Pitney Bowes Inc.PBINYSE
LOADING
|||
Operator: Hello, and welcome to the Third Quarter 2025 Pitney Bowes, Inc. Earnings Conference Call. Joining us today are Chief Executive Officer, Kurt Wolf; Chief Financial Officer, Paul Evans; and Director, Investor Relations, Alex Brown. [Operator Instructions].
Alex Brown: Good afternoon, and thank you for joining us. Included in today's presentation are forward-looking statements about future business and financial performance. Forward-looking statements involve risks, along with uncertainties that could cause actual results to be materially different from our projections. More information about these items can be found in our earnings press release, our 2024 Form 10-K and other reports filed with the SEC that are located on our website at www.pb.com and by clicking on Investor Relations. Please keep in mind that we do not undertake any obligation to update forward-looking statements as a result of new information or developments. Also included in today's presentation are non-GAAP measures, specifically EBIT, EBITDA, EPS and free cash flow, all on adjusted basis. You can find reconciliations for these items to the appropriate GAAP measures in the tables attached to our press release. We have also provided a slide presentation and a spreadsheet with historical segment information on our Investor Relations website. With that, I'd like to turn the call over to our CEO, Kurt Wolf.
Kurt Wolf: Thank you, Alex, and thanks to everybody who is joining today's call. I trust that everybody has had a chance to review our press release and my letter. That said, I'd like to touch on a few key points before going to Q&A. We reported continued profitability improvements for the quarter. However, we expect the year to come in around the low end of our range for revenue, EBIT and free cash flow. To be clear, this is primarily due to issues with forecasting and has nothing to do with operational factors, which have, in fact, been more positive than negative during the quarter. With respect to the forecasting issues, these are problems that have long plagued the company, and I'm working closely with Paul and his team to fix our forecasting process. Moving to our strategic review, we are making significant progress. We continue to enhance our talent, structure and processes to support future growth of the business. Additionally, we are compiling and evaluating a set of profitable growth opportunities. What we are learning in the strategic review is giving increased optimism about the outlook for the business, which supports our decision to spend an additional $161 million on share repurchases during the quarter. In summary, we are still tripping up on past mistakes, but are aggressively attacking and fixing issues as they arise, making us a stronger company. For this reason, my optimism about the future of Pitney Bowes only continues to grow stronger. With that, let's open the call for questions.
Operator: [Operator Instructions]. Our first question comes from the line of Kartik Mehta with Northcoast Research.
Kartik Mehta: Kurt, just wanted to get a little bit more insight into SendTech. Obviously, the revenue declines are decelerating, which is a positive. And you've talked about, obviously, the IMI migration as you move past that. As you look at that business, what do you anticipate the trajectory over the next 12, 18 months for that business?
Kurt Wolf: With respect to SendTech, as you did mention, the IMI migration, we're largely getting past that. You can see that in the results this quarter. We do expect that should continue to be a benefit in Q4. By Q1, it should be fully lapped. So I think by and large, the impact of the difficult comps from the IMI migration are largely behind us. So the revenue decline we saw in Q3 probably is a realistic look of where things stand for now. And the question becomes, I'm incredibly excited to have Todd Everett join the company from the Board. He has a strong background in the shipping space. He's an incredible operator. He's excellent at operating Newgistics before it was sold to Pitney Bowes. I think he's done a lot of great work already. Happy to answer more about the work he's doing, but he's evaluating opportunities to accelerate growth, but also -- but again, one of the big focus is profitable growth going forward. So the outlook for various parts of the business may be a little different than previously discussed. One of the big areas I would highlight is we've been so focused on our shipping solutions, that so much attention has gone there that we've probably underinvested and opportunities exist within the mailing business. So I don't want to speak on Todd's behalf, but I think there are some things that we could be doing given our position in the market to help decelerate the decline of the postal business. Again, we're in no -- we have no illusions about the fact that the space is declining, but I think there's things we can do to slow that decline.
