Q3 2025 Cengage Learning Holdings II Inc Earnings Call
Question and answer session will follow the formal presentation, if anyone should require operator assistance. During the conference. Please press star zero on your telephone keypad. Please note. This conference is being recorded I will now turn the conference over to your host Richard Vice Sir the floor is yours.
Speaker Change: Good morning.
Speaker Change: And welcome to Cengage group's fiscal 2025 third quarter Investor update.
Speaker Change: Joining me on the call are Michael Hanson, Chief Executive Officer and Bob.
Speaker Change: Bob Munroe Chief Financial Officer.
Speaker Change: A copy of the slide presentation for today's call has been posted to the company's website at Cengage group Dotcom forward slash investors.
Speaker Change: The following discussion contains forward looking statements within the safe Harbor provisions of the U S. Private Securities Litigation Reform Act of 1995.
Speaker Change: Such forward looking statements can be identified by words such as believe.
Speaker Change: That may.
Speaker Change: Will.
Speaker Change: Estimate likely and similar words and are neither historical facts, nor assurances of future performance and relate to future results and events and they are based on cengage group's current expectations and assumptions.
Greetings, welcome to the send gauge group's third quarter, fiscal year 2025 conference call. At this time, all participants are in a listen
A question and answer.
Speaker Change: Because forward looking statements relate to the future.
Speaker Change: They are subject to inherent uncertainties risks and changes in circumstances that are difficult to predict and many of which are outside of our control.
Speaker Change: Many factors could cause our actual results and financial condition to differ materially from those indicated in the forward looking statements.
Presentation, greetings if anyone welcome to should require to send gate operator, groups service assistance quarter during the conference school year, please 2020, press stores, 25 0 on your conference. Call telephone key pad at this time please name all parts. This conference has been RNA, recorded and only mode. I will now turn the call for a question over to you and answer your host session with Richard, follow the formal vice president, the floor should require operator assistance during the
Speaker Change: You should consider such factors many of which are subject to the risks and uncertainties discussed in our slide presentation, which accompanies this call and in the risk factors section of our fiscal 2020. When we report for the year ended March 31, 2024 as may be updated by our quarterly reports for fiscal 2025.
The conference, please press star zero. Good morning on your telephone keypad and welcome to engage group. Please note this fiscal. This conference is 2025.
Third quarter over to you, your host shorty, give me on the call on Michael Hansen. The floor is yours, executive officer.
And Bob Monroe, Chief Financial Officer.
Good morning.
A copy of this and welcome to slide presentation groups. Fiscal for today's call, 201225 has been posted to third quarter and the company's website.
Any forward looking statements made in this presentation is based on currently available information.
At Sage group.com joining me on the call forward slash Michael hash investor.
She?
Executive officer officer.
Speaker Change: The company disclaims any obligation to publicly update or revise any forward looking statements, except as required by law.
The following discussion. Bob change forward, looking Financial offering statements within the safe harbor. Provisions of the copy of the US. Private the slide president, private security stations, living days for today, should reformat this call has been 1990 posted to the 5 companies website.
Speaker Change: On today's call and in our slide presentation, we will refer to certain non-GAAP financial measures.
Such forward-looking Stage Group statements can be identified by words such as belief.
Expect.
Speaker Change: Definitions and the rationale for using these measures.
Speaker Change: And reconciliations of each to its most directly comparable GAAP financial measure are provided in the appendix to the slide presentation.
May the following discussion will contains forward within the site daily orbit and similar visions of the u words as privacy and neither has litigation or political facts, reformats, nor Act, assurances of 1996 performance.
Michael: I will now turn the call over to Michael for an update on the business.
And relate to future with such forward-looking results in a very statement and they they are based on notified, brownie records. That group's current expectation. Leave.
An assumption spec.
Michael: Followed by Bob who will take you through the third quarter and year to date details before we open the call for questions.
To the estimate, the future.
Michael: Michael.
Like are subject and risks changes are difficult.
Michael: Thank you Richard and good morning, everyone.
And many of which are the future of our results, an event.
Michael: Thanks for joining us today for our fiscal year 2025 third quarter Investor call.
and they are many age groups, could actual vacations, adults and conditions to different material from those indicate to the Future,
Michael: I'm pleased to provide you with an update on our business and our outlook for the future.
There are subjects, you should consider, in fact.
Michael: At the close of our third quarter, we are on track to deliver a fourth consecutive year of solid revenue and EBITDA growth for fiscal year 2025.
Change to the risk is in circumstance. That if it's discussed in the next slide presentation, which are of which
Michael: The seasonality of our business is apparent in our year to date results for the period ended December 31st with adjusted cash revenues flat in.
In the risk factor SE, many of our figures are 2020, actual annual worlds and conditions for the year, ended period of March, 3020 indicated or and then the for as maybe up the updated by our quarterly reports for consider such factors in 205 many of which are subject to the risks. Any
Michael: And adjusted cash EBITDA growing 11%.
Michael: Trailing 12 month results for the period ending December 31st a more useful when considering seasonality and more in line with our full year guidance with adjusted cash revenues increasing 2%.
An uncertainty looking State discussed the statement made in this in the slide. Press presentation. Presentation is based on companies, this call currently available information and then the risk information Factor second section of our business account 2025, any disclaims, my annual, any obligation to public for the yearly update, or ended more or less. First 204 looking for statements as made except to be updated as required by our Courts for fiscal 2020. On today's call,
And added on a slide education forward looking. We will refer to statement made a certain non in this present. Gaap technician is based on current Financial measures currently available information.
Michael: And adjusted cash EBITDA growing 13%.
Michael: Our businesses are performing well.
Michael: And we are confident in our ability to deliver our guidance through the final quarter of this fiscal year.
The commissions and the revenue. Displayed rationale for use, any of us using these navigation, to pleasure to update, or revise, any, for reconciling stations of agents to its most, except as required by directly to law comparable. Gaap on today's call Financial medals and it provided my presentation. In the pension, we will fix start to certain of the slide press non-GAAP presentation Financial measures.
I will now turn the definition of the call over and around Michael for you and update on using these measure business.
Michael: One contributor to our solid financial results.
Michael: The cost savings and efficiency program, we started more than a year ago, which is now substantially execute it.
And reconciled by each to its will take you through the third quarter, comparer and year to date, gaap details Financial before. We open measure up in the call for provided, any questions in the appendant to Mike the slide presentation.
Thank you.
Good morning, everyone.
Michael: Through this program, we simplified our operations, enabling strong EBITDA expansion.
Michael: Building upon the strong foundation, we will continue our focus on cost discipline, while deepening investment in key capabilities that will further differentiate cengage group from its competitors.
An update on the business. Thanks for joining us today. Followed by for our school year, it will take you through 2025, to the third quarter, the quarter and year to date. Investor call detail. Before we open the call, please call for questions to provide you with an update on our Michael business.
And our outlooks for the future. Thank you, Richard and
Good morning everyone at the close.
Michael: We will share more details on these areas of differentiation in the coming quarters.
Of our third quarter. Joining us, we are a for our on track 2023 Force 5 consecutive, third quarter year of Sir, invest solid Revenue. Call, can you and Ebe growth for I'm pleased to invite you on our business.
Michael: Looking ahead, we are committed to further driving revenue and EBITDA growth as we laid plans for fiscal year 2026.
And this is an Li of our outlook for business is a part of the future parents.
In our year to date res for the at the clock, period, and the of December of our third, 31st quarter.
