Exclusive Networks SAS

PAR:EXN

Earnings Call Analysis

Exclusive Networks' Q1 Performance and Strategic Outlook

Exclusive Networks reported a 7% growth at constant currency for Q1 2024, aligning with market expectations and showcasing resilience despite a challenging macro environment. The company maintained its full-year guidance, forecasting accelerated growth in H2. The acquired NextGen will be consolidated from Q2 2024, expected to drive double-digit growth and enhance market presence, particularly in APAC. Software now constitutes over 50% of gross sales, accentuating a strategic pivot from hardware. Exclusive Networks continues to benefit from strong industry demand for cybersecurity solutions and robust vendor relationships, positioning it well for future growth.

Resilience Amidst Adversity

The first quarter of 2024 showed Exclusive Networks resilient in the face of difficult comparisons from last year, with overall growth just over 7% at constant currency. This was in line with expectations after a robust 28% growth in Q1 2023, driven by supply chain recoveries. The management has navigated these complexities successfully, highlighting their operational strengths despite slower deal closures due to increased financial scrutiny.

Strong Demand for Cybersecurity Solutions

With the rising tide of cyber attacks, cybersecurity remains a prominent priority for companies worldwide. Exclusive Networks is capitalizing on this trend, leveraging their market position and relationships with key vendors, leading to a growth in sales. Their business, now more than 50% derived from software, underscores a strategic pivot towards high-demand areas like cloud and cybersecurity services.

Stability and Growth in Different Regions

Regionally, EMEA was the driving force with 9% growth reported, while North America stabilized at 1% growth, balancing the previous year's high comparisons. Meanwhile, the APAC region is showing signs of recovery, having undergone a challenging phase with previous 9% declines. Exclusive Networks anticipates further growth as booking trends improve in APAC.

Strategic Acquisition of NextGen

One notable development is the acquisition of NextGen, which is expected to bolster Exclusive Networks' capabilities and expand its presence in the APAC region. The firm plans to start consolidating NextGen's financial results from Q2 2024, anticipating commercial synergies by the second half of the year. This acquisition is expected to contribute 2% to gross profit growth, enhancing their cybersecurity solutions portfolio significantly.

Navigating Pricing Pressures

The earnings call also revealed ongoing pricing pressures, with a net negative effect of 1.7% in Q1. This comes from a decrease in the prices of products coupled with currency fluctuations, reflecting a need for keen management of pricing strategies going forward.

Future Outlook and Confidence

Management was optimistic about H2 2024, expecting a rebound based on indicators within their pipeline and execution strategies. They reiterated earlier guidance, showing confidence in overcoming the present headwinds and achieving targeted growth rates. Specifically, they noted returns from newly launched vendors and enhanced partnerships to bolster performance in an evolving market landscape.

Earnings Call Transcript 2024-Q1

[Operator]

Hello, and welcome to the Exclusive Networks First Quarter 2024 Conference Call. Please note, this call is being recorded. [Operator Instructions]

I will now hand you over to your host, Mr. Hacene Boumendjel, Head of Investor Relations, to begin today's conference. Thank you.

[Hacene Boumendjel, executive]

Thank you. Good morning, everyone, and welcome to Exclusive Networks First Quarter 2024 Earnings Conference Call, which is broadcasted live and will be available on demand on our website. The presentation slides and press release for this call are also available on our website in the Investor Relations section.

First, I would like to draw your attention to the disclaimer on Slide 2 of this deck regarding the information contained within this document and in particular, the forward-looking statements. I invite all participants to read this.

Today's call is scheduled to last about 60 minutes, and I'd like to introduce our key speakers this morning: Jesper Trolle, CEO of Exclusive Networks; and Nathalie Buhnemann, our CFO. The presentation will last about 30 minutes and will be followed by a Q&A session. If we don't have the time to take everyone's question in this session, I am available, I'm happy to take any of your questions following up the call.

I will now pass it over to Jesper for a few opening remarks and his overview of Q1 2024. Jesper, the floor is yours.

[Jesper Trolle, executive]

Thank you, Hacene, and good afternoon, everyone, and welcome to our Q1 trading update. I want to start today's call with a few quick words of context. First, I'm sure that you have seen that cybersecurity continues to make headlines with several high-profile cyber attacks widely reported in the media these past months. In this environment, cybersecurity continues to remain at the top of the agenda for CEOs globally. In fact, recent CIO survey shows that cybersecurity continues to remain among the top spending priorities for companies worldwide. This trend naturally continues to benefit the demand for cybersecurity solutions and, in turn, our business.

Secondly, you may recall that our full year results presentations, I announced that half one would see a continuation of the softer trends already observed in the second half of last year. I said that we expect growth to accelerate in the second half of this year, and I confirm that this is still our outlook today. Therefore, when presenting our Q1 numbers today, I would preface by saying that, one, Q1 is broadly in line with Q3 and Q4 2023, as expected; and two, Q1 also takes into account the high basis of comparison versus our high Q1 last year at plus 28%, due to the backlog release after the supply chain bottlenecks, as you recall, we have spoken about many times.

Finally, I want to express my sincere gratitude to all of our teams across the globe for their hard work and their consistent execution of our strategy. These skilled people are what really make Exclusive Networks unique in the markets we serve.

In Q1, we grew 7% at constant currency, a figure that we are proud of, and it is fully in line with the market growth. The current macro environment remains similar to previous quarters. We continue to see that it takes longer for deals to close and that there is more financial scrutiny going into every project. However, on a positive note, in Q1, we have not seen any further deterioration of this demand environment.