Kartik Mehta: And then, Kurt, in your letter, you talked about the Presort business. It seems like some of the smaller competitors might be having some issues. I'm wondering your ability to continue to consolidate that particular business. Are there opportunities? Or is it just better to go get the business on your own and just win the market share?
Kurt Wolf: I'd say we're pursuing an all-the-above strategy. And for some context, July of 2024, there was a significant increase in the work share discount. So profitability across the industry took -- became significantly improved starting in Q3 of last year. So as we continue to talk to potential acquisition targets, given the trajectory of their business, those conversations largely died out. And one of the reasons we do talk about some of the issues we're seeing, we won't get into too many details, but there are signs of financial issues with some of these companies. But we are all of a sudden getting callbacks from companies that 6 months ago, a year ago, we were saying they had no interest in selling. So there's definitely more interest given the way that pricing competition heated up and has depressed margins for a lot of these players as well as for us.
Kartik Mehta: And then just one last question. Maybe just on a free cash flow standpoint, I think you maintained your guidance. So I think that would imply a pretty big fourth quarter free cash flow quarter. Just if you could just walk through how you're getting to that or maybe what some of the puts and takes are for that?
Paul Evans: Yes. This is Paul. Look, I mean, where we're sort of coalescing around is around the $330 million as we sort of stress tested our forecast for Q4, it will come in plus or minus 1% of that. The quarter ended midweek. And obviously, there were payments that came in shortly thereafter the quarter happened. We had a very strong pickup in the first part of this quarter and so that gives us confidence. I mean we still got work to do, but we have confidence that will sort of around the [indiscernible]
Operator: And our next question is from Anthony Lebiedzinski with Sidoti.
Anthony Lebiedzinski: First, just wondering if you guys could maybe just comment -- just curious about the cadence of revenue as you went from July through September, -- were there any variation? I know, Kurt, you talked about the -- some flaws in your forecasting. So just wondering if there was any big variations from month-to-month as you went through the quarter in both of your segments.
Kurt Wolf: Yes. So Anthony, I appreciate the question. No, there's been nothing really that stood out from a month-to-month variance. What really -- the first indication we had is what we're seeing internally, the business is operating well. As an example, within Presort, I believe we've not lost a single customer since June, and we've been picking up businesses -- our business. So as we were progressing through the quarter, it did become a point of question of how are we operating well and not getting the financial results we were looking at. At that point, Paul and I got heavily involved, started to dig into the processes involved with forecasting, identified some process issues, some -- you're an analyst, you do forecasting yourself. There's just a lot that goes into it, particularly when you're at a company. We have access to tremendous amounts of data. Just understanding how we were processing data, assumptions we are making, et cetera. So we've -- so that sort of is what brought it up. It wasn't any sort of monthly variation. It just was the fact that the business is performing well and the financials weren't going as expected relative to budget. So when the operations are doing as well as you expect and the financials aren't quite as strong as you expect, there's clearly an issue with our forecasting. And I can assure you, Paul and I are very serious about this. We both stepped in. This has been a problem that's plagued the company for far too long during '22 and '23. It was something that I talked quite publicly about the problems of forecasting, and it's something that I've now been able to come to understand what the issues are, and we are taking this very seriously. We brought in outside help on it, and we're doing a lot internally to fix this once and for all so that we can be much more accurate in our forecasting. And again, this isn't just about providing guidance. This is we need to make significant investment decisions, business decisions. And if we don't have incredibly accurate data, we're going to end up making worse decisions. So it's unfortunate that we had this issue with our forecasting, but it's emblematic of what we're doing within the organization. We continue to identify issues. We aggressively get after them, fix them, and it makes us a better company for it. So it's frustrating to once again not be able to give great news on the forecasting front like we might have hoped for, but I think we're a better business as we continue to uncover these issues.
Anthony Lebiedzinski: That makes a lot of sense. And then turning to Presort. It sounds like you have been able to win back some previously lost clients. So with that in mind, when would it be reasonable to assume that Presort gets back to sales growth on a year-over-year basis?
