are assembled and edited by external guest editors who are from the field and chosen for their specific expertise and position. In this case, we noticed misconduct in certain special issues under certain editors in which compromised papers were being submitted and accepted. To be clear, this was being done by non-Wiley editors and reviewers. Upon discovery, the Wiley team responded quickly, suspending the Hindawi Special Issues Program and fixing the source of the problem by purging the external bad actors and by implementing measures to prevent this from happening again. To date, these actions include increasing editorial controls and introducing new AI-based screening tools into the editorial process. We've also been scrubbing the archive and publicly retracting any compromised articles. This situation is disappointing to say the least, and it is consequential for the year. The current projected impact to our full-year outlook is up to $30 million in revenue and up to $25 million in adjusted EBITDA. Looking ahead, we expect this issue to have some impact on Hindawi submissions and publications in fiscal 24 due to the article backlog that has accumulated and the potential impact on the affected Hindawi journal brands. To state the obvious, we take this issue and all issues like it very seriously, and Wiley will do whatever is needed to protect the value of our brands and the integrity of the scholarly record. This includes proactively sharing our findings and best practices with the rest of the industry and working together to stop anyone from undermining the value of published scientific research. Continuing with research, Let's talk about how we're doing on our strategic and operational commitments for fiscal year 23. Our first commitment in research is to publish more to meet global demand and drive revenue. Unfortunately, the interruption of the Hindawi special issues drove lower volumes this quarter, with article submissions and publishing output both down 7%. Year-to-date, overall submissions were up 2%, with output down 4%. Notably, if we set aside the Hindawi publishing pause, OA submissions and output were up 10% and 4% year-to-date. So, demand to publish with Wiley, as always, remains solid. Beyond this, we're making very good progress on our publishing productivity goals, such as the referral rate of rejected articles from one Wiley journal to another. This is key since there was always pent-up demand to publish in Wiley journals. 70% of submitted articles are rejected by Wiley, mostly due to improper fit, not article quality. Increasingly, we're finding homes for these articles within our expansive journal portfolio. Year-to-date, 63% of rejected authors were offered another Wiley option to publish, up from 49% the prior year period. This is a great low-cost driver of consistent volume and revenue growth. We continue to make very good progress on transformational agreements, signing initial multi-year agreements in India, the Czech Republic, Hong Kong, and our first countrywide agreement in Canada. In the U.S., we signed new deals with Princeton, NYU, and Texas A&M. We also signed an important multi-year renewal in Japan, expanding it from four to 18 institutions. To date, Wiley has signed over 60 of these agreements, representing thousands of institutions in 23 countries. Looking ahead, the pipeline remains strong, and this is foundational to our research strategy. In Research Solutions, we signed 20 new partners in the quarter. This group includes leading academic societies, not-for-profits, and corporations. We also signed another major publishing peer, and they now subscribe to multiple Wiley services. To refresh, Wiley Research Solutions delivers the critical platforms and tech-enabled services that publishers, companies, and institutions need to succeed in the open research economy. Notably, upsells continue to accelerate across our Wiley network of over 900 partners, validating the scalability of our solution strategy. We signed 18 upsells deals this quarter. Notable wins include a career center partnership with a prominent scientific organization, a platform partnership with the world's largest technical society, and an education hub partnership for a major national medical association. The partner solution strategy has material revenue and profit potential, and we're very excited about the way that it is developing. We're working through some unusual challenges in research this year, but our strategy continues to be supported by favorable long-term trends and a very strong competitive position. Wiley has one of the world's leading journal portfolio brands, the industry's leading content distribution platform, and a large network of partners supporting our strategic direction. Let's turn to how we're doing with our key initiatives in career-connected education. As a reminder, We said we would expand our corporate and university client bases, and we are. We're making especially good progress in growing our corporate partner network. This quarter, we signed another five clients for Wiley Edge, our talent development brand. This included major multinationals in energy, consumer goods, information, and financial services. And the client pipeline remains very healthy. For our existing clients, we saw continued double-digit growth in employee placements through Wiley Edge. While demand has been strong through Q3, we continue to watch for hiring slowdowns given the challenging economic climate and the reported pullback in tech hiring. That said, there remains a long-term shortage of technology and digital business professionals in nearly every industry. And a recent survey shows that 80% of managers say they plan to increase their technology talent budget in 2023 to meet increasing digital demands. So the big long-term opportunity for Wiley is solid. Wiley continues to be an important strategic partner to universities. We recently signed a partnership with Columbia University School of Engineering and Applied Science to deliver engineering certificates to all Wiley Edge graduates. This is an exciting example of Wiley using its unique position in both academic and corporate education to bridge the talent gap and drive growth. We are very proud to be in partnership with Columbia, one of the world's preeminent academic institutions. Within our existing partner base, we added four new degree programs for a total of 60 new programs year to date. After the quarter closed, we added three new schools at Ohio University. This included 16 new degree programs and nine new certifications. While market-related enrollment issues remain, we continue to see demand from institutions for our gold standard university services. Turning to digital courseware, we continue to see good momentum, even in a challenging market environment. Our XyBooks courseware saw growth of 31% this quarter with strong institutional demand, especially from some of the most innovative and fastest growing universities. We launched new courseware solutions in information technology and in quantitative reasoning, and we signed large courses in STEM disciplines with national and regional institutions. XyBooks is a good example of widely finding success through focus and differentiation. In summary, Despite the macroeconomic and market headwinds, we continue to execute well on our commitments. I'm now going to pass the call over to Christina to talk about our results, our outlook, and how we're accelerating our Pan-Wiley simplification and optimization efforts, which we will outline in more detail in June.

