Q3 2022 Softwareone Holding AG Trading Statement Call

Speaker 2: Ladies and gentlemen, thank you for standing by and welcome to the Q3 Training Update Conference Let's go! At this time all participants are in Liston Hollywood.

Speaker 2: After the speaker presentation there will be a question and answer session.

Speaker 2: To ask a question, you will need to press star 1 and 1 on your telephone.

Speaker 2: I would now like to end the conference of your speaker today, Hannah Hengel.

Speaker 3: Please go ahead.

Speaker 4: Good morning and thank you to everyone for joining SoftwareOne Q3 2022 trading update. My name is Anna Englund, Head of Investor Relations at SoftwareOne and joining me today are Dieter Schlosser, our CEO and Rudolfo Stavisky, CFO . Before handing over to Dieter, let me draw your attention to the usual disclaimer regarding forward-listen statements and non-IFRS measures.

Speaker 4: on slide two.

Speaker 4: With that, I will hand over to Dieter.

Speaker 5: Good morning. I'm pleased to welcome everyone to our Q3 trading update.

Speaker 5: We had a strong third quarter with our integrated model of software, cloud and services continuing to deliver across our markets.

Speaker 5: Cross profit for the group was up 17% in constant currencies to 216 million ZR.

Speaker 5: Both business lines contributed to this double-ditch growth, with software and cloud posting a particularly strong quota.

Speaker 5: This performance is a clear indication that we are well positioned and are meeting the needs of our customers as they prioritize digital transformation despite an increasingly challenging macroeconomic environment.

Speaker 5: A adjusted FEDA was 45 million Swiss Rengt, implying a margin of 20.8% or 2.7% higher than last year. This is a solid level of profitability considering the usual seasonality. The improvement was driven by continued cost discipline and cross-profit growth.

Speaker 5: Our clear focus is on profitable growth with adjusted FBA up 30% growing significantly faster than our top line. Based on our nine months performance and robust outlook, we are on track to meeting our targets for the full year, which are mid-teens cross-profit growth and an adjusted FBA margin above 25%.

Speaker 5: Finally, I am pleased to announce that we will launch a share buyback program of up to 17 million Swiss Rents.

Speaker 5: This is fully in line with our growth strategy and balanced capital allocation framework presented at the H1 results in August . Our growth opportunity remains strong and investing in the business will continue to be our first priority.

Speaker 5: However, we see scope for further enhancing shareholder value by returning additional funds. Rodolfo will take you through the details of the buyback program later on.

Speaker 5: Moving on to our recent performance.

Speaker 5: All four regions contributed to our strong cross-profit growth. Noram and Latam continued to deliver double-digit growth on the back of good results in Microsoft. EMEA also delivered a strong performance led by services including the contribution from the acquisition of Predica.

Speaker 5: APEC dipped slightly below double digits in Q3 at 9% compared to a strong quarter last year. On a nine month basis, growth in APEC was 14.3% and in general we see a strong demand environment in the future.

Speaker 5: this region. So as you can see the good momentum that we have seen from the beginning of the year has continued. Fundamentally our customers continue to invest in cloud-based solutions to manage complexity and increase the flexibility, agility and security of the businesses.

Speaker 5: giving us confidence in our ability to leverage a structurally growing market over the midterm.

Speaker 5: However, we also note that some customers, particularly in the public sector, are taking a more considered approach to their investments.

Speaker 5: They are more focused on moving to the cloud in a cost optimized way, a journey we are also well placed to support. As a reminder, public sector accounts for approximately 15% of our cross-border.

Speaker 5: Diving into the performance of each of our business lines, solution and services deliver just over 25% gross profit growth.

Speaker 5: This is down compared to earlier periods when the business was scaling out rapidly and is more indicative of the level of growth that we expect to see going forward which is 20 to 30%.

Speaker 5: In general, the performance was broad based across service lines, across customers and geographies, which is an excellent sign that we are fully addressing our customers' needs through our broad portfolio.