Paul Evans: So Anthony, I'll take that question. So I think that assumption right there, and that's one thing that Kurt and I really dug into numbers and we looked at the budget that was the basis of our forecast. The one, it wasn't anticipated that how our competitors would use the sort of, if I can call it a premium on the rate case to sort of go take share from us, and they bought that share. And then obviously, how long does it take to get that back. And so that's -- well, it will come back to us. It hasn't come back to us yet, but we're aggressively going after it. So there's a lapse in time, you lose it, they get with somebody else for a while. We go back in, what can we do better and then there's a bidding opportunity. And so -- and we're close on some to take it back. So I think I'm optimistic about the volumes for Presort next year.
Anthony Lebiedzinski: Okay. That's good to hear. And then thinking about the new cost cuts, the $50 million to $60 million that you talked about, will that -- will those be mostly through corporate unallocated? Or will that flow through the different segments? Just maybe help us understand how to model those cost cuts.
Paul Evans: Sure. I mean it's across the company. So some of them are in the -- for your model in the G&A level, some sort of hit higher up. But we went across all Kurt's leaders looked at that. And so it was really a management-led effort to refine our costs. And through that, we identified some very good opportunities. Look, we'll get to the point where we're always going to look to drive cost out of our business that every healthy company should do that. And this one, I'm new to the role. Kurt is relatively new to the role. He's got a whole new -- relatively speaking, new leadership team. So we challenged everybody as operators to look at what you have and what do we really need really going forward. And so that's what you're seeing here. And these benefits should be all realized by the end of '26.
Anthony Lebiedzinski: Okay. Got it. Okay. And then lastly, just actually just returning quickly to Presort. Given the competitive dynamics there, it sounds like there are some struggling operators. Would those be opportunities perhaps for acquisitions for you? Or do you just want to focus on getting back to sales growth at Presort before you start looking at potential acquisitions?
Kurt Wolf: No. Anthony, these acquisitions are so accretive that we're always looking at them. And by the way, as I said, that's sort of one of the signs that we're seeing that the pricing is really affecting players in the market is the fact that 9 months ago, none of these players -- none of the players had any interest in selling, and we're starting to get inbound calls from people that are looking to potentially sell their business. So it's -- and we're always in the market to make these acquisitions. They just drop to the bottom line. And again, it's one of the frustrations over the volume that we did lose. This is a high fixed cost business in the short term. So losing the volumes that we did, the amount of the profitability that we lost by not retaining those customers was pretty dramatic. So bringing in these new -- if we do make acquisitions, the degree to which revenue drops to the bottom line, particularly given that we now have a little of excess capacity in our facilities is just incredibly high. So we're absolutely in the market to make acquisitions.
Operator: And our next question comes from the line of Aaron Kimson with Citizens...
Unknown Analyst: Kurt, you mentioned in the letter that you recently completed your review of the leadership team. Obviously, there have been a lot of changes at the executive and Board level since you took the reins in May. Are you comfortable with the leaders you have in place now? And then if we think a level down about your direct, direct, do you have any thoughts on when the business may have the continuity you desire and be operating more of a BAU state?