Michael: We anticipate that it will be our fifth consecutive year of revenue and EBITDA growth with continued margin expansion.
Michael: Our financial results have enabled many new investments in our business and operations, including acquisitions partnership expansions and AI investments covering both internal efficiencies.
We are with adjusted contract to a 4 flat consecutive year and the Justice cash solid Revenue, the dark grow and growing 11% for fiscal year. 2020 5 failing 12 months results for the this period ending seasonality of our business. December 31st are more year in our useful year to date. When considering for the period seasonality and the disease December 31st and March 1st are more in line with line without adjusting our full year guidance, Revenue within flat, just it cash revenue and adjustments. Increasing this 10% growing and that lasted 10%, even without growing.
13.
Michael: And product enhancements.
Michael: Starting with the internal efficiencies, we are leveraging select third party vendor offerings across our systems and platforms from salesforce to workday to enable greater productivity in our workforce such as in our content production operations.
Training 12 months results. However, the period business is up. Its ending faring. Well, this September 31st, and it was more your confident useful in our ability to consider deliveries guidance analysis through the final quarter and more of is more in last school year. Without a full year guidance, 1 contributor just to our test Revenue solely with in
Financial results sent.
Is the just saving cash and efficiency without the wrong program. We start more than a year ago.
Which is our business. Now, this is a substantial forming while we execute it.
And we are.
Confident in our through this to the program.
In addition, we are investing in automation to drive internal efficiencies like in AI powered search with products such as Antonio to improve the availability of product and customer information to sales and marketing teams and reduce the effort required to find answers to day to day.
We decide.
After all the operational. Quarters is enabling the school year, strong.
Even.
Expansion.
To Alice billing and financial with the strong results, Foundation.
Well, many year of deepening involvement, which is in Keys. Now capability, we execute that will further differentiate.
Through this group.
From it, which simplifies our operations.
Michael: Yes.
Michael: We believe these tools will significantly increase productivity of our go to market teams.
Enables areas of differentiation in the coming building upon this strong Foundation.
We will.
Focus.
Michael: Shifting to generative AI powered product enhancements.
We are committed to.
Driving deepening in Revenue Investments that grow capable facilities.
Michael: In August we announced beta testing of our journey I enabled student assistant to empower students and personalized learning.
as we relate, that plans will further what you think, what is
Its competence page that it will be our, we will share more more.
Michael: Based on the success of these beta tests, we have now expanded the student assistance to other courses and added features that allow students to provide feedback on AI responses.
Coming quarter with continued margin.
Investments in our business, including acquisition.
Partnership expansion date.
We are committed to deploying at scale Jenny high powered product enhancements and will do so in a disciplined way to ensure that we are getting an appropriate return on our investments.
And investment for Cal.
And use margin expansion.
Michael: We also continued to make other investments in our business to drive revenue growth.
Starting with the internal results and enable, we are leveraging selecting and Clash forms.
Michael: In January we announced the acquisition of visible body a leader in interactive three D models and software for the Sciences.
For the sales force to work day and night operations.
Michael: This acquisition enhances our science offerings.
Michael: Providing new mediums and interactive experiences to learners to engage and deepen their understanding of science content.
In addition, starting with the messaging and automation to draw a level in AI. Pause also,
To improve the availability of the productivity in our world.
Michael: The addition of visible body aligns with our commitment to help learners gain the skills and competencies they need to enter the workforce and grow in their careers.
Operation.
effort required addition to find information to drive internal efficient removing
Tools. Like,
Michael: We have also expanded our partnership with Big ideas learning ahead of future math adoptions in California and Florida.
For research, for of our country market Rio.
To improve the availability of May I follow in hand and marketing.
In August.
Michael: This partnership nurtured over many years is perfectly timed to support these important upcoming adoptions and further strengthen our position in these key markets.
We made reference.
Ai. And they would say, to me assistance,
To empower students.
Learn significantly increase.
Michael: In personnel news, we recently announced the transition of our CFO Bob Munroe.
We have now expanded the shifting to the general.
Teachers.
that allowing August, we now
Michael: Bob and I have worked together for many years at a few different companies.
On able to.
Michael: Since his arrival to join US at Cengage group nearly six years ago, Bob and his team have reshaped the finance function into a key enabler for our growth.
assist and we are committed to employing and scale personal in AI powered product enhancements on and will
So in that way.
We have to now.
That we are getting.
appropriate, we do our
features.
Michael: Thanks to Bob's leadership and vision Cengage group is on track to achieve its fourth consecutive year of revenue and profit growth.
That allow students. We also guided into make other inventory. I love business.
To drive Revenue growth.
Committed to the in January.
Michael: He has been instrumental in strengthening the company's balance sheet by progressively reducing debt and driving earnings growth by improving profit margins.
A leader. And
leading model that we are getting in the
acquisition of rings.
Michael: Additionally in partnership with his leadership team Bob transformed the finance function and established best practices that we are leveraging across our global business.
We also providing new mediums to make other Investments and interact with business experience.
To engage and in January, even there. We now spending of acquisition science Concepts Visible bodies.
The additional corrective.
The.
Alliance and software.
For the science.
Michael: Bob had expressed a desire to leave Cengage group for personal reasons and has remained committed to his role and his team until we could find a highly capable successor.
To help learn this in this acquisition and skills enhances, our incompetence science operates. They need to provide to the work for New Media and and interact growth of experience in their careers to learners
Dean Tinsley: Dean Tinsley.
Dean Tinsley: Dean has a depth of experience with large global publicly traded and privately held companies.
To engage and deepen, their understanding. We understanding of science. Also, expands content with our partnership, with the district ideas, a lot of visible bonding, the aligned ahead with our commitment of future. Mass adoption of Learners in California skills and the art and floor and competencies they need.
to end this part of
Dean Tinsley: He has extensive experience leading results driven teams as well as his background in the education and technology industries will be valuable to Cengage group as we embark on the next phase of our journey.
The workforce yet. No, and Richard over many people in their peers.
Is perfect. The time to support, we have these expanded important, our partnership upcoming it, with big learning and ahead, further strength of future. Now, position as adoption in these in California marketer in Florida.
This.
Partnership.
Speaker Change: He then Bob will work side by side for the next months and Dean will assume full responsibility as CFO as of March 1st.
In personal nurtured over non use years, we reached personally announcing the time. The position of support for our CF of these improved. Bob Monroe's, upcoming adoptions
Dean Tinsley: Bob will remain in an advisory capacity until April 30th to ensure a smooth transition.
And Bob, and I have further strength work together our position for many years. These key benefits, few different companies.
Dean Tinsley: And the final quarter of fiscal year 2025, we are focused on closing the year strong and planning for a successful fiscal 'twenty six.
In person, since is around use, I work to join. We announced it to this group of our 6 years ago, CFO B mono team have re and I have shaped the fine work together and its function, many years, and inside a few companies enabler
Dean Tinsley: Our focus remains on enabling high quality affordable and job relevant education that leads to employment.
Dean Tinsley: In conclusion.
For our growth. Since this is arrival to join us at Sage. Thanks to group nearly 6 leadership ago, different Vision. Bob team have managed to appreciate the funds on track to function, to achieve into the same key in a policy consecutive for every year growth of revenue and profit. Thanks to work for Bob's leadership and vision, he has been sending
Dean Tinsley: I want to express my confidence in our business and our ability to lever on our commitments.
