Q1 2022 DXC Technology Co Earnings Call
Okay.
Good day, Thank you for standing by and welcome to the extra day technology Q1 fiscal year 'twenty 2 earnings conference call. At this time, all participants are in a listen only mode.
After the speaker's presentation, there will be a question and answer session to ask a question during that session you will need to press star 1 on your telephone keypad. As a reminder, there is a limit of 1 question per analyst. If you require any further assistance. Please press star zero.
I would now like to hand, the conference over to your Speaker today, Mr. John Sweeney, Vice President of Investor Relations the floor is yours.
Thank you and good afternoon, everyone I'm pleased that youre, joining us for Dx C. Technologies' first quarter 2022 earnings call. Our speakers on the call today will be Microsoft Vino, our president and CEO and Ken Sharp, our executive Vice President and CFO. This call is being webcast at <unk> Dot Com slash investor.
On the webcast include slides that will accompany the presentation today.
Today's presentation includes certain non-GAAP financial measures, which we believe provide useful information to our investors in accordance with SEC rules. We provided a reconciliation of these measures to their respective and most direct comparable GAAP measures. These reconciliations can be found on the tables included in today's earnings release on on the web.
Slide certain comments, we make on the call will be forward looking statements. These statements are subject to known on uncertain risks and uncertainties, which could cause actual results to differ materially from those expressed on the call a discussion on these risks and uncertainties is included in our annual report on form 10-K and other SEC.
I'd now like to remind our listeners that <unk> technology assumes no obligation to update the information presented on this call except as required by law on with that I'd like to introduce Dx C Technologies', President and CEO, Mike Salvino, Mike Thanks, John and I appreciate everyone joining us.
Call today, and I Hope you and your families are doing well today's agenda will begin with a quick update on our solid Q1 performance, which continues to show that revenue adjusted EBIT margin book to Bill and non-GAAP EPS, all have a positive trajectory compared to past quarters.
During our Investor day in June we gave you additional insights into the steps of our transformation journey and those depths are inspire and take care of our colleagues focus on our customers optimize cost sees the market and build a strong financial foundation.
I will give updates on each step and then hand, the call over to Ken to share our Q1 financial results guidance and more details on how we are building a strong financial foundation finally, I will make some closing remarks before opening the call up for questions.
Regarding our Q1 performance our revenues were 4.14 billion and our adjusted EBIT margin was 8%. This represents the fourth straight quarter of both revenue stabilization and sequential margin expansion and we expect both trends to continue in Q2.
Book to Bill for the quarter was 1.12 this is the <unk>.
Fifth straight quarter that we have delivered a 1 point or better book to Bill and we expect our success of winning in the market to continue in Q2.
Our non-GAAP EPS was <unk> 84 cents in the quarter, which is up 300% as compared to 21 that we delivered in Q1 of FY 'twenty 1.
The positive trajectory of all 4 of these numbers gives us confidence that our playbook is working as a refresher our playbook has 3 phases. The stabilization phase was completed in FY 'twenty..1 this phase enabled us to make great progress with our colleagues customers on revenue.
<unk> margin book to Bill and reducing our debt.
We are now focused on the foundation phase. This phase focuses on the steps that will allow us to deliver growth. The goals of this phase are first continue to increase our employee engagement all while we attract and retain highly talented colleagues.
Stabilized year on year organic revenue.
Third expand adjusted EBIT margins for consistently deliver a book to Bill number of 1 point or greater with a nice mix of new work in renewables and finally under Ken's leadership deliver a financial foundation that increases discipline and improves our cash flow and earnings power.
Now I will discuss the good progress we are making on each step of our transformation journey, beginning with inspire and take care of our colleagues.
We are executing a people first strategy, attracting and retaining talent is fundamental to enable our growth. Our refreshed leadership team has deep industry experience and is delivering Brenda who is our chief marketing officers. Our newest addition, Brent as a strategic results oriented leader who brings.
Deep marketing experience to DXP set.
75% of our leadership team is now on new to <unk> and bringing in talent based on their personal credibility as talent follows talent.
What the team is finding is that the new <unk> story is resonating in the market and new hires are wanting to join <unk> because they see the opportunity to progress their careers with a company that's on the right trajectory.
We mentioned during our investor call that nearly 50% of our vice presidents across the company are new to <unk> within the last 22 months.
Also we are investing in our people this quarter, we rewarded high performance by paying annual bonuses that benefited roughly 45000 of our colleagues.