Kurt Wolf: Absolutely. Yes, Aaron, welcome to the call, and thank you for joining. Yes, as far as the leadership team goes, I'm incredibly happy with the -- as Paul mentioned, I have 7 direct reports. incredibly happy with the team we have. It's the right people. Those who are bought into the level of accountability and drive for excellence that we expect of everybody at this organization. Anybody who wasn't bought into that's no longer with the company, at least within the executive team and everybody who is here is 100% bought in. And as you can imagine, anything starts from the top down. So we have the right leadership team. That leadership team -- and by the way, that informed the $50 million to $60 million in cost cuts after I was -- as I work through this process myself, Paul and the rest of the leadership team did the same within their organization. And I think it's really important to highlight that previous cost cuts were an effort by -- largely driven by outside consultants to say, here's an opportunity to reduce costs. This wasn't an effort to reduce cost. This was an effort to get better as a business. This is leaders that are restructuring their organizations I could go division by division, but almost every corporate function and almost -- and business unit has changed their organizational structure to better meet the needs of the business. Within that, they've addressed what processes -- they're addressing what processes don't we need to do and how can we be better on a go-forward basis. So that's really what has driven the $50 million to $60 million of cost cuts. It was not the pursuit of cost cuts per se, but just the -- this effort being pushed down the organization. And again, I feel incredibly fortunate to have the leadership team that I do that's doing such an excellent job of it. I think we have stability within the leadership team. And as they're working with their group, I think stability is developing the next years down. And I would say just as a general comment about Pitney Bowes, I maybe say this too much, but I can't emphasize enough as a shareholder how happy everybody should be with the employees that represent the company that you're an investor in. We've made a lot of changes in the last 18 months, a lot of cost cuts, a lot of challenge to these employees. And everybody shows up with a good attitude every day. Everybody asks what more they can do to help this company. So I know there's been a lot of change. But what I would say is I don't think there's any change needed in terms of the bulk of the employees at the company. We have a great employee base, do a great job. So I think they provide stability even as we've been changing some of the leadership.
Unknown Analyst: That's really helpful. And then as a follow-up, can you dig a bit further into the misalignment of incentives in GFS and how you're approaching the realignment and future of that or?
Kurt Wolf: Yes, absolutely. And yes, so GFS is not its own business unit. It was a loosely organ -- is like I don't even know what you want to call it. It was a part of our structure. And things financial would go through GFS. So you'd have situations and things like this would come up where we would -- so as SendTech would try to sell a meter, GFS would ultimately have approval over the actual credit, the -- because we're leasing these meters, if we were offering them purchase power for revolving credit to use that meter, that was all through GFS. And so what could end up happening is if GFS' attitude was we don't want any credit loss, and SendTech saying this is an incredibly lucrative deal. You had 2 peers essentially looking at each other in a standoff saying we're not willing to -- they created issues. So what we've done is SendTech, ultimately, GFS was reporting through SendTech financially. So Todd now owns SendTech. -- all the credit decision, if something is going on to the SendTech balance sheet, for lack of a better word, the approval of that, it's a business decision by Todd that he can evaluate what's the opportunity in the sale and what's the credit risk before those 2 decisions were differentiated. So it led to incredibly low credit losses in the past, but it also led to a lot of failed sales that would have been profitable. And it's led to a lot of a lot of difficulty in the sales process. So what should be a very seamless customer experience became incredibly difficult going through 2 different organizations that were focused on different aspects of a deal. So it was just -- it was unworkable. It just was really incredibly inefficient. So hopefully, that gives you just one example of a problem that would arise.
Paul Evans: Yes. Aaron, if I could say what it's really -- and somebody pointed this out to me, it's analogous to we were selling the car and also the gas. And so we were okay to sell the car. But then when it came to sell them the gas, the other side said, we don't think they're creditworthy to sell them gas. And that really hit home with me. And so obviously, that inefficiency, that decision now that rests in Todd's world. It doesn't mean that we're going to lower standards that we want to take on excess counterparty credit risk. We won't do that. We'll still be rigor, but we're not going to let this misalignment of interest stop us from servicing a customer.
Kurt Wolf: And not to over harp on this point, but at one point, and this is after we were already trying to fix the problem. I received an e-mail from a customer that had bought multiple meters from us that was complaining that they could not use their meter because they weren't getting approved for the use of purchase power. So I mean it just doesn't make -- it just was really -- and that's what I mean in terms of this opportunity in mailing. We have the best product. We have the best services. We have -- we're peerless in every way, but we are creating a nightmare for our customers. And again, that's what I'm driving at is a lot of this restructuring we're doing is trying to get better as a business and the $50 million to $60 million of savings is a side benefit.