To battle the group is on to strengthen back, to achieve the company's balance sheet, fourth consecutive, like the year, Progressive of Revenue, reduced and profiting debts.
Speaker Change: I will now hand over the call to Bob Munroe, our CFO, who will walk us through the details of our Q3 results Bob.
And having earnings Been instrumental in strength, improving the company's profit margin, balance sheets.
like progressively, additionally, reducing debt in partnership with his deriving earnings leadership, team growth by Bob, proving transformed with margins, the finance function,
Bob Munroe: Thank you Michael and good morning.
Bob Munroe: Turning to Cengage group financial highlights.
Bob Munroe: With two months of the year to go and a successful spring season in U S higher education.
And establishing best partnership with his deceased leadership team that we are Bob leveraging. Transformed the cross our organized functional business and its established best practices bobhead that we are expressed to leveraging, the desire across our globe to leave, s group for personal reasons.
Bob Munroe: We are on track and expect to close out fiscal 'twenty five strongly.
and there's remain committed to resting this role and desire and to leave teemage group till the for person could find reasons, a highly capable 6 and as you submitted to the, and
As a depth of experience, find with large highly Global public.
Bob Munroe: For the full year, we expect revenues to be in the range 156 to one $5 7 billion representing underlying growth of 3%.
Betrayed assessment and privately held companies.
Extensive experience leading results through teams has it as well as sets of his backgrounds ground in the large education and global technology in public. Industries traded will any valuable private or group.
as we embark on the next phase of our journey,
Bob Munroe: Adjusted cash EBITDA is expected to fall in the range 530 to 535 million representing growth of 15%.
as the result will work side by side for the networks month and background Dean will assume the full responsibility that the CF or knowledge first
Bob Munroe: I will provide further details on guidance as I talk to the business unit results and in my closing remarks.
April 30th to ensure as, as the final quarter of this period. 2025 involve we focused our side closing the earliest side for the
Month and planning for, and by successful, the will is through fiscal 206. Responsibility CFO our Focus high quality
Year to date adjusted cash revenues were $1 1 billion.
Affordable Bob will remain and join in an ad relevant, education until that leads April 30 to employment this to ensure a smooth.
Bob Munroe: Flat against a high comparative in the prior year.
Transition in conclusion.
Bob Munroe: The year to date performance is held back by sales timing effects in our research and Australia, K 12 businesses.
I want to exp in the press. My final quarter of Finance, in our fiscal year, 20 business 2025, our ability to live their focus on our on closing commitment, 3 years, strong,
Bob Munroe: And by the impact in this fiscal year as the re basing of a large ministry of education contract and our English language teaching or E. L T business.
I will now hand and planning over the call to 6 Monroe. That's for CFO, go 20 who walk us through the details of our focus. Our Q3 remains on a result enabling high quality
portable.
And job relevant. Thank you. Mike. Good morning. Good morning needs to have appointment.
Turning to send engage groups Financial.
I want to.
express my
Bob Munroe: As we covered in the Q2 update.
Bob Munroe: This is expected to have a one time impact on revenues in fiscal 'twenty, five or approximately $25 million.
Confidence with 2 months in our business, the year to go and our ability to successfully deliver a spring season in US higher education.
I will not we are all now hand over the crack called to bump them and expect to roll our clothes out for your full school, 20 Live Strong. Walk us through the details.
Bob Munroe: Representing around a one 6% drag on the full year revenue growth.
Of our for the Q3. Oh yeah results, we expect revenues
To be in the range.
1.
56.
Bob Munroe: Adjusting for this contract year to date Cengage group revenues are ahead, 1%.
To 1.57 billion and good morning. Representing underlying growth of
Of 3%, turning to same age group.
Bob Munroe: Year to date, adjusted cash EBITDA was $362 million up 11%.
Financial digestive highlights cash ebit star.
Is expected to fall in the change 500 years ago and 30 and 500 success, 35 million.
to see in a new,
Bob Munroe: This represents over 300 basis points in margin uplift.
Represent us higher ed and growth education of 15%. We are on track.
Bob Munroe: With margin expansion accelerating again in this quarter.
And expect further, physical details on guidance. As I talked to the business student results and
In my closing remarks here.
We?
Bob Munroe: On a trailing 12 month basis revenues are up 3%.
Expect Revenue to be adjusted in the range revenues 1.5.1 billion.
Bob Munroe: To 153 billion or 3%, excluding the impact of the ELT contract consistent with our growth expectations for the full year.
1.57 against a high billion comparative and the prior year presenting
Underlying growth the year to date of 3. Performance percent is held back by sales, timing effects
In our research and our cash businesses.
Bob Munroe: Digital continues to drive that growth with trailing 12 month digital net sales up 7% to.
Bob Munroe: To 1.17 billion and representing 78% of the total.
Is expected by the impact of falling in the range. This fiscal year 500030. The rebates of 500 of a large 130th, Ministry of 5 million education contract in represent our English language, in growth teaching,
Business.
Bob Munroe: Trailing 12 months EBITDA was $496 million.
I will provide, as I further be covered in the key, Tails. I'm going to divide. I talk to them. This is ex business unit. Did to have a
Bob Munroe: 13% over the comparative period.
Bob Munroe: EBITDA growth is significantly outpacing revenue growth with margin expansion accelerating as the year progresses.
fact in this fiscal year of the rebasing of a large Ministry of Education contract in our English language teaching, or
Bob Munroe: This is driven by the increasing flow through of cost savings aligned to our new operating model, which is now substantially complete and expected to further accelerate EBITDA growth and margin expansion over the fourth quarter.
The tree business.
As we covered in the Q2 update, this is expected to have a 1-time impact on revenues in fiscal. 25 of approximately 25 million.
Representing around a 1.6% drag on full year. Revenue growth.
Bob Munroe: We have realized over $60 million of savings in fiscal 'twenty five before taking account of new investments.
Adjusting for this contract. Year-to-date Sage group revenues are ahead 1%
Bob Munroe: We are on track to realize over $100 million of expected incremental savings this year and in fiscal 'twenty six.
Year to date, to just to cash, ebitda was 30062 million up. 11%
Bob Munroe: Sustaining healthy margin expansion through our next fiscal year, whilst funding incremental investments to drive growth and further improve operating effectiveness.
This represents over 300 basis points in margin uplift.
With margin expansion and accelerating a game in this quarter.
On a trading 12-month basis revenues are up 2%.
Bob Munroe: Turning to our business segments.
To 1.53 billion.
Bob Munroe: The same gauge group year to date revenue performance reflects the aggregate of flat revenues in academic sustained high growth of 15% in work.
Or 3%, excluding the impact of the elt contract.
Consistent with our growth expectations for the full year.
Bob Munroe: Offset by a 6% decline in select which is held back by temporary sales timing effects.
Digital continues to drive that growth with trailing 12 months, digital net sales up 7%.
Bob Munroe: And cengage academic year to date adjusted cash revenue was flat at $673 million.
To 1.17 billion and representing 78% of the total.
Bob Munroe: This reflects U S higher education year to date revenue growth of 4%.
Bob Munroe: Offset by secondary and international performance.
Training 12 months even Dar was 496 million of 13% over the comparative period.
Bob Munroe: U S higher Ed is driven by sustained high digital and institutional growth.
Ebit Dar growth is significantly outpacing. Revenue growth with margin expansion accelerating as the year progresses.
Bob Munroe: Improved enrollment and benefits from lower returns across the small residual print unbundled base.
Bob Munroe: Looking across our full academic year.