In Q2, we are planning merit increases that will benefit roughly 77000 of our colleagues. In addition to these investments we are doing a great job of taking care of our colleagues and their families. During the pandemic.
This focus on our colleagues is unique and builds trust with them increases employee engagement allows us to compete for talent and enables us to deliver for our customers.
Focus on our customers as the second step of our transformation journey, our investment and our customers is the primary driver of revenue stabilization.
During the Investor day presentation, I couldnt be more proud to have you here from American Airlines, Fedex PNG, Lloyds Brighthouse Deutsche Bank, Campbell's and Microsoft and I want to thank them again for their support and partnership.
It was clear from their comments that the new <unk> story is resonating with them because we already delivery.
These are all large global companies and they are saying that their IP as states are important in fact, they use the word critical our strategy of delivering services builds customer intimacy and develops trust that when our customers want to further transform their business they turn to us.
And allows us to move them up the enterprise technology stack additional.
Additional evidence that our strategy is working as the nice progress we have made on our GBS business, along with the cloud and security layer of our Gis business. All of this gives us confidence that we will deliver on our financial commitments now, let me turn to our cost optimization program.
We continue to do well optimizing our costs and delivering for our customers without disruption. We are focused on 4 cost levers which are contractor conversion.
Real estate scaling our <unk> and automation through platform acts. These levers have helped us expand our margins going from 7.5% last quarter to 8%. This quarter you will hear from Ken that we expect to continue to expand margins in Q.
You too.
Next sees the market is where we are focused on cross selling to our existing customers and winning new work. The 112 book to Bill that we delivered this quarter is evidence that our plan is working in Q1, 57% of our bookings were new work and 43% were renewals.
You will see that we are running specific sales campaigns.
An example of these campaigns is Ato monetization, which is focused on improving the performance of our customers as states. Another example is our campaign to show our customers how to think about cloud, which combines on prem private cloud and public cloud technology.
Our ability to deliver a consistent book to Bill of 1 point in each of the last 5 quarters is evidence that these sales campaigns are working and that we can win in the it services industry. This momentum and success in the market gives us confidence that we will deliver another book to bill of 1 point or greater.
In Q2, now let me turn the call over to Ken.
Thank you, Mike turning to our financial performance on Slide 12 for the quarter DXP exceeded the top end of our revenue margin and earnings guidance and continued to deliver a strong book to bill.
GAAP revenue was $4, $1.4.010 billion higher than the top end of our guidance range adjusted.
Adjusted EBIT margin was 8% in the quarter, an improvement of 380 basis points as compared to the prior quarter.
In Q1 bookings were $4.6 billion for a book to Bill of 1.1 to the.
The fifth straight quarter of a book to bill greater than 1.
Moving on to Slide 13, our Q1 non-GAAP earnings per share was <unk> 84.
Or <unk> higher than the top end of our guidance benefiting <unk> from a lower tax rate restructuring and tsi expenses were $76 million down 58% from prior year.
Free cash flow was a use of cash of $304 million as compared to a use of cash of $106 million in the prior year, we expect free cash flow to improve significantly as the year progresses.
As the next slide shows our Q1 FY 'twenty 2 performance continues our trajectory as we deliver on our transformation journey, starting with organic growth progression. We went from approximately 10% declines in the first 3 quarters of FY 'twenty 1 to down.
6.5% in the fourth quarter and now down to a decline of 3.7%.
This is a 40% improvement from the prior quarter.
Let me highlight our organic revenue growth calculation and our prior year earnings releases was structured to provide the year over year deconstruction of revenue changes into FX acquisitions dispositions and organic compared to prior period GAAP.
Revenue.
Our previous organic revenue growth calculation was not performed in this manner. As a result, we have revised organic growth rates for the prior year periods and our earnings deck and have further supplemented our organic calculation to include all the information to support the calculation.
Providing you complete transparency.
This change does not yield a meaningful difference to our historically reported organic revenue growth rates trajectory or guidance.
Adjusted EBIT margin expanded 380 basis points, excluding the impact of dispositions margin expanded almost 600 basis points. We continue to win in the market with 5 consecutive quarters of a book to bill greater than 1 and lastly non-GAAP.
Earnings per share quadrupled.
Now moving to our GBS business composed of analytics and engineering applications and business process services.