Operator: And our next question comes from the line of Matthew Swope with Baird.
Matthew Swope: Could I go back to Presort? And Kurt, I think you alluded to it, but I think we all maybe underestimated the decline this quarter there. And to see a $17 million decline in revenue drive a $13 million decline in EBITDA and EBIT. I know you talked about fixed cost absorption. But can you talk about sort of how that incremental margin or decremental margin maybe in this case works?
Paul Evans: So okay. So here's what happens. I mean, once you overcome your fixed cost in that business is high-volume business, and you recognize that your labor has a capacity, you can sort of sweat them. Any additional throughput you have from that really is just profit in large part, it just falls to the bottom line. So a decline in that sort of -- that part of the stack will sort of have a direct impact to your EBIT. So it's a very -- certain part of it is a very high contribution margin business. Once you've overcome your cost, then you're really into the land of super high-margin work.
Kurt Wolf: Yes. And Matthew, just another couple of points on that. If you look at our Q3 of 2024 compared to our Q2 of 2024, so sequential, not year-over-year, you can see that impact. The price increase, I believe, hit July 17, maybe in 2024. So almost all Q3 of 2024 had this higher price. And you can look at it, our revenue was up $19.2 million I'm sorry, it was up $19.5 million and EBIT was up $19.2 million. It's essentially -- that was coming -- I guess that was coming through as price. But bottom line, I guess we've seen it on the opposite side with volumes where, again, as these volumes come through -- to use an example, Debbie's system is optimized for a certain level of -- so the rent we pay, the equipment we buy, all of those things are pretty much fixed. As we optimize our system, if we're running 100% volume versus 90%, you still have the same labor force on the work -- on the floor. So maybe there's a small incremental increase in electrical costs or what not or maybe the equipment is going to break down a little faster if you're running it more. But in the end of the day, that lost volume, our contribution margin is incredibly high on volumes. Obviously, as you get to certain volumes, you have to add fixed costs. But at this point, given that we're not fully utilizing our system, it heavily drops to the bottom line.
Matthew Swope: So that comment on price from last July, Kurt, makes a lot of sense. It feels like this was as much volume driven as price though. Could you talk -- maybe if I ask the question in a different way. If the 11% revenue decline, are you able to just roughly break that into price and volume?
Paul Evans: We certainly know what it is. Yes. I mean, look, we had a big loss in volume relative to our budget. And so that, for me, explains most of the story, what's going on. And obviously, we'll see some reversion of that volume in our next year numbers. But it's really more about the volume and how that incremental volume, what that meant to the bottom line. I mean what -- where our mind is on this as we looked is how did our competitors use that rate case, the new funds associated with that rate case. They used it to go out and bid share, and we didn't use it to bid share. And so because of that, we lost volume. We are the low-cost provider. So now what we're doing is, okay, fine. We'll use our position as the low-cost provider to go back and win back that lost volume.
Matthew Swope: So when you talk about the key drivers, obviously, you guys have talked extensively about the prior rigid pricing strategy. What about the comment about broader market decline? What is that piece of the key driver?
Paul Evans: I mean there is a decline in the space. But from decline, you can grow through decline. You do it 2 ways. You can bid share and you can buy share. But through that, you need to make sure that you're the low-cost provider, which we believe we are.
Matthew Swope: I see. So the market decline is just sort of the standard secular pressure that you face in the business.
Paul Evans: Yes that is. But you know we believe we can grow through that...
Matthew Swope: Right. And you guys clearly have done so for many years.
Paul Evans: Yes, we've done that for many years. We've done it through a lot of acquisitions. And as Kurt mentioned, while our competitors, our smaller competitors were enjoying the benefits of the rate case. And so they weren't reaching out to us. Now that sort of worked itself through the system and now they're sort of calling back again. So one of the reasons why we've upsized our revolver. So as those opportunities present themselves, we can move quickly.
