Better stated, the TAM for us is beyond just the core that everybody sees as our core business. We need to execute and grow inside of our client accounts with products and services that we already have. And we’re seeing evidence of that with new signings.
Erik Woodring: Okay, super. Thank you. Very helpful, Steve. Xavier, if I maybe turn to you, can you maybe help us all better understand maybe the trajectory of gross margins relative to OpEx in 2022 to kind of land at that 7.5% operating margin target? And I just asked because, you know, depending on how we think about gross margins, you know, we are looking at a — as a percentage of revenue, fairly significant reduction in OpEx. I understand you announced the RIF on January 2, but it would imply revenue as a percentage of OpEx that is quite low? And so, really just want to better understand how to think through some of those dynamics and how much you might be reinvesting on the other end? So just all of that collectively, if you could help us understand that for next year or this year 2024, please?
Xavier Heiss: Yes, Erik, you got the big picture here. So what we are expecting is a slight expansion of gross margin. This is just to — I would say via all the actions that we have put in place, that we have supported or enabled a lot of pricing actions that have driven some margin expansion this year, but next year as well, we will have some expansion of gross margin. And also, as we mentioned it, we are exiting or reducing some low profitability revenue. We mentioned paper, I mentioned also IT endpoint solution with lower margin and we are offsetting this margin or this revenue reduction by other type of revenue stream with a higher profitability. OpEx is clearly the area with improvement and you have already been able to measure it this year.
If you look at SRI specifically with the PARC donations that we have done, it’s a significant improvement year-over-year and it reduces RD&E amount that we had related to PARC by more than 100 basis point here. When you look at the trajectory we will have on SAG with the restructuring here, then this will be the main driver of the operating margin — adjusted operating margin improvement year-over-year. So 190 basis point are based on action that we have already either announced on actioning or actions that were taken last year on the back end of last year where we would see the benefit on the flow through. So, the key point. The key point behind my message here is that the dependency on the revenue trajectory, it is less than on us executing the cost actions.
Steve Bandrowczak: Yes, Erik. the other thing I’d like to add, because we always get the question, you did the big actions with Own-It, now you’re doing reinvention. And so in the beginning of the year, we really looked at all of our end to end cost structures, whether it was it finance, whether it’s SG&A, what we did with sales coverage, et cetera. And when you look at that against industry benchmarking, look at that against opportunity to where we can drive this company, that’s where we’re confident. We still got a lot of work to do to simplify this business. Whether it’s around the number of systems we have, number of processes we have, the variations in different ways in which we do business. So when we look at it, just from a pure benchmark standpoint against other companies and industries, we’ve got a lot of opportunity ahead of us.
Obviously, we got to execute. We’ll execute that through the next 24 to 36 months, but there’s still a lot of room for us. And that’s really where we put GBS in place. GBS is really focused, our global business services is really focused on looking at each and every one of those end to end processes, looking at the cost that we’re using and that we’re expending in each one of those processes. How do we simplify it? And then think about how do we automate and how do we drive technology. We see AI, we see chat-GPT, RPA, robotics process automation, and the simplification of our business as a significant opportunity to grow those margins in the future, independent of their revenue line staying flat or a slight decline. So we’re very, very optimistic that we can execute and we can drive and we’ve got a lot of room in our cost basis to make this company a lot more efficient.
Erik Woodring: Super. Thank you for that incremental color, and Xavier at the beginning for that. Maybe one last quick question, and that was on capital allocation. Obviously, we didn’t really hear about buybacks, and so just want to make sure I kind of understood those priorities right and that we should not be thinking about any buybacks being done in 2024? And then that’s it from me. Thank you.
Xavier Heiss: You are correct.
Erik Woodring: Okay. Thank you so much.
Operator: Thank you. This does conclude the question-and-answer session of today’s program. I’d like to hand the program back to Steve Bandrowczak for any further remarks.