Speaker 5: X-Simples, our pay-as-you-go offering for SME customers, grew 45% in the border based on 365 Simple and Azure Simple combined.

Speaker 5: Still at a very strong level, the growth rate has stabilized compared to previous quarters when the pace of transition from mighty agreements to subscriptions was higher.

Speaker 5: Cloud services saw very strong growth, in particular Azure up over 100% due to accelerating demand from our customers with similarly impressive performances across our other hyperscaler practices AWS and Google.

Speaker 5: I would also like to highlight the high double-digit growth in application services and SAP services.

Speaker 5: driven by customer demand for cloudified applications and the impending deadline of SAP migrations to the cloud.

Speaker 5: In terms of profitability and again keeping in mind the impact of seasonality, solution and services adjusted FDEA margin was at 2.1% in Q3, up from negative territory last year driven by operating leverage.

Speaker 5: Now turning to software and cloud. Gross profit grew 11% to $119 million. This extends the robust momentum that we saw in H1 driven by strong results across the hyperscaders including Microsoft and our ISV portfolio.

Speaker 5: Total Microsoft Billings reached 3.4 billion, growing at 11% year on year. Momentum across enterprises and SMEs was positive, with lower growth in public sector as mentioned earlier.

Speaker 5: We also continue to see strong momentum in our expanding ISV portfolio as we grow market share with key vendors, particularly in areas such as cybersecurity and virtualization.

Speaker 5: As for margin, you see that software and cloud was at a very impressive level of over 48% adjusted WDA margin in Q3.

Speaker 5: An improvement compared to last year. This is a testament to the scale and to the high level of efficiency that we have reached in this business.

Speaker 5: Lastly, I would like to give you a few examples of key customer events and how we help our customers in practice.

Speaker 5: Highlighting three examples, I will first mention a sizable public sector in Europe where we will be delivering training services on Microsoft user and admin topics to help the employees work and collaborate more effectively.

Speaker 5: We are also supporting a large US consumer goods company with IT asset management diagnostics and advisory services to optimize their software costs.

Speaker 5: And thirdly, we are working with an Asian tech startup for the provisioning of Reliq, DevOps and security software to help them get visibility on the performance of their entire stack.

Speaker 5: These examples are a great reflection of the diversity inherent in our business.

Speaker 5: Our broad portfolio, our global footprint and wide end-market exposure, which should serve us well in the current environment.

Speaker 5: With that I would like to hand over to Rudolfo to take you through our financial performance in Q2.

Speaker 5: Thank you Dieter. A warm welcome from my side as well.

Speaker 6: As Dieter already mentioned, we have delivered another quarter of strong results.

Speaker 6: with 17% growth profit growth on a constant currency basis.

Speaker 6: Keeping in mind that Q3 is a lower margin quarter due to seasonality, the adjusted EBITDA margin was solid at 20.8%.

Speaker 6: This is well above last year's level and reflects both growth momentum and cost control measures in place since early this year.

Speaker 6: As you can see on the slide, growth in adjusted operating expenses came down to 14% in constant currency.

Speaker 6: Adjusted operating expenses have now remained at around 170 million Swiss francs for four quarters in a row.

Speaker 6: As a result of the strong feed-sprink, forex headwinds had a significant impact of just over 5.5 percentage points on our revenue and gross profit growth.

Speaker 6: However, given our natural hedge with similar exposures on the opex

Speaker 6: The forest impact on adjusted EBITDA was again minimal.

Speaker 6: You will recall that in H1 we increase the level of transparency by disclosing the business line P&Ls down to adjusted EBITA.

Speaker 6: We also introduced a new alternative performance measure called contribution margin which equals revenue less external and internal delivery cost.

Speaker 3: As I explained,

Speaker 6: Contribution margin is a more appropriate measure than gross profit, particularly for our solutions and services business line, which now represents too close to half of our total revenue.