Revenue was $1.9 billion in the quarter organic revenue growth was positive 2% as compared to prior year in terms of quarterly progression organic revenues declined about 6% to 7% in the first 3 quarters of FY 'twenty 1 declined 3.4.
<unk> in the fourth quarter and turned to positive 2% this quarter.
GBS segment profit was $272 million with a 14, 4% profit rate up 450 basis points from the prior year.
GBS bookings for the quarter were $2.4 billion for a book to Bill of 129.
As you've seen for a number of quarters the demand for our GBS offerings. The top half of our technology stack have been quite robust and now yielding positive organic revenue growth.
Turning to our Gis segment, consisting of outsourcing cloud and security and modern workplace.
Revenue was $2.3 billion down 9.1% year over year on an organic basis, we are seeing the rate of decline moderated this quarter. Despite the headwinds from our modern workplace business.
Gis segment profit was $131 million with a profit margin of 5.8%, a 480 basis point margin improvement over the prior year quarter.
Gis bookings were $2.2 billion for a book to Bill of <unk> 97, compared to 0.77 in the prior year.
It is safe to say revenues continue to stabilize and demonstrate that with improved customer intimacy and delivery. Our revenue is not running away, allowing us to build our growth Foundation.
Now I will break down our segment results GBS and Gis into the layers of our enterprise technology stack, starting with GBS analytics and engineering revenues were 482 million up 12, 9% as compared to pre.
Per year.
We continue to see high demand for our offerings with a book to Bill of 132 in the quarter.
Applications also continued to demonstrate solid progress with revenue of 124.6 billion growing organically almost 1% applications also continues its strong book to Bill at 132.
Business process services revenues were $118 million down 13% compared to the prior year quarter with a book to Bill of 113 <unk>.
Cloud and security revenue was $549 million up 4.9% as compared to the prior year.
The cloud business is benefiting from increased demand associated with our hybrid cloud offerings book to Bill was <unk> 85 in the quarter.
It outsourcing revenue was $1.1.3 billion down 9% as compared to prior year.
To put this decline in perspective last year. This business declined almost 20% year over year. We expect this momentum to continue an organic declines to further abate as the year progresses.
Modern workplace revenues were $577 million down 19, 7% as compared to prior year book to Bill was 1 point <unk> in the quarter.
As you May recall modern workplace was part of our strategic alternatives and was not part of our transformation journey until recently.
As a result, we previously disclosed that the performance would be uneven as we invest in the business enhancing our offerings.
In innovating the end user experience as our transformation journey takes hold we expect modern workplace performance to improve similar to the trend we have seen with our <unk> business.
1 of our key initiatives to drive cash flow and improve earnings power is the wind down restructuring in tsi cost, we expect to reduce this from an average of $900 million per year over the last 4 years to $550 million in FY 'twenty 2.
And about $100 million in FY 'twenty 4.
On slide 19, we detail our efforts to strengthen our balance sheet. We are proud of what we achieved on this front and reducing our debt by $7 billion, while improving our net debt leverage ratio to 0.9 times.
Further we have reached our targeted debt level of $5 billion with relatively low maturities through FY 'twenty 4.
From our improved balance sheet, let's move to cash flow for the quarter.
First quarter cash flow from operations total to an outflow of $29 million free cash flow for the quarter was negative $304 million.
As you likely realize with Mike's leadership, we will continue to make decisions to better position the company for the longer term, creating a sustainable business certain of these decisions impacted cash flow this quarter.
As our guidance anticipated we plan to take certain actions that impacted the Q1 cash flow we remain on track to deliver our full year free cash flow guidance of $500 million.
Let's now turn to our financial priorities on Slide 21, we are working to build a stronger financial foundation and use that base to drive the company forward in a disciplined and rigorous fashion unleashing Dxp's true earnings power.
Our second priority is to have a strong balance sheet, we achieved our targeted debt level. We are encouraged by our almost 50% year over year interest expense reduction we continue to focus on reducing interest expense and are evaluating refinancing options given the advent.
Pages interest rate environment.
Third we will focus on improving cash flow.
During the quarter, we paid $88 million to draw the conclusion, a long standing 3 billion dollar take or pay contract for it hardware. These types of contracts are not efficient and we are reducing our exposure.
Additionally, we paid down $300 million of capital leases and asset financing in order to allow us to dispose of it hardware purchased under the previously mentioned take or pay arrangement and realize a tax deduction. Once we dispose of the unutilized assets.