Thank you, Brian. We are obviously disappointed by our results this quarter and our revised outlook. It has been a highly unusual and unpredictable time for Wiley on several fronts. We have a path forward and we're moving with urgency and focus. Let's begin with our segment performance, starting with research. Research publishing revenue declined 3% this quarter, primarily due to the Hindawi special issues pause. As Brian noted, we continue to execute on our strategy to convert legacy read-only models to our transformational read and publish models. while building on our cascade strategy of finding rejected articles another, more appropriate home within the Wiley portfolio. Research solutions revenue rose 6% or 4% organically, driven by our platform services and science databases. We continue to make great progress here in expanding our partnership network, signing 77 society and corporate partners for services ranging from research consulting and production to delivery platforms, corporate events, and education. An important note here, it does take time to onboard these partners. So in many cases, the revenue from these signings will not materialize until fiscal year 24. Solutions is a growth driver for us, and so in Q2, we increased our investment in this space. Adjusted EBITDA and research declined 7%, primarily due to the Hindawi revenue decline, and investments to expand our editorial capabilities and scale our solutions offerings to meet partner demand. A quick note, the unusually strong currency fluctuations this year brought to light that our adjusted EBITDA in research was being adversely impacted by royalty expenses denominated in British pounds but derived from U.S. dollar revenue. We normalized for this FX impact, resulting in an adjusted EBITDA benefit of $2 million for this quarter. We also amended Q1 and Q2 adjusted EBITDA by $3 million each quarter. The currency impact was insignificant in prior year. We believe this change more adequately reflects our true operating performance. Year to date, research revenue was up 2% while adjusted EBITDA was down 5%. Our adjusted EBITDA margin was 33.9% through nine months versus 35.6% in the prior period. This is primarily due to the in-year investment to scale research solutions. Let's turn to academic. The current environment remains challenging. Academic publishing revenue was down 8%, driven by declines in both print and e-books. Digital courseware remains a bright spot, with Xibook's revenue growing over 30%, with strong institutional demand and large course wins in STEM and business disciplines. University services revenue declined 11%, driven by ongoing enrollment headwinds and lower revenue share in our long-term renewals. Spring enrollment in our programs was lower than anticipated, down 6%. We recorded a material impairment for university services this quarter due to the market-related challenges we've been discussing. Adjusted EBITDA was down 20%, mainly due to the revenue decline. Year-to-date, academic revenue was down 9%, and adjusted EBITDA was down 27%. Our adjusted EBITDA margin was 18.3% through nine months, versus 22.9% in the prior year period. While margins are down mainly due to the revenue performance and mix, we have made good progress this year in reducing our expense base. And as Brian noted, we divested our test prep business and will continue to identify additional cost savings and operational improvements. Let's turn to talent, where we saw good growth in talent development and corporate training. Revenue for the quarter was up 18% driven by strong placement and robust volume in our assessment and learning solutions. As mentioned, Wiley Edge added five new multinational corporate clients this quarter and grew placements by 38% over prior year. Let me say a few words about our corporate training line. This has been a consistent performer and contributor to Wiley. Before COVID, our training was largely done in person. COVID forced it online, and now it's even more compelling as a hybrid solution. Here, we're providing high-demand soft skills training and workplace assessment tools. They are delivered to employees through digital platforms and through an authorized distributor network of independent consultants, trainers, and coaches. Our brands include EverythingDisc, The 5 Behaviors, Leadership Practices Inventory, as well as pre-hire assessment tool called PXT Select. These solutions help organizations hire and develop highly effective managers, leaders, and teams. Companies continuously invest in team development, so it remains a strong growth engine with very attractive margins. Back to our results in talent. Adjusted EBITDA for the quarter was down 2% due to investments to scale talent development and from inflationary pressure on placement costs. Year to date, Talent revenue rose 28% and adjusted EBITDA 21%. Our adjusted EBITDA margin was 21.2% through nine months versus 22% in the prior year period. Now let's review our financial position. Free cash flow year to date with a use of $22 million versus a prior year source of $77 million. The large variance reflects quarter-to-quarter working capital fluctuation, lower cash earnings, and restructuring payments. The latter is related to targeted workforce reductions and real estate optimization. Importantly, we expect the working capital timing issues to resolve in Q4. We'll talk about our cash flow outlook on