On a trailing 12 month basis adjusted cash revenues are U S higher Ed was $630 million up 5%.
This is driven by the increasing flow through of cost-savings aligned to our new operating model, which is now substantially complete and expected to further accelerate ebit. D growth and margin expansion over the 4 quarter,
Bob Munroe: For the full year.
We have realized over 60 million of savings in fiscal 25 before taking account of new Investments.
Bob Munroe: Growth is expected to further accelerate over Q4 as the momentum of a successful fall season continues through the current spring semester.
We are on track to realize over a 100 million of expected incremental, savings this year and in fiscal 26.
Bob Munroe: Year to date institutional revenues being both inclusive access and Cengage and limited institutional sales were $117 million and grew 26% on an underlying basis.
Sustaining healthy margin expansion through our next fiscal year whilst funding incremental Investments to drive growth and further improve operating effectiveness.
Turning to our business segments.
This is after taking account of a large customer that changed billing timing to the detriment of the year to date revenues.
The sage group year to date Revenue performance, reflects the aggregate of flat revenues in academic.
Bob Munroe: On a trailing 12 month basis institutional sales with $262 million up 27% on an underlying basis and now represent 42% of total U S higher Ed revenues.
Sustained high growth of 15% in work.
Offset by a 6% decline in select which is held back by temporary sales, timing effects.
Bob Munroe: We are encouraged by the recent updated fall enrollment data from the national student clearinghouse.
In senge, academic year to date, adjusted cash. Revenue was flat at 673 million.
Bob Munroe: Looking beyond the headlines our initial estimates are that enrollment is approximately 3% ahead. In this segment is relevant to our business.
This reflects us higher education year to date Revenue, growth of 4%.
Offset by secondary and international performance.
Bob Munroe: Higher enrollment provides a welcome boost on top of the second successive year of expected solid underlying growth.
Us higher ed is driven by sustained High digital and institutional growth.
In.
Improved enrollment.
Bob Munroe: Enrollment to side growth is driven by a proven digital strategy.
And benefits from lower returns across the small residual, print and bundle base.
Looking across a full Academic Year.
Bob Munroe: With sustained growth in Standalone digital products outweighing, the declines in an ever smaller print and bundled base.
On a trailing 12 months basis, adjusted cash revenues for us. Higher ed was 630 million up 5%.
Bob Munroe: This continues to progressively strengthened the profile of U S higher Ed improving profitability customer retention and predictability.
For the full year.
Bob Munroe: As we look forward to fiscal 2006 and beyond this gives us confidence that we can continue to deliver solid growth and a less benign enrollment environment.
Growth is expected to further accelerate over Q4 as the momentum of a successful fall season continues through the current spring semester.
Bob Munroe: And international higher at year to date cash revenue was $76 million, 7% behind the prior period.
Year to date. Institutional revenues being both inclusive access and sage and limited. Institutional sales were 170 million and grew 26% on an underlying basis.
Bob Munroe: We continue to see good growth in our India test prep business and solid performance in Canada, taking accounts of sales timing effects.
This is after taking account of a large customer that changed billing timing to the detriment of the year to date revenues.
Bob Munroe: These growth businesses are outweighed by other regions, where a combination of higher print dependency and enrollment pressures is translating into demand weakness.
On a trailing 12-month basis, institutional sales were 262 million of 27% on an underlying basis and now represent 42% of total us higher ed revenues.
Bob Munroe: In Latin America, we have repositioned our business from a direct go to market to our licensing distribution mobile to address this with a onetime drag on revenues in fiscal 'twenty five.
We are encouraged by the recent updated for enrollment data from the national student Clearing House.
Looking beyond the headlines.
Our initial.
That enrollment is approximately 3% ahead in the segment relevant to our business.
Bob Munroe: We are assessing our strategy in other regions to stabilize the business and return to growth.
Bob Munroe: And secondly, you year to date adjusted cash revenues were $172 million down 4%.
Higher enrollment provides a welcome boost on top of a second successive year of expected solid. Underlying growth.
Enrollment aside growth is driven by our proven digital strategy.
Bob Munroe: This reflects good growth in career and technical education, and advanced placement cornerstones of our strategy.
With sustained growth in Standalone. Digital products, outweighing the decline in an Ever smaller, print and bundle base.
Bob Munroe: And high double digit growth in big ideas Mats revenues, where we gained over 40% share in the Oklahoma adoption with a new program Matthew.
This continues to progressively strengthen the profile of us higher. Ed improving profitability, customer retention and predictability.
Bob Munroe: This gives us confidence as we look towards California, and Florida math adoptions in the coming years.
As we look forward to fiscal 26 and Beyond this gives us confidence that we can continue to deliver solid growth in a less benign and enrollment environment.
Bob Munroe: Growth was outweighed by the impact of a weaker adoption year in high school and Middle School programs and a sharper than expected decline in our legacy K five English language Arts program, which we've been exiting.
In international higher ed year-to-date cash Revenue was 76 million.
7% behind the prior period.
Bob Munroe: Our adjusted cash revenues reflect around 30% as the big ideas customer billings given the structure of our exclusive long term partnership with big ideas learning, which we extended with effect from the first of January.
We continue to see good growth in our India test, prep business and solid performance in Canada taking account of sales timing effects.
These growth businesses are outweighed by other regions where a combination of higher print dependency and enrollment pressures is translating into demand weakness.
Bob Munroe: All in total billings basis, including a 100% of big ideas, which better reflects our market performance.
Our secondary business grew year over year, reflecting the solid sales performance in a weaker adoption year.
In Latin America, we have repositioned our business from a direct, go to market to a licensing, distribution model to address this with a 1-time drag on revenues in fiscal 25.
Bob Munroe: In summary for the full year fiscal 'twenty five we continue to expect cengage academic to deliver low single digit growth driven by accelerating growth in U S higher Ed.
We are setting our strategy in other regions to stabilize the business and return to growth.
In secondary.
Year to date to just do cash. Revenues are 172 million down 4%.
Bob Munroe: At Cengage work.
Bob Munroe: Year to date, adjusted cash revenues were $103 million up 15%.
This reflects good growth in Career and Technical education and advanced placement.
Cornerstones of our strategy.
Bob Munroe: This reflects sustained high double digit growth in that to go where revenues were up over 20%.
Bob Munroe: Moderated by flat performance in <unk>.
and high double digit growth in Big Ideas, Maps revenues, where we gained over 40%, share in the Oklahoma reduction, with our new program math, and you
Bob Munroe: Is that to go revenue growth is driven primarily by higher enrollment and advanced career training courses supplemented by accelerating growth in our ready to higher employer business.
This gives us confidence as we look towards California and Florida map adoptions in the coming years.
Bob Munroe: From a low base.
Enrollment growth continues to be driven by our ongoing program to tightly integrate into our extensive network of educational institutions and through extending distribution and diversifying sources of funding through business to business partners.
Growth was outweighed by the impact of a weaker adoption year in high school and middle school programs and the sharper than expected decline. In our Legacy K5 English language arts program, which we have been exiting
Bob Munroe: At <unk> the year to date revenue performance is held back by a combination of competitive pressures.
Our adjusted cash revenues reflects around 30%, of the Big Ideas customer Billings, given the structure of our exclusive long-term partnership with Big Ideas learning which we extended with effect from the 1st of January.
Bob Munroe: And in the boot camp segment federal budget constraints.
On a total Billings basis.
Bob Munroe: Slowing down the sales pipeline over the last quarter.