Given our relatively low borrowing cost it makes less sense to enter into capital leases as the borrowing costs are higher and creates other complexities, we continue to reduce capital lease and asset financing origination from approximately $1.1 billion in <unk>.
Why $20 million to $450 million in FY 'twenty, 1 and believe that we will remain at that level or lower for FY 'twenty 2.
As we continue to curtail capital lease origination our average quarterly lease payments will reduce from about $230 million a quarter in FY 'twenty, 1 to about $170 million near term our efforts to limit capital leases does create.
Upward pressure on capital expenditures, though on balance we expect to reduce cash outflows for both capital leases and capital expenditures overtime.
Lastly, we terminated our German AR securitization program negatively impacting cash flow by $114 million for the quarter going forward. This will result in interest savings strengthen our balance sheet, but more importantly, it will bring us closer to our customer.
As cash collections is tied to their success.
Fourth we will reduce restructuring in tsi expense, improving our cash flow.
Fifth as we generate free cash flow, we will appropriately deploy capital to invest in our business and return capital to our shareholders. All the while continuing to maintain our investment grade credit profile during the quarter, we executed 67 million of stock buyback.
To offset dilution taking advantage of what we believe was an attractive valuation in the market.
I should note, we continue to make progress with our efforts to optimize our portfolio unlocking value as we divest non core assets, including both businesses and facilities we.
We expect to continue these efforts our results today include the benefit from the sale of assets, partially offset by other discrete items and the headwind of 30 basis points of margin associated with the disposition of our health care provider software business.
Moving on to second quarter guidance on slide 22.
Revenues between 4.08 billion and $4..1 3 billion. This translates into organic revenue declines of down 1% to down 3%.
Adjusted EBIT margins of 8% to 8.4%.
Non-GAAP diluted earnings per share in the range of 80 to 84.
As we look forward to the rest of the year I would note that we expect a $175 million of tax payments in Q2 related to the gains on dispositions. We also updated our FY 'twenty 2 interest guidance to approximately 100.
80 million, a 20 million dollar improvement.
<unk> reduced our full year non-GAAP tax rate by 200 basis points to 26%.
As noted on slides 23, and 24, we are reaffirming our FY 'twenty 2 and longer term guidance lastly, we expect to see further improvement in the quarterly year over year organic revenue growth rates as we move through the year with.
That I will now turn the call back to Mike for his closing remarks.
Thanks, Ken Let me leave you with 3 key takeaways first I couldnt be more pleased with the trajectory of the business our improvement in revenue margins and EPS is evident and we expect this success to continue.
Second we have momentum and continue to win in the market. We expect our progress in driving a book to bill of over 1 point, though to continue.
Third our financial Foundation is coming together nicely under Ken's leadership, we have made great progress on debt reduction, reducing our restructuring and tsi expense and delivering on our capital allocation priorities.
These 3 key takeaways show that we have good momentum we are building the foundation for growth and we are confident that we will deliver on our financial commitments with that operator. Please open the call up for questions.
As a reminder to ask a question you will need to press star 1 on your telephone keypad.
That is star 1 on your telephone keypad.
You have your first question coming from the line of Bryan Keane from Deutsche Bank, You May ask your question.
Hi, guys.
Just wanted to ask when we look at that enterprise stack.
When we go towards positive organic growth can you just kind of walk us through there the big change items, Mike I guess, it sounds like IPO becomes even less of a drag and just thinking about the components there to get to the positive organic growth in the future.
Thanks, Bryan So when you look at the stack, let's just take Gis and GBS the drivers that you'll see is in Gis.
<unk> like Ken said is not only stabilizing but it's going to get better throughout the year.
And that's because look we're focused on taking care of our customers as states, which they think are incredibly important when we do that I've been very consistent that will build customer intimacy. When we build that customer intimacy. They will turn to us for new work. That's why the book to Bill continues to be over 1.
Point out so what we're seeing in that space as we are seeing the need in the states to do the maintenance and then like I said, we're running sales campaigns to move them to the cloud. If you go back to our Investor Day, Both American Airlines for example, along with Fedex talked about us move.
<unk> them to the cloud and we think cloud it will be a combination of on Prem.
<unk> and public those are the 3 technologies will put together so when I think Gis those businesses are going well.
What we have there is we have to continue to turnaround modern workplace.
And thats going to be on the same path.
<unk> business was that's why I like when Ken was saying that a year ago <unk> was roughly 20.