Speaker 6: Given strong growth and strict cost control, we continue to see a positive impact from operating leverage leading to improved EVITA margin in both of our business lines.

Speaker 6: In solutions and services, the contribution margin was 43 million Swiss Francs or 37% of revenue.

Speaker 6: comparing favorably to peers and not by 2.6 percentage points versus priority.

Speaker 6: grew at a materially lower rate than the top line, translated into an adjusted with a margin of 2.1% in line with our expectations given seasonality.

Speaker 6: With high revenue growth and a strong contribution margin,

Speaker 6: EBITDA margin will continue to increase over the coming quarters and reach our target of around 15% of revenue by 2025.

Speaker 6: In software and cloud, we also see a positive impact from operating leverage, with contribution margin growing ahead of revenue and EBITDA growing faster than contribution margin.

Speaker 6: EBITDA margin remains strong at 48% and importantly at the level we see as being both healthy and sustainable.

Speaker 6: Moving on to the next slide.

Speaker 6: As already mentioned at H1 results, we are launching a wide-ranging efficiency program to maximize the impact of key functions and to ensure a best-in-class cost structure.

Speaker 6: with some of the savings being reinvested in innovation and growth.

Speaker 6: This program aims to improve our commercial model, optimize our operation delivery, and right-size key support functions such as finance and HR.

Speaker 6: Since August we have made significant progress across all three areas.

Speaker 6: regarding our Salesforce.

Speaker 6: We are increasing its productivity by ensuring the optimal mix of business development executives and account managers and by reducing and rightshoring non-customer facing roles.

Speaker 6: We are leveraging our next generation sales program to improve governance, incentives and tools to maximize return on our sales investments.

Speaker 6: In our solutions and services delivery network, we have undertaken an exercise to drive an optimal shoring mix.

Speaker 6: and an efficient organizational structure in terms of layers and spans of controls.

Speaker 6: The transition to a more streamlined operating model is already on the way.

Speaker 6: And finally, we will be improving productivity metrics across our support functions by both transferring transactional activities to our shared service centers.

Speaker 6: in leveraging functional centers of excellence at global, original levels.

Speaker 6: With these measures, we aim to reduce fragmentation of resources across country organizations.

Speaker 6: in terms of timeline.

Speaker 6: we will have the full project blueprint, including productivity targets ready for disclosure, together with our full year results in March 2023.

Speaker 6: given the strength of our business model and healthy balance sheet.

Speaker 6: Combined with our focus on optimizing shareholder return, we have today announced our intention to launch a share buyback program of up to 70 million street friends.

Speaker 6: The program will start in early Q1 2023 and will be executed on a second trading line on the 6th fees exchange.

Speaker 6: Our intention is to propose a capital reduction and subsequent cancellation of the bought-back shares at future ATMs.

Speaker 6: Few further details on the program will be available on our website prior to launch.

Speaker 6: I also want to provide a brief update on working capital.

Speaker 6: Given its relatively high level at the end of June 2022, we have taken specific measures to reduce it.

Speaker 6: The year-on-year increase in networking capital position at the end of quarter three has narrowed to approximately 40 million Swiss francs.

Speaker 6: compared to 200 million Swiss francs at the end of June .

Speaker 6: While we will continue to optimize payment terms with vendors and customers, we expect to be above last year's December position.

Speaker 6: as we seek to achieve a normalised or more sustainable level of working capital over time.

Speaker 6: Moving on to our guidance.

Speaker 6: It's important to keep in mind that as always, December is a critical month for the year and will determine where we land within our guiding strength.

Speaker 6: Given our year-to-date performance and robust outlook, I reiterate our guidance for the year and for the midterm.

Speaker 6: We expect to deliver meetings growth in 2022, an adjusted EBITDA margin of about 25%, and a dividend payout ratio of 30-50% of our adjusted profit for the year.