the next slide. CapEx was $75 million through nine months, $6 million lower than prior year, and there were no material acquisitions. We remain active but patient on the acquisition front, primarily focused on adding scale and capabilities in research. As of January, we had $126 million of cash on hand and undrawn revolving credit of $553 million. As a reminder, we amended a revolving credit agreement in Q2 to extend more than $1.3 billion in credit capacity through November of 2027. with approximately $200 million in existing credit commitments to remain at the current maturity date of May 2024. Our total credit facility size remains at $1.5 billion. Net debt to EBITDA ratio was 2.1 at the end of January compared to 1.9 in the prior year. Finally, we allocated $58 million year-to-date to dividends and $24 million to share purchases on par with prior year. Our current dividend yield is over 3%, and we've acquired 540,000 shares at an average cost of $44.47 per share. On to our outlook. In Q2, we began to see material headwinds in academic, namely enrollment and consumer spending. As a reminder, We revised our revenue guidance downward in December, given what we knew then. At that time, we also reaffirmed adjusted EBITDA and free cash flow and guided towards the lower end of the range for adjusted EPS. In Q3, academic headwinds were worse than expected, driven by the combination of macroeconomic challenges and the strong labor market's impact on enrollment. In addition, the Q3 emergence of the Hindawi publishing interruption has pulled down our full year expectation by up to $30 million in revenue and up to $25 million in EBITDA. With these unexpected challenges in Q3 and Q4, we are taking our revenue outlook down by an additional $45 to $60 million. This leads us to reduce our adjusted EBITDA guidance by $30 to $40 million to a range of $395 to $410 million. We're lowering our adjusted EPS outlook by 40 to 50 cents to a range of $3.30 to $3.55. This reflects lower projected EBITDA and higher interest expense. Finally, we're lowering our free cash flow outlook to a range of $160 million to $185 million. The primary drivers are lower projected cash earnings and higher payments for restructuring. particularly the closing of our tech development center in Russia. Our CapEx range remains $110 to $120 million. In terms of FX impact on our outlook, currency is a $60 million headwind at the revenue line. Since most of our global business is denominated in U.S. dollars and given our large expense base in Europe, we remain largely self-hedged from an earnings and cash flow standpoint. Onto our critical simplification and business optimization work. We are well underway in our multifaceted multi-year plans. Our objective is to drive both performance and profitability and our plans are built on the ongoing review and active rationalization of our business portfolio. Our commitment is to focus widely on its core growth and profit engines while improving the economics of our product and consumer portfolios. Beyond just realigning our segments, we continue to reallocate investment to our best growth and profit opportunities, such as those in research and talent, and prune our portfolio where it makes the most sense. We recently restructured parts of education, right-sizing them to reflect the market realities and generating important savings. As noted, we recently sold our test prep business with further reviews underway. Organizationally, the alignment of our segments is improving both the speed and execution while eliminating redundancy and waste. Around the company, we are streamlining our core processes and workflows with tech-enabled solutions. One example of this is the reengineering of our highly strategic but costly area of research content development and publication. This initiative is enhancing our publication process end-to-end by driving automation and intelligence from submission to publication. As a result, we can significantly reduce the cost and labor intensity of the whole process while increasing quality, data, capacity, speed, and customer engagement. It's early days here, but we are encouraged by our progress to date, and we're already starting to share these advances as solutions to our clients. On the restructuring front, we recorded a $9 million charge in Q3 stemming from the official closure of our Russia Tech Development Center. Our year-to-date restructuring charges total $45 million. Elsewhere, we've continued to reduce our global office footprint by 22% this year and a third since 2020. Combined, these actions are expected to yield a run rate savings of approximately $60 million. $30 million of that is expected this fiscal year and is reflected in our current outlook. We will continue to identify permanent cost savings as we relentlessly focus on operational excellence. All of this is freeing up capital to support both improved profit and growth. While our margins have declined this year due to revenue shortfalls and investments in research solutions and talent, we've also made steady progress in our optimization efforts. We see many opportunities to expand this program and have engaged outside advisors to help identify additional improvements that will drive future performance and materially increase our operating margin over time. We'll update you further on our progress in June. And with that, I'll pass the call back to Brian.