Negative 20, and now it's -9 we expect workplace to do something similar and we've talked about moving up the stack you can see our numbers in GBS analytics and engineering outstanding Alright that growth there.
Not only is good but we expect it to to continue with the book to Bill at 132, and then same with applications applications should continue to get better.
So Bryan look that's the way we're looking at the business.
The.
The focus is continue to move our clients up the stack.
And the biggest thing there is making sure that we take care of not only what they have today, but also where they want to go tomorrow.
Yeah.
Your next question is from Lisa Ellis from Martha Vinson, you May ask a question.
Good afternoon, thanks, guys.
Bester day, you reiterated that DXP is focuses on your 175 platinum accounts the ones that generate about 2 thirds of your revenue can you give a sense for the health of those accounts like relative to the overall comp.
Any wide organic revenue decline of 4% or are they performing better than that how much better are they growing many of them growing with you now can you just give us a little bit of color of what's going on with those accounts. Thank you.
So at least on those accounts are the ones that are driving our revenue stability.
Those are our biggest accounts what I said on Investor day is that like I said, we're focused on making sure that we deal with not only the <unk>, but also them moving up the stack. So those are the accounts that are focused on when I look at our new management team.
In terms of stabilizing our business. So they are driving the majority of this stabilization that's what I would tell you there, but the other thing that's key is the 57% of the new work that we're now getting.
And that new work is usually also Lisa on those accounts, we are getting some new labels, but our focus is on those platinum accounts.
Next question is from Keith Bachman from BMO capital markets. Your line is now open.
Yes, Thank you for taking the question.
Wanted to.
Follow up question with the affirmation of both your 'twenty, 2 and 'twenty for guidance as I think about this year Theres a lot of moving parts to both the revenue on the costs, but even if we look at.
Say FY 'twenty 3.
You're intimating is that revenues will continue to flatten out indeed, just call it flattish and yet margins will continue to expand.
How do you how do you balance that as you as you're working through the cost actions that presumably help this year, but as you think about the next 2 years on particularly.
At the end of this year, how do you continue to expand margins with revenues flattish.
When presumably a lot of your restructuring activities will have run the course, thank you.
So Keith 1 of the if you go back to our 4 cost levers are for cost levers or contract contract conversion real estate.
The scaling of the <unk>, that's our global innovation delivery centers and then the final 1 is the automation what was never done with this business is first of all we're very focused on making sure that we replaced contractors with our own people.
And we think we've got a substantial.
Chunk that we've taken out of that and there's more to go real estate. We will continue to look at 1 of our strategies is to implement a distributed workforce. That's 1 of the things that we like about our modern workplace solution, we're implementing our own modern workplace solution on ourselves and therefore were.
And his leadership to drive down our real estate costs. So that will also continue.
Now on the last 2 are the keys, because as you stabilize all of these customers and you don't have service delivery issues anymore. In fact, our customers say our delivery is silent now which means we're performing that's when you can take the next 2 clicks.
The operations in the first 1 is you got to scale.
Centers and in the past we had not done that so what youre seeing is we've got roughly around 20 key global information our innovation delivery centers Thats, what we are scaling and then on top of that.
Platform acts as where we're automating a lot of that manual work away. So when I look at those 4 levers those are the 4 levers that will drive us towards not only delivering on our 'twenty 2 commitments, but also on our 24 commitments.
Yeah.
Next question is from the line of Rod bourgeois from deep dive. Your line is now open.
Hey, guys I wanted to look at your stack slide and ask about the workplace business with that.
Negative 19, 7% organic growth I assume that business's sales process had stalled some.
When it was up for sale and I would now like to ask you a bit more about your outlook for that business in.
The levers that you have to to make its trajectory more like the rest of the IPO business debt, where you're making progress you had this big partnership with Microsoft and there's been some recent press on that yet.
Business is shrinking quite a bit so it would be helpful to get some more color on what youre seeing in that business and the levers that you have thanks.
Okay Rod so first let's start with what happened with that business. So that was 1 of the businesses like bps that we put into the strategic alternatives to remind everybody and look let's be Frank whenever you do that you lose a level of.
Customer support and Thats, what happened to us last year, when we put that business.
Into that state and the key thing now is we fully expect that that will follow the same similar path as Ato.
So think about it Ato last year minus roughly -20% now it's -9 and continually to.
<unk> trending in the right direction and it hovered in the sort of the mid teens negative mid teens last year, that's what I see modern workplace doing.