Bob Munroe: We remain focused on returning the business to strong growth and are investing in products and go to market capabilities.
Including 100% of Big Ideas, which better reflects our market performance, as secondary business grew year-over-year reflecting the solid sales performance in a weaker adoption year.
Bob Munroe: In our software business, we are encouraged by increased momentum in the sales pipeline from our recent partnership with right hand, cyber security to launch new human risk management solutions.
In summary for the full year. Fiscal 25
To deliver low single digit growth driven by accelerating growth in US higher ed.
And boot camps, the implementation of the large new federal government contract won last quarter is progressing well and we will come into full effect in fiscal 'twenty six.
Senate work.
Year to date adjusted cash revenues were 103 million up to 15%.
Bob Munroe: Cengage work is rapidly growing profits and expanding margins.
This reflects the stained High double digit growth in Ed to go. Where revenues were up over 20%.
Bob Munroe: Year to date, adjusted cash EBITDA reached 14 million compared to $5 million in the prior period.
Moderated by flat performance at infosec.
Bob Munroe: Over 65% of incremental revenues flow through to EBITDA driving margins to 14% and testament to the effective scaling of the business.
I said to go Revenue growth is driven primarily by higher enrollments, in Advanced Career Training courses. Supplemented by accelerating growth in our register higher, employer business, albeit from a low base.
Bob Munroe: For the full year, we expect second gauge work to broadly maintain the year to date revenue growth rate to 15% and generate an EBITDA contribution of around $20 million.
Enrollment growth continues to be driven by our ongoing program to tightly integrate into our extensive network of educational institutions and through extending distribution and diversifying sources of funding through business to business partners.
Bob Munroe: In Cengage select.
Bob Munroe: Year to date cash revenues of $319 million.
Bob Munroe: 6% lower than the prior period.
Bob Munroe: This shortfall largely reflects the onetime impact of re basing the large ministry of education contracts in ELT.
At info SEC. The year-to-date Revenue performance is held back by a combination of competitive pressures. And in the boot camp, segment federal budget, constraints.
Slowing.
Down the sales pipeline over the last quarter.
Bob Munroe: And adverse sales timing effects on top as modest trading shortfalls in research.
We remain focused on returning, the business to strong growth and are investing in products and go to market capabilities.
Bob Munroe: English search year to date adjusted cash revenues were $151 million.
Bob Munroe: 6% behind strong prior period comparative.
Bob Munroe: Year to date performance is held back by a combination of sales timing effects.
In our software business, we are encouraged by increased momentum in the sales pipeline, from our recent partnership with right-hand cyber security. To launch new, human Risk Management Solutions
Bob Munroe: Including slippage of subscription renewals and the timing of our cash sales.
Bob Munroe: And demand weakness in the U S public and school library market from funding pressures.
In boot camps, the implementation of the large new federal government contract 1. Last quarter is progressing well and will come into full effect in fiscal 26.
Bob Munroe: The timing effects are expected to reverse in the final quarter.
10 days work is rapidly growing profits and expanding margins.
Bob Munroe: Underpinning by a solid archive sales pipeline and strong subscription renewals, which year to date are running at 92%.
Year to date. Adjusted cash ebit. Da reached. 14 million compared to 5 million in the prior period.
Bob Munroe: For the full year, we now expect research revenues to be marginally behind the prior year.
Bob Munroe: Reflecting the revised outlook in the U S public and school library markets.
Over 65% of incremental revenues flow through to ebit, Da driving margin to 14% and testament to the effective scaling of the business.
Bob Munroe: English language teaching is maintaining good underlying momentum.
Bob Munroe: Year to date, adjusted cash revenues were $114 million, representing underlying growth of 5%. Excluding the one time re basing of the large ministry contract.
For the full year, we expect sen gauge work to broadly maintained the year to date Revenue growth rate of 15% and generate an ebitda contribution of around 20 million.
In Sage select.
Year to date cash revenues were 319 million.
6% lower than the prior period.
Bob Munroe: Year to date underlying performance was also moderated by temporary timing differences, which are expected to reverse in the final quarter.
This short form, largely reflects the 1-time impact of rebasing. The large Ministry of Education contract in elt.
Bob Munroe: In fiscal 'twenty five we now expect overall revenue growth to be down in the mid single digit range due to the ministry contract and modest shortfalls in core markets against high growth targets.
And adverse sales timing. Effects on top of modest trading, shortfalls in research.
In research year to date adjusted cash. Revenue were 151 million
6% behind a strong prior period comparative.
Bob Munroe: Excluding that Ministry contract, which is expected to drive a onetime basing of revenues of approximately $25 million.
Year to date. Performance is held back by a combination of sales timing effects.
Bob Munroe: Core <unk> business is on track for another strong year.
Including slippage of subscription renewals and the timing of archive sales.
Bob Munroe: We expect underlying revenue growth.
Bob Munroe: In line with the 10% underlying growth.
And demand weakness in the US public and school library markets from funding pressures.
Bob Munroe: Achieved through December on a trailing 12 month basis.
The timing effects are expected to reverse in the final quarter.
Bob Munroe: This was driven by sustained strong growth in the U S and Latin America.
Bob Munroe: In the other segment year to date revenues were $54 million 5 million behind the prior period.
Underpinned by a solid archive sales Pipeline, and strong subscription renewals which year to date are running at 92%.
Bob Munroe: With solid growth in M'lady.
For the full year. We now expect research revenues to be marginally behind the prior year.
Bob Munroe: Outweighed by adverse phasing of export orders and the Australia U K 12 business.
Reflecting the revised Outlook in the US, public and school library markets.
Bob Munroe: We'll export orders confirmed for delivery in Q4 for the full year, we expect the other segment to deliver another year of solid growth.
English language teaching is maintaining good underlying momentum.
Bob Munroe: In total we expect revenues for the select business for the full year to be marginally lower than the prior year drill.
Year to date adjusted cash revenues were 114 million representing underlying growth of 5%, excluding the 1-time rebasing of the large Ministry contract.
Bob Munroe: Driven principally by the onetime contract effect and ELT.
Bob Munroe: Turning to our cash performance.
Yesterday, its underlying performance was also moderated by temporary timing differences which are expected to reverse in the final quarter.
Bob Munroe: Our business is highly cash generative.
Bob Munroe: With year to date, Unlevered free cash flow or operating cash flow, reaching 255 million up $33 million or 15%.
In fiscal 25, we now expect overall Revenue growth to be down in the mid single digit range due to the ministry contract and modest, shortfalls in core markets against high growth targets.
Bob Munroe: This strong operating cash performance reflects the flow through of accelerating EBITDA growth with temporary delays in collections around the holidays acting as a drag on working capital.
Excluding that Ministry contract which is expected to drive a 1-time rebasing of revenues of approximately 25 million.
Bob Munroe: As these timing effects reversed in Q4, we expect to deliver meaningfully improve operating cash conversion compared to the 69% achieved last year.
The core elt business is on track for another strong year.
We expect underlying Revenue growth, broadly in line with the 10% underlying growth.
Achieved through December on a trailing 12-month basis.
Bob Munroe: This expectation includes significant benefits from our global working capital efficiency program, which we estimate has delivered over $50 million of structural savings in fiscal 'twenty, four and 'twenty five.
This is driven by sustained strong growth in the US and Latin America.
In the other segment, year-to-date revenues were 54 million, 5 million behind the prior period.
With solid growth in the lady.