Speaker 6: Finally, let me remind you that from 2023 onwards we will start guiding for growth based on revenue.

Speaker 6: and EBITDA margin will be calculated as percentage of revenue and not gross profit.

Speaker 6: We will of course continue to provide visibility between old and new metrics to ensure full apples-to-apples comparison.

Speaker 6: Let me now hand over to Dieter for his closing remarks.

Speaker 5: Thank you Rodolfo. As we reach the end of our presentation there are three messages that we would like to take away today.

Speaker 5: Firstly, our Q3 results confirm that we are on track to meet our 2022 guidance of mid-teens growth and an FBA margin of above 25%.

Speaker 5: Secondly, we remain fully committed to our growth strategy supported by operational efficiencies to deliver profitable growth.

Speaker 5: This drives continued cash generation and further returns to our shareholders.

Speaker 5: And thirdly, we have taken important steps this year in terms of increasing the level of transparency in our financial disclosure and this will continue to be a priority in 2023.

Speaker 5: Thank you and we will take now your questions.

Speaker 2: Ladies and gentlemen, we now begin the question and answer session.

Speaker 2: If you wish to ask a question, please press star 1 and 1 on your telephone.

Speaker 2: We are now taking the next question.

Speaker 2: Next question for Michael Briss from UBS.

Speaker 7: Good morning. Congratulations on the good Q3. There's a couple from me. Could you give more color around the cost and efficiency targets that you report on slide 12, just some scope of how much magnitude we could expect for exceptionals and the planned savings?

Speaker 7: And then in terms of the macro environment, determine obviously good growth in Q3. You called out public sector. I know in the past SMEs been in area of weakness. But is there any more color you can give on the linearity, October trading, which sort of maybe informs your outlook for next year as much as for Q4? And then, Rodolfo, just on the cash flow.

Speaker 7: Can you just sort of clarify what you said about working capital? Will it be up by less than 40 million year on year at year end? Was that what you were saying, that that should then be a more sustainable level? I didn't quite understand that. Thank you.

Speaker 5: Yeah, thanks and hi Michael for the comments. Yeah, from starting with the operation excellence, as you have shared, as Rudolfo has shared, we will give the full outlook on that with the full year's result in 2nd of March 2023. But Rudolfo, if you give a bit more color on this right now, and then also to the cash flow, I will then answer the macroeconomics.

Speaker 6: Yes, very good. So in terms of the savings, we can disclose today as we did in the first half that the minimum level of savings we see is in the mid-single digit percentage of our cost base. And we will provide more specific targets as we have said with the full year results.

Speaker 6: So at this point we cannot elaborate more on that. Of course, like you mentioned also, would there be any restructuring provision and again as with any optimization program there will be the need for some restructuring costs and we will provide details on that as well early next year with the full year numbers.

Speaker 6: cannot elaborate more on that. Of course like you mentioned also would there be any restructuring provision and again as with any optimization program there will be the need for some restructuring costs and we will provide details on that as well early next year with the full year numbers. Then on cash flow

Speaker 6: The numbers I quoted during the presentation, the higher working capital position of 40 million in September compared to the 200 million higher position in June ,

Speaker 6: Of course, it emphasizes that we have increased control on our networking capital and we are reducing it compared to prior year.

Speaker 6: However, I also mentioned in the H1 poll

Speaker 6: that the level in December 2021 was

Speaker 6: let's say extraordinarily low compared to the usual average level of networking capital. So what this means is as we approach December we will be at a higher position than we had in December 2021 but I expect that the delta would not be too different from the position.

Speaker 6: last December . But again, we are seeking to move into a more sustainable level of working capital and that will translate into a higher position towards the end of the year, compared to December 2021.

Speaker 5: All right, thanks. On the macroeconomic demand environment, Michael, you have seen now for the last nine months we had a very solid demand environment. And we have outlined that we see one sector, which is the public sector, being more considerate in the approach of adopting.