Matthew Swope: Great. Can I switch to the capital allocation part of Kurt's letter. One question, Paul, maybe for you. You guys are pretty quickly after the Q2 earnings interaction, you guys did a convertible bond. Could you talk a little bit about the philosophy of doing that convert and sort of where that fits into your capital structure?
Paul Evans: Yes. We wanted to -- it was another market that was open to us, very attractive effective yield on that. That will sort of yield some additional benefits to us. It's known in the market that it will come along with coverage. So we will pick up coverage from a number of firms, but that's not the reason we did it. I mean it's -- the stated coupon is 1.5%. Think back to the time where we had a stated coupon of over 10% on some of our debt. So an attractive opportunity for us in a market that wasn't previously open to us.
Matthew Swope: Do you see yourself doing more in the convert area?
Paul Evans: Not sure yet. I mean, obviously, after this week, I'll be with Alex in New York, and we'll go and meet with all our lenders. And so we'll see. What we're blessed with is lots of options today. And so we'll see. We'll evaluate it, but we don't know for sure.
Matthew Swope: And then also on the debt front, you bought back another $12 million of your 2027, I know, and had an interesting comment about just being in a position to retire that 2027 issue in full at par in March of next year when they become -- when the call price drops. Is that the plan that you would just use effectively cash on hand to deal with the 2027 maturity?
Paul Evans: That's one option to us. We might do it that way. We might do a smaller refinancing. We just -- again, we'll lock down what's our plan in the coming month or so. And then just... We have the liquidity. If we wanted to take it out, we could take it out.
Matthew Swope: Right. And as you continue to sort of weigh debt versus the shareholder cash out, whether it be dividend or share buybacks, how are you -- now that you've been here for a few months or in the seat for a few months, how do you think about giving to shareholders versus reducing your overall debt?
Paul Evans: I look at it on an implied return on investment. Given where our stock is trading, it's a very attractive investment to do that. I mean that's in part why we continue to -- we increased the size of the facility from $400 million to $500 million that we still like that. Obviously, we're value buyers on our debt. And if it hits our bid, we'll buy. Obviously, we know it's going to go to par in a couple of months. So that will open up opportunities for us. So look, I'm looking at that. I'm looking at that. I'm also looking at what is our maintenance CapEx, which is very manageable for us. If there was an actionable acquisition in front of us, we would evaluate that relative to share buybacks. or debt buybacks. But that's not there right now. So with that, our best course of action is to continue to buy back our shares and also where it's economic, we'll buy back our debt.
Kurt Wolf: And Matt, just to be clear, with respect to capital allocation, we're always going to be incredibly opportunistic. One of the things we're pushing as an organization is to be nimble in everything that we do. So we'll evaluate whether the debt market is available, what sort of pricing. We'll look at where our stock price is. Paul mentioned acquisitions. There -- any acquisition we do is almost certainly going to be pretty small in size. So that's not going to be a major use of capital, but we still want to consider that as part of capital allocation. So I would just keep that in mind as we move forward that we're always going to look at how best to maximize that. And currently, one thing that I will say is we believe we can carry a lot more debt based on our outlook for the business than the market does, but we are very cognizant that the market sets -- the market drives everything. So I think the market is comfortable with about a 3.0 leverage ratio that's written into our current covenants. And if that's where the market -- the debt market is for us, then we want to make sure that we're getting below that 3.0 from time to time to reset our covenants, but also just to keep the debt markets comfortable with our level of leverage. But again, we have very strong conviction longer term, we can carry heavier debt. But until the market agrees with us, we're going to make sure that we meet the market's expectations with respect to our debt.
Operator: And our next question comes from the line of Justin Dopierala with Domo Capital Management.
Justin Dopierala: Most of my questions have been answered. I just have a couple. I haven't had a chance to work through all those huge share repurchase numbers you guys have. I'm just wondering, do you have an idea or can you give an approximation of where we stand today as of shares outstanding?
Paul Evans: About approximately $160 million.
