We’ve moved away from that. So, I’d also say that some of these questions that investors have asked me come from a corporate setting. And I think it’s a different way people operate in a corporate setting versus a small business, we could use it again for loyalty cards in a store. It’s a box insert for small e-commerce or other product sellers. I mentioned QR codes. And so the trends are very different. Overall, other businesses have far less revenue from the business cards National Pen and builds basically nothing in Upload and Print, it’s closer to 5%.
Meredith Burns: Great. Thank you, Robert. Robert, I’ll stick with you for the next question, which is about the Wix partnership. How do you think about digital offerings contribution to the business throughout the course of the year? And where do you think it can grow over the medium term?
Robert Keane: Okay. I’m pretty sure your question is about financial contribution, but I just want to give the context of value proposition contribution. I just mentioned QR codes, we recognize, of course, in this world, the physical digital connection of small business brands is important and in mid-larger businesses. So having the Wix partnership at Vista is very important to be relevant in that world because design and marketing activities very much transcend that physical digital divide. Or increasingly are removing that device. Now financially, we think we have an opportunity to grow in the Wix partnership because we’re now fully migrated off of our legacy product we have in Zero. We’re focused on optimizing the experience of the Wix product, which is an excellent product for customers in the small business space.
And we think we’re offering our customers a product. They like more, but importantly, the retention is strong in customer cash flows for us even after split the split we do with Wix are better. And we’re looking at very successful increases in retention rates. So, again — so far, the transition has been the focus off of the old product we have. Now, that it’s done, the team that’s working on this is shifting their focus to building from here. These are very valuable customers for us. The product is very relevant in today’s world, and we’re optimistic.
Meredith Burns: Thank you, Robert. All right. Let’s shift to Sean. Can you remind us of our software capitalization policy? I love it. Do you expect capitalized software to remain at current levels or moderate given the Vista re-platforming is behind us? And if a moderation is expected, would those outflows no longer be incurred or would they shift back into the income statement?
Robert Keane: Yes. We expect capitalized software to be either flat or slightly lower this year than it was last year. Last year’s level was $58 million. And that’s — last year’s level was down from FY 2022, which was a high of $65 million. From the — in terms of the income statement part of the question, if you’re asking about the GAAP income statement, the costs that we capitalize get amortized into the P&L over three years. And so that reduction in the capitalized software levels from what was that high of $65 million in FY 2022, down to what will be approximately the same as last year, probably a little bit lower to $58 million. That difference will benefit the P&L over time because the amortization happens over time. So that founds a little delayed.
My guess is that the question might be trying to get at whether that reduction effectively would reduce our EBITDA because the cost of those team members is just no longer capitalizable, or is there a true reduction and that won’t have any impact on EBITDA. And the answer there is that the reduction from those FY 2022 levels is primarily due to the cost reductions that we did in FY 2023, which did focus where we’re investing, but also did take advantage of areas where we could make changes post re-platforming. And so you shouldn’t expect the cases that are here at swing back as to EBITDA.
Meredith Burns: Great. Thank you. All right. So, we’ve had a live question here. And I think Robert or Sean will do a great job answering it. How are you leveraging technology data and AI and Gene learning to improve customer experiences and drive growth across your lines of business?
Robert Keane: Yes. So, one, we’re doing a lot. I’ll give a few examples now. I’d really encourage you to go to our most recent Investor Day, it’s all online at our IR site where both the slides. But if you look at the script or watch the video, you really get a good sense in much more detail that I can go into today. But let me just touch a few points. Data is very important. Martin, our CTO at the group level, [Indiscernible] at the Vista level and you spoke about technology and data in a great extent. We have literally millions of enrichment where we improve the quality of data at our customers and over 80 billion specific events that happen in upload and order payment, et cetera, which all goes into our data systems. We use machine learning in many different areas.
We started at three, four, five years ago in early examples of how do you make graphic uploads higher resolution, how do you do background knockouts over time that’s gotten much broader than what we were doing back in FY 2020. And today, we’re doing things like having insights into the designs. Our customers are uploading AR-powered ten-fleet galleries, the AI information or capabilities we have behind things like logo maker are all based to getting machine learning. We’re moving into generative AI work for suggesting graphic design improvements, design quality insurance, customer service and a lot of other ways. So, again, that’s a brief and rapid list of some of the things we’re doing. I’d encourage you to look at our Investor Day to get more detail.
Meredith Burns: Fantastic. Thank you, Robert. All right. We have one more question that is on capital allocation. So, Sean, get ready, would you consider buying back term loan B seeing that the total interest on TLB is higher than the bonds, which are 7% fixed? We had a couple of questions like that.
Sean Quinn: Sure. And we’ve had a couple of questions like this in recent quarters. So the answer will be very consistent with what we’ve said in recent quarters. As of — at the end of September, the weighted average interest rate on our term loan B that was just under 8%, 7.9%, inclusive of swaps. And so the non-hedged portion of that was higher. So, yes, the current rates are higher for our term loans, which were at variable rate, and that’s higher than the 7% coupon on our bonds. But our bonds were trading at a deeper discount our loans. So, when you look at the yield, the yield has been much higher for bond repurchases. That was the case in Q1. To put that in perspective, during the window that we were buying in Q1, our bonds traded between 93% and 94%, and our average purchase price was 93.6% or so.
And the U.S. dollar tranche of our term loan B traded closer to part. So that discount was not there. The yield to maturity on our bond repurchases in Q1 averaged a little bit under 10%. Although if you assume that we refinance our bonds in advance of the maturity, then the actual yield goes up from there. The bonds also mature two years before the term will be. So, we take term into account when we’re trying to make these decisions as well. It’s not out of the question that we would buy term loan B, but these are some of the factors that we consider, most notably yield and term. There are some others too. And so we’ll continue to look at that and also the direction of interest rates, which obviously is an important input to this.