Bob Munroe: These working capital benefits outweigh the impact of our investments in global business systems, which will be largely complete this year with the U S implementation of a global ERP system in April.
Outweighed, by adverse, phasing of export orders. In the Australia, K12 business.
Bob Munroe: Year to date, Levered free cash flow was $67 million compared to $45 million in the prior period.
With export orders confirmed for delivery in Q4 for the full year. We expect the other segments to deliver another year of solid growth.
Bob Munroe: This is after a lower net interest payments of $104 million and one time non operating cash flows of $75 million.
In total we expect revenues for the select business for the full year to be marginally lower than the prior year.
Driven principally by the 1-, time contract effect in the LT.
Bob Munroe: The nonoperating cash flows principally reflect the implementation of the cost savings program and new operating model, which is substantially complete.
Turning to our cache performance.
Our business is highly cash generative.
Bob Munroe: In addition, this includes onetime payments for real estate exits of the buyouts acquisition of intellectual property and legal settlements.
With years to date and levered, free cash flow or operating cash flow, reaching 255 million up, 33 million, or 15%.
This strong operating cash flow.
Performance.
We have incurred one time implementation cost of around $95 million in relation to the cost savings program over fiscal 'twenty, four and 'twenty five.
Through of accelerating ebit D growth.
With temporary delays in collections around the holidays acting as a drag on working capital.
Bob Munroe: Of this around $80 million has been paid in cash through December with the balance expected to be largely paid by the end of the fiscal year.
As these timing effects reversing Q4, we expect to deliver meaningfully improved operating cash conversion compared to the 69% achieved last year.
Bob Munroe: We have significantly lowered our cost of capital over the course of calendar 'twenty four.
Bob Munroe: We refinanced the term loan in March and successfully returned to the market in November.
Bob Munroe: Further reducing the interest rate margin by 50 basis points to 350 basis points over sofa.
This expectation includes significant benefits from our Global working capital efficiency program, which we estimate has delivered over 50 million of structural Savings in fiscal 24 and 25.
Bob Munroe: In addition, we maintained the potential for two future step downs in margin of 25 basis points, each tied to reductions in our net leverage ratio.
These working capital benefits, outweigh the impact of our investments in global Business Systems, which will be largely complete this year with the US implementation of our Global Erp system in April.
Bob Munroe: In September we entered three year swaps hedging $550 million of axiom loan at a fixed rate of 323%.
Yesterday, 113 cash, flow was 67 million compared to 45 million in the prior period.
This is after lower net interest payments of 104 million.
Bob Munroe: In combination with favorable market rate redemptions over 24. These actions have reduced our total interest cost to seven 6% at the end of December compared to 10, 4% a year earlier.
And 1-time non-operating cash flows of 75 million.
The non-operating cash flows. Principally reflect the implementation of the cost savings program. A new operating model which is substantially complete.
Bob Munroe: For the full year, we expect net cash interest to be around $135 million compared to $213 million in fiscal 'twenty four.
in addition, the includes 1-time payments for Real Estate exits, or the buyouts
Acquisition of intellectual property and legal settlements.
Bob Munroe: Our expectation remains to cash pay dividends on our preferred equity.
Bob Munroe: The first and second quarter dividends of 29 million in total are reflected in the December year to date cash flow.
Bob Munroe: And the Q3 dividend was paid in cash in early January reflecting the strength of our liquidity position.
We have incurred 1-time implementation costs of around 95 million. In relation to the cost Savings Program. Over fiscal 24 and 25 of this around. 80 million has been paid in cash through December, with the balance expected to be largely paid, by the end of the fiscal year.
Bob Munroe: We have continued to progressively deleverage the business strengthen our balance sheet and liquidity position and provide increased financial flexibility to invest in the business to accelerate that growth strategy.
We have significantly lowered our cost of capital over the course of calendar. 24.
We refinanced the term Loan in March.
And successfully returned to the market in November.
Bob Munroe: At the end of December cash balances totaled $294 million with total liquidity of around half a billion dollars.
Further reducing the interest rate margin by 50 basis points to 350 basis points over so far.
Bob Munroe: We expect this to meaningfully improve by the end of the fiscal year.
Bob Munroe: After having invested $35 million and the recently announced acquisition of visible body, which we completed in January.
In addition, we maintain the potential for 2 future step Downs in margin of 25 basis Points. Each tied to reductions in our net leverage ratio,
This acquisition is tightly aligned to our strategy and science disciplines, and I expect it to be accretive in its first year.
in September, we entered 3 years swaps, edging, 50050 million of our Term Loan at a fixed rate of 3.23%,
Bob Munroe: The combination of strong growth in trailing 12 months EBITDA and cash generation improved net leverage to two seven times at the end of December compared to three one times a year ago.
In combination with favorable market rate. Reductions over 24, these actions have reduced. Our total interest cost to 7.6% at the end of December compared to 10.4% a year earlier.
Bob Munroe: We expect net leverage to further improve through the balance of the year driven by accelerated growth in EBITDA and cash generation, which is reflected in our full year guidance.
For the full year, we expect net cash interest to be around 135 million, compared to 213 million, in fiscal 24.
Our expectation remains to cash, pay dividends on our preferred equity.
Bob Munroe: With the business well into the final quarter and the spring season in U S higher education tracking to our expectations. We are pleased to both reconfirm and refine our guidance.
The first and second quarter, dividends of 29 million in total are reflected in the December year to date cash flow.
Bob Munroe: Cengage group is on track to deliver our fourth consecutive year of solid growth in adjusted cash revenue, which we expect to be in the range 156 to $1 $5 7 billion.
And the Q3 dividend was paid in cash. In early, January reflecting the strength of our liquidity position.
We have continued to progressively, de-lever the business.
Bob Munroe: This represents underlying growth of 3% after adjusting for the onetime impact of the Ministry contract and E. L T.
Strengthen our balance sheet and liquidity position and provide increased Financial flexibility to invest in the business to accelerate our growth strategy.
Bob Munroe: This reflects the combination of low single digit growth in cengage academic driven by the accelerating growth performance in the U S higher Ed.
At the end of December cash balance is total 294 million.
With.
Total liquidity of around, half a billion.
Bob Munroe: Strong double digit growth in cengage work.
We expect this to meaningfully improve by the end of the fiscal year.
Bob Munroe: And low underlying single digit growth in select before the impact of the ministry contract and the LT.
After having invested 35 million in the recently announced acquisition of visible body, which we completed in January.
Bob Munroe: We expect adjusted cash EBITDA to fall in the range $530 million to $535 million.
This acquisition is tightly aligned to our strategy in science disciplines and expected to be accretive in its first year.
Bob Munroe: Representing growth of 15%.
Bob Munroe: And margins of around 34% approximately 400 basis points higher than fiscal 'twenty four.
Bob Munroe: This reflects the inherently strong unit economics of our business.
The combination of strong growth in trailing 12 months, T, and cash generation improved. Net leverage to 2.7 times at the end of December compared to 3.1 times a year ago.
Bob Munroe: The benefits of the cost savings program and the meaningful and accelerating profit contribution from Cengage work as the business continues to scale.
We expect net leverage to further improve through the balance of the Year. Driven by accelerated growth in E, bitar and cash generation, which is reflected in our full year guidance.
Bob Munroe: The expected high EBIT dollar growth improvements in working capital are expected to deliver $390 million to $400 million in operating cash flow and we expect to end fiscal 'twenty five with net leverage of two five times or lower.
with the business, well, into the final quarter and the spring season in US, higher education, tracking to our expectations
We are pleased to both reconfirm and refine our guidance.