Thanks, Christina. Let me quickly summarize the key takeaways for the quarter before we go on to Q&A. Above all, our Q3 results in full-year outlook were below expectations and simply not good enough. Like many, we're facing strong and unusual market headwinds this year, and these unexpectedly increased in the quarter, especially in education. Add to this the publishing pause in a high-growth program in research, and the result is a surprising and unsatisfactory quarter and lower expectations for the year. We're committed to meaningfully improving Wiley's performance and profitability and are both executing and accelerating our simplification and optimization plans. We'll provide more detail on this in June. And as always, Wiley's strong balance sheet and annual cash flow continue to allow us to reinvest in profitable growth while also rewarding long-term shareholders with dividends and share repurchases. All that said, we are very confident in Wiley's future. Our core growth engines are strong, our strategies remain well aligned with the long-term positive market trends, and we continue to execute our strategic commitments. Today's unusual environment demands that we act decisively to fuel our best opportunities while also driving structural and operational improvements that ensure we grow more profitably. We expect to share meaningful progress in the quarters to come as we make our way to our October Investor Day. As always, I want to thank our colleagues around the world for their exceptional efforts and continued execution through this very challenging period. This global team's steadfast commitment to our mission, our customers, and our colleagues is simply remarkable. This community is special, and I'm thankful to be part of it. With that, I'll now open the floor to any comments and questions.