Justin Dopierala: Perfect. And then, I mean, lastly, to me, this is a cash flow story. There kind of seems to be an impression in the market that this year's cash flow is sort of a onetime event fueled by the over $100 million you freed up with the Pitney Bowes Bank receivables purchase program, even though that really shouldn't have any impact on free cash flow. Can you confirm this and also confirm there haven't been any material onetime impacts to free cash flow in 2025 that wouldn't be unrepeatable for 2026?
Kurt Wolf: Yes. Justin, so to tick those off, with respect to the receivable purchase program, that does not impact cash flow. It just frees up what used to be restricted cash, makes it unrestricted. So no, our free cash flow forecast is not impacted by that. With respect to any sort of onetime items, Tax assets has come up is something we've talked about. As we look at it, the degree to which we've been able to take advantage of our deferred tax assets, we expect to be able to do for another couple of years. So I don't think that's in the -- at some point, we will -- won't have the same benefit. But for years to come, perhaps 2, 3 years, we expect to be able to recognize the same cash benefit from our tax asset. And then with respect to other onetime items, I don't know if Paul has this number handy, I'm trying to look for it. Working capital is a significant use of cash this year based on our business, I think it's going to be a much larger use of cash this year than it normally would be. So if you were to normalize our working capital in the current year, our free cash flow would actually be a fair bit higher. And just looking at it, $205 working capital please? Okay. So I'm being told that year-to-date, working capital has been a use of $205 million. That will somewhat reverse in Q4. I believe Q4 of last year, we had free cash flow of about $145 million. I'm not saying we'll be exactly there. I guess, based on our guidance, I think it may actually be -- I think we're expecting a higher level of free cash flow in this Q4, but that will be some reversal of that use of cash. So bottom line, if anything, onetime items are actually restraining our free cash flow this year due to working capital as opposed to the opposite.
Justin Dopierala: Got it. So then I mean, based on that and the other things you've announced, the cost savings, et cetera, I mean, it sounds like free cash flow for 2026 should really be greater than 2025 then?
Kurt Wolf: We're not giving guidance for 2026. I would just say, everybody on this call is pretty proficient with Excel. If you look at where we are, you have some sense of where revenue should be, some sense of how that flows through the income statement. Look at the $50 million to $60 million of cost out, and Paul can correct me on this. It should all be done by the end of 2026. The vast majority is being implemented currently and should be done by the end of 2025. So I think the run rate in 2025 is going to be awfully high. So there'll be a significant improvement. I will say just full transparency, there's obviously offsets to that. So I think when you look at merit increases, you look at benefits, some other factors, there's maybe $15 million to $20 million that we're anticipating in additional costs just cost of living adjustments, et cetera. But still, that's a significant cost reduction. And as you say, we haven't modeled it out yet, but this is an unusually high use of working capital this year. So I'll let you draw your own conclusion. But based on all that, I would say that where you're coming out makes a lot of sense to me.
Operator: I'll now hand the call back over to Chief Executive Officer, Kurt Wolfe, for any closing remarks.
Kurt Wolf: Yes. Thank you, everybody, for being on this call. And I just want to make one last comment. I know I say it a lot, and I can't -- but I can't say it enough. As an investor in this company, I hope everybody appreciates the employee base that we have at this company. As I said already, we've gone through a lot of changes at this company. This last round of taking out another $50 million to $60 million of costs. It impacts a lot of people and a lot of lives. And the employee base, like I said, it's impressive. People show up every day ready to work, asking how they can be of help. And just as an investor, hopefully, you have some confidence in the leadership team. But as investors, I hope you appreciate just how special workforce we have here at Pitney Bowes. It's -- the position we have in our markets, the products we have, the services we have is something special, but the employees we have at this company is as well. So I hope everybody appreciates that. And just a special thank you to our employee base for everything they do for us. So thank you all.
Operator: Ladies and gentlemen, thank you for participating. This does conclude today's program, and you may now disconnect.