Bob Munroe: Looking ahead to fiscal 2006 and beyond we believe the business is well positioned to maintain robust topline growth and further expand EBIT margins.
Fangage group is on track to deliver a fourth consecutive year of solid growth in adjusted cash Revenue, which we expect to be in the range 1.56 to 1.57 billion.
Bob Munroe: As Michael stated we are building on the foundations of our new operating model and proven go to market strategies and investing in new capabilities to further differentiate cengage group.
This represents underlying growth of 3%, after adjusting for the 1-time impact of the ministry, contract in elt.
Bob Munroe: The strength of the balance sheet provides the financial flexibility of highly targeted M&A and organic investment opportunities to further drive the growth of the business and value creation for equity holders.
This reflects the combination of low single digit growth in sang, academic driven by the accelerating growth, performance of us higher ed.
Strong. Double digit growth in Sage work.
And low underlying single digit growth in select. Before the impact of the ministry, contract in healthcare.
Bob Munroe: Also looking forward to fiscal 'twenty six today, we issued an 8-K announcing a change in our auditor's from Pwc to Deloitte with effect from fiscal 'twenty six.
We expect adjusted cash ebit data to fall in the range 530 to 535 million.
Representing growth of 15%.
Bob Munroe: Pwc will complete their audit of the current fiscal year in the normal course.
And margins of around 34% approximately 400 basis points higher than fiscal 24.
Bob Munroe: We periodically consider a professional advisers consistent with best practice of governance.
this reflects the inherently strong unit, economics of our business,
Bob Munroe: And in conjunction with the audit Committee, we determined that this was the right time to make this change and we look forward to working with Deloitte.
The benefits of the cost Savings Program and the meaningful and accelerating profit contribution from Sage work as the business continues to scale.
There have been no disagreements or issues with pwc this year or in any preceding it.
Bob Munroe: We maintain a strong relationship with Pwc and we are grateful for his service as the cengage over many years.
Bob Munroe: Finally.
Speaker Change: As I stepped down after six years in this role I would like to thank overview for your support and ongoing commitment to cengage.
The expected high ebit, D growth and Improvement in working. Capital are expected to deliver 390, to 400 million in operating cash flow. And we expect to end fiscal, 25 with net leverage of 2.5 times or lower.
Looking ahead to fiscal 26 and Beyond.
Speaker Change: And for keeping us on our toes.
Speaker Change: It's a privilege to be handing over the reins to such a highly accomplished CFO his team.
We believe the business is well positioned to maintain robust, Topline growth and further expand ebit Dar margins.
Speaker Change: And I look forward to following the continued growth and success of the company from.
Speaker Change: From your seats.
Speaker Change: I will now pass back to the operator for questions.
As Michael stated, we are building on the foundations of our new operating model and proven go to market strategies and investing in new capabilities to further differentiate Sage group.
Speaker Change: Certainly at this time, we will be conducting a question and answer session.
Speaker Change: I would like to ask a question. Please press star one on your telephone keypad.
Speaker Change: A confirmation tone will indicate your line is in the question queue.
The strength of the balance sheet provides the financial flexibility, a highly targeted m&a. An organic investment opportunities to further Drive the growth of the business and value creation for Equity holders.
Speaker Change: You May press Star two if you would like to remove your question from the queue.
Speaker Change: For participants using speaker equipment and may be necessary to pick up your handset before pressing the star keys.
Speaker Change: One moment, please while we poll for questions.
Also looking forward to fiscal 26 to today. We issued an 8K announcing a change in our Auditors from PWC to Deo with effect from fiscal 26.
PWC will complete their audit of the current fiscal year in the normal course.
We periodically consider our professional advisors consistent with best practice of governance.
Speaker Change: Your first question for today is from John Kovacs diameter capital.
John Kovacs: Hey, good morning, Thanks for taking the questions and for the initial remarks here I had a couple of questions first on the cost savings program. It sounds like you've made great progress, so far with $60 million out of $100 million.
and in conjunction with the audit committee, we determined that this was the right time to make this change and we look forward to working with Deloitte
There have been no disagreements or issues with PWC this year or in any preceding year.
John Kovacs: Could you give us a little bit more detail on which layers of the cost structure and category, specifically that $60 million. That's already been achieved which came out of and then same question for the $40 million left to go please.
We maintain a strong relationship with PWC and we are grateful for their services to send engage over many years.
Finally.
As I stepped down after 6 years in this role, I would like to thank all of you for your support and ongoing commitment to Sage.
And for keeping us on our toes.
John Kovacs: Sure Hi, John.
John Kovacs: Okay. Good.
John Kovacs: To hear from you.
John Kovacs: So.
It's a privilege to be handing over the Reigns to such a highly accomplished CFO as being.
John Kovacs: In terms of that.
<unk>.
John Kovacs: The $60 million this year and it comes from I think a number of key sources. The first is.
And I look forward to following the continued growth and success of the company.
From your seats.
I will now pass back to the operator for the question.
John Kovacs: A significant sort of rationalization.
John Kovacs: Of our sort of global supply chain.
John Kovacs: Sort of impact change suppliers, where we manufacture and so on and so on and that comes through very strongly in that gross margin.
Certainly at this time, we will be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue.
John Kovacs: Which is up.
John Kovacs: <unk>.
John Kovacs: 160 basis points in the year to date, so very clear demonstrable progress.
You may press star 2 if you would like to remove your question from the queue.
John Kovacs: And on top of that.
For participants using speak or equipment and may be necessary to pick up your handset before pressing the star keys.
John Kovacs: With our new operating model.
John Kovacs: <unk> focused on leveraging.
1 moment, please while we pull for questions.
John Kovacs: Core capabilities and central services.
John Kovacs: Across the whole group so closer to home, we have been extending central finance sort of shared services.
John Kovacs: We've been consolidating sort of customer service.
Your first question for today, is from John Kovach with diameter capital.
John Kovacs: Addressing changes to the organization and Resourcing model, so using more offshore resources and outsourced resources where applicable.
John Kovacs: And thats been set.
John Kovacs: Very broad brush across all sort of central operations.
John Kovacs: I think the third significant area.
John Kovacs: Is which is the area that also has a bit of a longer tail is the rationalization.
John Kovacs: Our technology infrastructure. So this is sort of simplification.
Hey, good morning. Thanks for taking the questions. And for um, the initial remarks here, I I had a couple questions first on the cost Savings Program. Um it sounds like you've made great progress so far with 60 million out of 100 million achieved. Could you give us a little bit more detail on which layers of the cost structure and categories specifically that 60 million that's already been achieved came out of and then same question for the 40 million left to go. Please
John Kovacs: All of our technology footprint.
John Kovacs: Removing multiple applications consolidating on single platforms deployment deployable systems and processes.
Sure. Hi, John good, good good. Good to hear from you. Um, so
John Kovacs: Appreciate that.
John Kovacs: That's very easy.
John Kovacs: Switch things off where you have.
Um, in terms of that um, first 60 million sort of this year, I think it comes from. I think a number of um, key sources. The first is
John Kovacs: Transfer work into.
John Kovacs: A single sort of.
John Kovacs: Confirmed application in other cases, it takes little bit longer and so some of that.
John Kovacs: Is continuing to extend.
John Kovacs: Into.
John Kovacs: The following fiscal year.