Speaker 5: new technologies. Going forward and for the rest of the year, which is a couple of weeks ahead of us, you do know that from a seasonality point of view, December is a very strong month for us, right? And that basically will derive also where within our guidance we will land.

Speaker 5: If I look back, Michael, you remember 2020, we had no flush out of the budgets at the usage of customers.

Speaker 5: 2021, last year, we had a flush out of the budgets, the IT budgets, which is a normal common scenario in the technology and in the industry. At years end, usually IT organizations are spending the remaining amount of the IT budgets. So provided this is coming, then we don't see any impact on the demand.

Speaker 5: But as I said, in the last two years we have seen one year of this and one year without. 2020 was obviously the Covid year.

Speaker 5: In terms of 2023, from our point, the time and the service of the addressable market remains absolutely strong and relevant for us. I think we are super positioned with our portfolio. It somehow hits the nail on the head because every single pain point the customer has, we are addressing.

Speaker 5: with our engine and with our geo coverage, we are very well positioned. Structurally also and from a geopolitical environment I think our local coverage with global best practices is kind of best in class. So we are positive on that angle but you know looking ahead I think we are doing this and in March when we do the previous presentation.

Speaker 5: for 2022 and give the guidance for 2023.

Speaker 7: Understood. Any observation on Microsoft's expected deceleration in the zero and zero

Speaker 7: I mean any observation on Microsoft's expected deceleration in Azure and elsewhere, I mean does that not affect you?

Speaker 5: Yeah, you know, you always have to look with a different eye on to the Microsoft numbers, because it combines of three and a half clouds and it also combines of commerce and customer commerce, etc. So if you break it down...

Speaker 5: If you break it down, the growth on everything which is cloud and particular ashes is still very solid. And I think if you look also the demand from the customers where they really need to accelerate cloud migrations, I don't think there is a slowdown on the consumption side.

Speaker 5: So I'm positive on this. Of course, the overall revenue from them reflects many areas where we are not participating.

Speaker 5: And that's also where we are choosy to participate in the ones where we can also have profitable growth behind it. Thank you very much.

Speaker 2: Thank you for your question.

Speaker 2: We are now taking our next question.

Speaker 2: question from Toby Hulk from JP Morgan.

Speaker 8: Yeah, hey, good morning. Couple from my side, firstly just on the macro. So when we look across the board, we're seeing signs of softening across the broader ecosystem, sales cycles lengthening, deals requiring extra approval and so on. And I know you've called out public sector specifically here as an area of weakness, but outside of that, are you seeing any other signs of slowing?

Speaker 9: lot more. Thank you.

Speaker 5: Yeah, thanks and welcome to the team. Again, from a macro point of view, you know what's a side of the customer segment which I mentioned earlier. Yes, here and there you see delays in terms of decision-making. That's absolutely right, but you know if you are in a segment where you either keep the lights on or you make the lights brighter, there's not much discussion.

Speaker 5: but it's delays it's not cancellation at the moment and from a Ash for you want to answer that? Yeah, look if you look at theenzie reggae

Speaker 6: recent trends, let's say, over several quarters back, we continue to have networking capital under tight control. When we look at the theoretical terms that we have with our customers and vendors, they are well balanced.

Speaker 6: We are very diligent when it comes to credit rating of our different customers. So we do not see at this point in time any problem with collections. We believe we can continue to manage our DSOs at an average of over 60 as we have shown before. Then when it comes to payment terms with vendors, again we do not see any problem with that.

Speaker 6: fundamental change in vendor payment terms and we believe we can continue to optimize those terms as we have done in the past.

Speaker 6: I don't see any issues continuing with very effective financial and networking capital.

Speaker 9: Understood, thank you.

Speaker 2: Thank you for your question.

Speaker 2: We are taking the next question.

Speaker 2: The next question for Andreas Müller from JKAB. Please go ahead.