Throughout this year and then turning now.
The key shoots are these the Microsoft relationship is important to US and we also are seeing good traction in the marketplace in terms of our pipeline, but 1 point.
That we showed here is good I expect that to continue second is the solution I think is second to none that's why I'm implementing it for our own people and then third going back to the cost levers. The main cost levers. There is that we have already replaced the leadership the.
On the second thing is again, we're focused on the contractor conversions and then scaling our delivery and looked that playbook has worked across this entire business I don't know why it wouldnt work on modern workplace. So I have confidence that we will definitely turn that around.
Next question is from Bryan Bergin from Cowen Your line is now open.
Hey, good afternoon. Thank you on a question on the hiring environment. So given the tightness that we've heard peers experiencing can you comment on your confidence on hitting the head count targets in your global delivery centers and any changes in the cost that you're experiencing around that versus the prior plan.
So on the cost no no change in cost 1 of the things I continue to highlight as us implementing our people Ford strategy, which is unique in this industry. You hear me talk about our colleagues all the time, because we believe talent wins in the market and retaining our best people is is it.
Incredibly important so if you think about the.
The environment that we're in first of all on the new <unk> not only story, but culture is resonating in the market.
Think about I've replaced 75% of our leadership team and again talent follows talent, along with 50% of our vps across the company.
Our new since I joined so.
Just that alone is bringing in a lot of good talent that we need.
To run the business now when I look at as we move up the stack look we are seeing.
Competition for analytical skills for application skills and for cloud skills, just like everybody else, but we are definitely getting our fair share of those to support our clients. So I still feel very confident looking at our talent across the board that we will compete very well on this space for <unk>.
On.
Next question is from the line of Darrin Peller from Wolfe Research. Your line is now open.
Thanks, guys looked a little higher level I mean, it's really good to see the book to bills coming in at this level consistently now for several quarters above 1.
Over $1, 1 this quarter and if you break down again, the new and the renewals, but also pretty constructive I think over 50% new business.
I mean, just the dynamic that gives you so much conviction on that continuing is it bill.
On the demand in the environment I.
I guess, if you could just give us a sense Mike of what you're most proud of is the top of the list of whats really winning the most resonating the most with incremental new logos right now maybe just if you could touch on the top few right now that is really doing it.
Well I mean, the biggest thing is.
We are delivering for our existing clients. The biggest thing when you look at this space as reference ability and when you deliver for those clients those clients talked to other folks that allow us to win new logos and I. Appreciate your comments about the $1.1 2 book to Bill because.
That is not only key to showing that we're winning in the market, but that mix is also important because that mix is always going to have renewals, which means clients are still wanting to do work with us and then new work on either existing clients or new clients. So when I think about the key thing that we are.
Doing in the market as we've embraced Ato.
There's a lot of people that have an embraced ato we've embraced that because that is critical and important to our clients. So if it's important to them. It is important to us and we are delivering.
I also talked on Investor day, and continue to talk about customer intimacy showing up and listening to these customers resonate in the market and Thats, what I keep talking about in terms of the new Dx now that gives us a chance to do cloud to do the applications work to do the.
The analytics work and look I'm very proud about not only stabilize in the Gis business. When you look quarter to quarter -9.3 to -9.1 but the key thing is look at GBS -3.4 last quarter positive 2% this quarter.
And we expect that that's going to continue so the strategy that we've put in place is absolutely working and gives us real confidence to not only deliver for Q2, but also our short and long term plans.
Last question comes from the line of James Faucette from Morgan Stanley You May ask your question.
Hey, this is Jonathan on for James you touched on costs earlier in response to Brian's question, but can you talk to your ability to pass on any potential wage pressure, perhaps in the form of Cola our clients receptive to these pricing dynamics.
I mean look coal is a pretty standard term within this industry. So we haven't had any issues in terms of getting colo.
And in terms of passing price pressures on.
Look we're incredibly competitive in this market across the entire stack. So I don't see that being an issue for our margin whatsoever.
That ends our question and answer session I will turn the call back over to the presenters.
So look I want to thank everybody for joining the call today.
Pleased with the momentum we've achieved in Q1 and we are confident that that momentum will continue also we're very excited about the future of <unk> because of the positive trajectory of the business and we look forward to speaking with all of you in Q2.
For our earnings and all the best to you and your families and operator, please close the call.
That concludes today's conference call. Thank you all for participating you may now disconnect.
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