Thank you. If you would like to ask a question on the phone lines today, you can press star 1 on your telephone keypad, And to remove yourself from the queue, that is star 1 again. We'll take our questions from Daniel Moore with CJS Securities.

Thank you. Good morning. Thanks for taking the questions, Brian and Christina. There's a lot to unpack. I'm going to focus on Hindawi 1 and some of the cost restructuring and how that might drive a rebound in profitability too. Starting with Hindawi, the $30 million revenue impact for fiscal 23, $25 million in EBITDA is very helpful. What would Hindawi revenue have been without the impact for the full year? In other words, what are special issue programs kind of as a percentage of Hindawi on a run rate basis today?

Yeah, we were on track to achieve about $85 million in revenue with Hindawi. The special issue program is a significant part of the Hindawi program. It's been very successful for us. And that represents over half of Hindawi's revenue for the year. So it's important to know that when we shut this down, which we did because we had to protect the integrity of our brands and needed to get ahead of it, we were also putting the pause on a significant part of the program. Of course, only a small part of that was actually affected of the Hindawi program, but we needed to clamp down.

Makes sense. And then just of the $30 and $25 million, maybe you gave it, I apologize, just trying to cut it up between Q3 and Q4, what was the impact on revenue and EBITDA in Q3? And then I can imply the remainder for Q4.

I can take that. Hey, Dan, the impact on Q3 was approximately $15 million. Yeah.

$15 million revenue?

Yeah, about half and half, yeah.

Got it. And about half and half, the same for EBITDA?

Yeah, yes.

Perfect. Okay. So just talk, Brian, to the, you know, the two to three year, I guess, is there a timeframe or a pathway to backfilling that? You know, recognizing it might spill into 24, but has the two to three year revenue and EBITDA outlook for Hendawi been impaired in your view?

Well, I mean, look, the answer is we're still unpacking, and I'm not going to provide forward projections for Hindawi or for the business overall. We'll be very happy to talk about all that in June. But this issue relates to this specific program. We put the fixes in place. We feel very good about what we've done. We're reopening the programs, and we're moving forward to clear the backlog and and drive forward with our publishing program. As you know, the underlying trends in open access and in research publishing remain really strong due to consistent funding levels, as we always say, and also due to continuing growth in output in research. There is no reason to believe that that consistent demand will not translate into growth rates in open access consistent with what we've seen before. And as you know, Wiley continues to gain more than its share due to our strong brands and our really successful and aggressive posture toward open access. So we expect to get back to that trajectory, but right now I'm not going to talk about exactly the timing thereof. I'll be happy to. But again, just to be clear, We stanched the problem. We shut down the program. We're now reopening again. So you can look at this as a temporary speed bump rather than anything that affects our long-term trajectory.

Very helpful. And then maybe can you provide, as it relates to, I think last quarter was $50 million in run rate cost savings up to $60 million, any more specificity in terms of the biggest buckets of those cost savings, you know, personnel versus platforms, just, you know, kind of how we break those up. And I'm assuming about half of the $60 million falls in 23 with the remainder in 24. Is that, for 24, is that earmarked for profitability? Do you see some of that being reinvested? Just trying to get a sense for how quickly we can rebound in terms of margins and profitability. Thanks.

Sure. I'll take that one, Dan. Thanks.

Approximately half of that restructuring is people-related costs, and the other half are things like real estate and other measures. And yes, for next year, of the $60 million run rate, we have $30 million this year and $30 million in the future. And we are in the process of, you know, in our planning and our, you know, our guidance and all of that, looking at how much of that we do want to reinvest and how much we want to, and obviously when we're reinvesting, we're looking to invest towards long-term margin accretion. and also how much you want to actually drop in the short term.

Yeah, and on top of that, I'll give a little bit more broad color. I did this pretty well in my prepared comments, but we are leaning in and accelerating our programs in both simplification and optimization. Uh, we feel very confident and, um, and, um, are seeing the evidence of the effectiveness of our strategies and we're executing against them, like we always said, but we're not comfortable with the way yet that we're converting that into cash and profitability. And so these programs are, are right now being accelerated and we're looking forward to talking to you more about that, uh, in June, um, as we, uh, as we flesh out those plans and lock in those, um, you know, what's going to come in terms of savings and when. Some of which, of course, will be in 24, but a lot of it will be in the longer term as we move forward.

Understood. I will jump back with any follow-ups. Thank you for the call. As a reminder, everyone, that is star 1 to ask a question. All right, and there are no further questions.

I would like to turn the call back over to Mr. Napak.

All right, look, thanks for joining the call today. I think it was a good call. We look forward to sharing Q4 and full year results in June and having a good, rich, and robust discussion then. Until then, again, thank you very much for attending.

And that does conclude today's presentation. Thank you for your participation, and you may now disconnect.