Speaker 10: Yes, good morning gentlemen, thanks for taking my question. One is, the first one is actually on the gross momentum in solution and services, which was a tick below the guidance for the year. What was the impact there of external growth or are there any specific reasons also why it went down from say 36 to...

Speaker 10: The next question is on earnouts. Are they going to stay at that level given also that on the acquisition front it was somewhat quiet recently? And then my first question is on the buyback program. Was that design part of the implementation?

Speaker 10: the result actually of this lower acquisition activity and also going forward is that pointing to that or is it just a result of the good operating performance. Thank you.

Speaker 5: Hi Andreas, thanks for the questions. On solution and services you rightly pointed out that we are slightly down to 25.3% in Q3. You might have seen also in the presentation, you see a de-acceleration on the on the examples of bundles which is a transition from

Speaker 5: from our three years commit to subscription base to pay as you go. We are reaching the tail end over there and as you might recall our focus was always to go towards our own book of business because we are the incumbent over there and we wanted to make sure that we are placing ourselves in there and are not opening the door to to the competitive landscape.

Speaker 5: So it was very much focused on converting existing book of business to pay as you go. And now since we are reaching the tail end of that, there's a more realistic growth of 45% which you see and constant currencies 50% which has also an impact on the overall growth.

Speaker 5: Going forward, that of course allows us again room because now we in the next six months or so, we can pivot further to go deeper into the converted existing book of business on one side, but also start the hunting to net new business in that area, which will be done. Of course, there's strategic attention on it.

Speaker 5: Also, if you see the scale which we have in the Meanwhile reached, we're talking about a half a billion business on solution and services. Basically, we reached equality to software and cloud by years and from the run rate. This allows us also to be more selective and not use any door opener or any entry into the customer side regardless whether we are

Speaker 5: That's a long-term strategic point for us. So we become more choosy on that. We focus more on retained professional services. We focus more on is the end game really possible with a managed service. So you will see that going forward, our growth on solutions and services will be rather in the range.

Speaker 5: Multipliers are slowly coming down and we are waiting eagerly that they become in a realistic range. So you should see in 2023 a different uptake on that. I'll let Rolfo add more information on this as well as on the buyback, which is still our capital allocation framework.

Speaker 6: So let me step back for a moment on the capital allocation. Again, we did reiterate that in his comments and I did the same. Our priority remains number one to support our growth momentum, to support our milestone strategy, M&A strategy in solutions and services, and of course to optimize also the returns towards.

Speaker 6: shareholders to our dividend and when possible to say like in this particular case a share buyback. Now to your question Andreas, it's not that we are slowing down on the bottom M&As going forward, we will assess whenever, as you just said, find the right targets at the right prices, we will continue to leverage those.

Speaker 6: and retention and earn out payments to the owners of companies we acquire. So we will continue to see that in the future.

Speaker 1: Okay, thanks.

Speaker 11: Thanks, guys.

Speaker 11: Thank you for your question.

Speaker 2: We are now taking the next question.

Speaker 2: The next question from Newt Dollar from Bader Bank.

Speaker 12: Hi, thank you. Just three questions. First, looking at the efficiency program, I understand that you will provide some more details with the release of the Q4 results. However, looking at three pillars of the efficiency program, can you give us an idea from a qualitative perspective, which pillar is expected to be the major contribution to the efficiency gains expected going forward?

Speaker 12: And to which extent should we see a net positive impact looking at rising inflation and the efficiencies? Do we expect a net tailwind or will it be overall a neutral effect looking at inflation? Then secondly, on the margin of solutions and services, if I understood you correctly, you said you're targeting 15% over the common...

Speaker 12: quarters and years apart from the scaling or drilling a bit further down into the scaling effects. Can you give us here some more color on the expected margin drivers? And lastly, on the operating momentum, did you see any material changes so far in the final quarter of the year? I understand December is the most important month of the quarter. However, did you see any changes in the future?