John Kovacs: And I think the other piece of the incremental 40 is really the full year impact of everything we've done this year, because we've been doing at progressive through the year. So you simply haven't seen the full year benefits come through and Thats. The reason we say this is substantially complete there's not a ton of work still to ATM, it's the annualized <unk>.
Um, you know, significant sort of rationalization, um, of our sort of global supply chain, that sort of impact, things sort of suppliers where we manufacture and so on, and so on. And that comes through very strongly in our gross margin, um, which is up over, um, you know, 150 basis points in the year to date. So very clear, demonstrator of progress.
and on top of that um, with our new operating model, um it's very much focused on, you know, leveraging, um,
John Kovacs: Packed and those remaining technology initiatives conflict play.
Michael: And this is Michael Hey, John just wanted to build on Bobs answer, which I on a percent agree with and get to a synchronous underlying your question, but correct me if I'm wrong.
Michael: I think the the cost savings are really coming from areas, where we have sustainably changed the way we operate so it's not a one off where yanking cost savings out of marketing or sales or any other thing that then will creep back but the way we operate operate now in a much more.
Core capabilities in Central Services, um, across the whole group. So, closer to home, uh, we've been extending, you know, Central Financial sort of shared services. Um, we've been consolidating sort of customer service, um, addressing changes to the organization and resourcing model. So using more offshore resources and outsourced resources where applicable, um, and that's been, um, fairly broad brush across, all sort of central operations. And I think the, the, the third significant area,
Michael: More centralized shared version of certain functions across the group is what gives us confidence that this is.
Michael: This is a sustainable margin expansion for the business.
Is, which is the area that also has a bit of a longer tail is the rationalization um, of our technology infrastructure. So this is sort of simplification um, of our sort of Technology footprint. Um removing you know, multiple applications, consolidating on single platforms.
Michael: Thank you both of those are definitely helpful clarification.
Michael: If I understand right then when we think about the all encompassing $100 million savings.
Deployment of Global Systems and processes. Um, and you'll appreciate that, you know, some of that's very easy. Um, you can switch things off where you have uh, and and transfer work into um, a single sort of
Speaker Change: It sounds like that's actually when you think about the actions taken all or substantially all done except for some of the remaining technology in it rationalization you mentioned Bob.
Michael: So.
Michael: That's absolutely right.
Michael: Okay. So as we look out into 2026, obviously too early to tell.
Michael: The guide yet, but I just wanted to make sure I'm understanding and modeling correctly, we should expect all $100 million of savings will be flowing through for the full year at that point or close to all of it.
Michael: Yes, that's right.
Michael: Okay.
Michael: Sure.
Michael: And so comparably for for fiscal 'twenty, five which should end in a couple of months.
Conformed application, in other cases, it takes a little bit longer and so some of that um, is continuing to extend, um, into, um, the following fiscal year. And I think the other piece of the incremental 40 is really the full year impact of everything. We've done this year because we've been doing it progressively through the year. So you simply haven't seen the full year benefits, come through. And that's the reason we say this is substantially complete. It's not a ton of work. Still to be done, it's the annualized impact and those remaining technology initiatives can lead to play.
Michael: There is $60 million flowing through just on an apples to apples basis.
Michael: Yes, that's correct.
And this is Michael. Hey John just want to build on Bob's answer, which I 100% agree with and get to. I think. What's underlying your question about correct me if I'm wrong.
Michael: That's helpful. Thanks, I have others, but I'll get back in queue. Thank you so much.
Joe: Thanks, Joe.
Joe: We have reached the end of the question and answer session and I will now turn the call over to Michael for closing remarks.
Michael: Thank you everybody again for joining us and I just want to take a minute to close out the call with a sincere. Thank you to our <unk>.
Speaker Change: CFO, Bob Munroe, Bob and I on a very personal level have worked together for many many years now well over 15 years and.
I think the the cost savings are really coming from areas where we have sustainably changed the way we operate. So it's not a 1-off where yanking cost savings out of, you know, marketing or sales or any other thing that then will creep back. But the way we operate operate now, in a much more centralized shared version of certain functions across the group is what gives us confidence that this is uh you know this is a sustainable margin expansion for the business.
Speaker Change: I cannot overemphasize the impact that Bob had on the business and on our success and where we are today and I know for all of you who have followed US you are aware of that impact and I just want to say on a personal.
Speaker Change: Bob you will be missed I am looking forward to working with Neil but you will be missed by the entire organization and you will be missed by me and I know many of the investors we will Miss you too, but I am certainly looking forward to staying in touch and I know we will so thank you again.
Thank you both. Those are definitely helpful clarifications um if I understand right, then when we think about the all-encompassing hundred million dollar savings uh sounds like that's actually when you think about the actions taken all or substantially all done except for some of the remaining technology and it rationalization you mentioned Bob. Um so that's absolutely right.
Speaker Change: I could not have envisioned doing this without you.
Okay, so as we look out in the 2026, obviously too early to to guide yet but I just wanted to make sure I'm understanding and modeling correctly. We should expect all 100 million dollars of savings will be flowing through for the full year at that point or close to all of it.
Uh, yes, that's right.
Bob Munroe: Alright, Thank you very much Michael I appreciate and as I say.
Okay, cool.
Speaker Change: Look forward to.
Speaker Change: Watching the continuing success and growth of the business as we go forward and absolutely staying in touch with you and.
Speaker Change: Many many of the colleagues.
And so comparably for for fiscal 25 which should end in a couple of months. Um, there's 60 million flowing through just down in Apple's Apple spaces.
Speaker Change: Latest.
Uh, yes, that's correct.
Speaker Change: Company, so successful over the past several years.
Speaker Change: Thank you. Thank you thanks.
Okay, that's helpful. Thanks. Um, I have others but I'll get back to you. Thank you so much.
Speaker Change: Thanks, everybody and looking forward to updating you on introducing dean on our next on our next earning calls for the full fiscal 'twenty five thank you.
Thanks.
Speaker Change: Have a great day.
Speaker Change: Okay.
We have reached the end of the question and answer session and I will now turn the call over to Michael for closing remarks.
Speaker Change: This concludes today's conference and you may disconnect. Your lines at this time. Thank you for your participation.
Thank you, everybody again for joining us and I just uh, want to take uh, a minute to close out the call with a sincere. Thank you to our, uh, CFO Bob Monroe. Uh, Bob, and I on a very personal level have worked together for many, many years now. Well, over 15 years and, uh, I cannot overemphasize. The impact that Bob had on the business and on our success and where we are today. And I know for all of you who have followed us, uh, you're aware of that impact. And I just want to say on a very, in a very personal note, Bob, you will be missed. I'm looking forward to working with Dean, uh, but you will be missed by the entire organization, and you will be missed by me. And I know many of the investors will miss you, too. Uh, but I am certainly looking forward to staying in touch and, uh, I know we will. So thank you again. Uh, it, I I could not have envisioned doing this without you.
Thank, thank. Thank you very much, Michael. I appreciate it. And as I
Look forward to, uh, watching the continuing success and growth of the business. Um as we go forward and absolutely staying in touch with you and uh many many other colleagues. Uh if they
Yeah, company. So successful over the past several years.
Thank you. Thank you.
Thanks everybody, and looking forward to updating you and introducing Dean on our next, uh, on our next earning calls for the, uh, for fiscal 25. Thank you.
Have a great day.
This concludes today's conference and you may disconnect your lines at this time. Thank you for your participation.