Speaker 12: noticeable changes in October-November from what you have observed in the third quarter. Thank you.

Speaker 5: Yeah, thanks and very good points and also on the three pillars of the operational excellence, I'll let Rodolfo answer that in a minute. Let me take the margin discussion on this solution and services. So to reiterate, we target by 2025 a margin of 15%.

Speaker 5: And you have seen how we are trending from a positive momentum. It's scale, you're absolutely right, it's scale, but that's not the only way. One pillar which Rodolfo will mention is also our delivery model. That's the middle pillar of the operational excellence and that's where we optimize quite heavily.

Speaker 5: So it's not only the right capability in the right place for the right price point, but also behind the delivery capabilities, what we can further automate and make sure that we separate the separate GP growth from OPEX growth. So that's the second piece, which is the delivery model. And the third piece is, in the meanwhile, we have a different standing with our customers.

Speaker 5: give us their crown jewels on the services side, if we haven't given the proof point. So we started off with a lot of professional services, a lot of proof of concept just to get the foot in the door and then expand from there. Then we have reached a level of maturity and also reputation in the market, where we can go into the higher margin business.

Speaker 5: on an ongoing basis. This goes also in line with learning to sell on value and output and outcome for the customer and impact and not selling against price, which you do in the beginning as well. So you see also a higher margin outcome.

Speaker 5: because of the baby structuring cells against something which Rudolfo will say an operation accident. In terms of operating momentum, so you know I was thinking earlier when Michael asked a similar question and also from JP Morgan came question you know if I look at the metrics which would give me an indication right so it's

Speaker 5: There are three four metrics which are relevant of it. First one is pipeline growth. The second one would be the conversion of the pipeline, the conversion ratio, but also the cycle time of it. The third one would be what is the average feed size which we are seeing. And the fourth one would be do we have a growing backlog or do we have a diminishing or flat backlog.

Speaker 5: So at the moment we don't have any indication which points us in a different direction over there.

Speaker 5: And that's why we are saying, you know, the variable is basically the year's end, December , and nothing else.

Speaker 5: Now, handing over to the telephone, Operation Accent.

Speaker 6: Yeah, so back to operational lessons and expected savings and what are the different buckets of savings. As I also mentioned C & D updated early on format enormousencies and pricing Hearing

Speaker 6: When you look at our P&L, particularly the ones by business line and the different cost elements, of course from a size of the cost line delivery is the biggest one. And then of course when you look at the rest of the optics.

Speaker 6: you can imagine that sales and marketing represent a bigger proportion than functions like HR and Finance. At this stage, I would say for the different buckets, of course there will be a range of savings, but we continue to see at this stage a minimum of mid-single digit.

Speaker 6: for the three buckets. Now there's a very important point to keep in mind. We continue to see increased operating leverage, meaning our costs are growing less than revenue. You have seen that in Order 3. Now, when we think about going forward, we reiterated our guidance of meeting growth.

Speaker 6: And that means, of course, our cost structure also has to grow to support.

Speaker 6: the revenue momentum.

Speaker 6: But with this efficiency program, we will be able to significantly grow OPEX even less so than revenue. That's something to keep in mind. So to your comment, yes, we have factored in inflation for next year. It's normal. We also have inflation in the revenue, so there's an offsetting element there.

We also need a certain level of growth, but the growth will be much slower. Also some growth on expenses, but it will be much slower given these efficiency measures that we will put in place. And of course as you can imagine they will not happen all in in quarter one, right? There we will get the low-hanging fruit and the program will need to be implemented over the next, call it 18.

donknow.

There are no further questions at the moment.

I think we can close the session. We have later on a detailed analyst call as well. I'm looking forward to speaking to you at that time. Thanks for your attention. Thanks for participating. Thank you very much. That's conclude the conference for today. Thank you for participating. You may hold this connect.

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