As you can see on this slide, our global serviceable addressable market continues to expand. It is now estimated at over $50 billion, more than double the size since our IPO. Therefore, our market share today of around 10% of this market still leaves significant runway for future growth as we continue to develop our global platform, our offerings and our vendor portfolio. Furthermore, whether it be with our vendors, our customers, we continue to enjoy very strong relationships, as you can see from our retention rates, which continually are above 100%. This is an important metric for our operating model as it's very efficient to upsell our existing vendors to our existing customers as a complement to the onboarding of new customers and new disruptive vendors.

Lastly, I want to highlight that we have reached an important milestone this quarter because for the first time ever, software have reached more than 50% of our gross sales mix, which I will comment on in a moment. But before we go into more details about Q1, I just want to say that so far, 2024 is progressing according to our expectations, with an acceleration expected in the second half. And therefore, we feel confident today in reconfirming our previously stated outlook for the full year.

Moving on to the next slide, a couple of takeaways. First, we continue to see rapid growth in our cloud-based business. This once again confirms that our added value business model is truly relevant in software, cloud and services. As you can see, our cloud-based business continues to represent an increasing share of our mix, up 6 points to reach over 1/3 of our business. Since cloud cuts across software and services, you see a relative decline of hardware in our mix. This relative decline of hardware is partly due to the comparison versus last year when much of the hardware growth was driven by the backlog release I already mentioned.

To sum up, in Q1, we once again see the stickiness of our model and our value proposition in each of our swim lanes, whether be it in software, hardware, cloud or services.

Now let's look at our performance relative to market trends in key cybersecurity subsegments. After a few years of significant spend on firewalls, which is the largest category within network security, we see a return to more normalized levels. Consequently, as per my earlier comments, hardware decreased as a percentage in our overall sales mix as we continue to focus our efforts on software and cloud-driven segments. We continue to have very strong momentum with an endpoint security as companies are still bringing legacy systems up to date. Our performance in this segment is well above the market, driven by our strong partnerships with leading vendors such as SentinelOne; and more recently, with the addition of CrowdStrike, who we have onboarded within Ignition Technology during Q1.

Lastly, let's not forget that e-mail still remains the #1 attack vector for any organization. In this segment, we work with market leaders and disruptors such as Proofpoint and Abnormal. We're also proud of our newer partnership with Mimecast, which we rolled out across the U.K. as well as several countries in Asia. So as you can see, we continue to enjoy strong growth in this segment and we are already getting tangible benefits from our partnership with Mimecast, which was only signed a year ago.

Lastly, I want to give a few words on our successful M&A strategy. As you would have seen, we recently acquired NextGen, a leading hyper growth channel services company headquartered in Australia with nearly 200 employees and about EUR 160 million in gross sales in the year ending June 30, 2023. NextGen is expected to generate steady double-digit growth in 2024 and beyond.

This transaction was financed entirely in cash, and we have acquired 100% of the equity of NextGen, which will be integrated as a wholly owned subsidiary of Exclusive Networks. We are retaining the NextGen leadership team to ensure continuity and a smooth integration process. We will be consolidating the financial results of NextGen from the second quarter of 2024, and we anticipate that this deal will generate commercial and financial synergies starting in the second half of 2024.

As we mentioned before, APAC is a very important market for us, and this strategic acquisition brings our combined gross sales for FY 2023 to EUR 615 million, making us one of the largest players in Australia and New Zealand.

NextGen is bringing a significant scale and reach in APAC, which in turn is enabling us to attract more vendors, more partners and through them more end customers in this important geography. NextGen was created in 2011 and has since become a cybersecurity powerhouse. They are completely aligned with our vision and have recently started to expand across Asia, which brings us a fantastic growth opportunity. Furthermore, NextGen has built a successful services business focused on market creation to spur customer demand. This comes as a perfect complement to our own services business, which has historically been focused on post-sales implementation, training and support.

For example, NextGen owns a digital marketing agency, Elastic Digital, which brings us strong demand generation and digital marketing services capabilities. In addition, their oSpace platform provides lead generation and AI-based analytics. We are looking forward to start deploying these new service offerings on the exclusive networks global platform.

NextGen also possesses leading cloud assessment and management capabilities, thanks to their own developed IP. NextGen is working with leading hyperscalers such as AWS and Oracle and offers cloud migration consultancy services through its Optima company. We will be able to cross sell our complementary offerings to ouur combined ecosystem, thanks to NextGen's additional service offerings. With this wider approach spanning from presales to transactions through to post sales, we can better serve our vendors and customers and thereby increase our market shares.

To conclude, our strategic acquisition of NextGen will create a lot of value. One, by enabling our larger footprint to grow faster in APAC; two, by expanding important relationships like CrowdStrike, NetSkope and Okta; and three, finally, by adding new important vendor relationships such as AWS, Oracle Cloud and IBM to our business.

On a more personal note, I've known John Walters for the last decade and have always admired the business that he has built. During the last couple of years, him and I have discussed the opportunity to join forces and I'm, therefore, very excited to welcome him and his team to the Exclusive Networks family. This acquisition will create significant opportunities for our company and we look forward to working with the NextGen team to deliver increased value and innovation to our combined ecosystem.

With that, I now thank you, and I will hand it over to Nathalie for a deeper dive into our Q1 numbers. Nathalie?

[Nathalie Buhnemann, executive]

Thank you, Jesper. Good evening, everyone, and thank you all for joining us today for our Q1 2024 update. I'm happy to report that Q1 continued our trend of $1 billion-plus gross sales in the quarter on the back of a record performance in Q1 last year.

Let's look first at the drivers of this growth during the period on Slide 11. On the left hand of the slide, you can see that we have experienced an outstanding performance over 3 years at plus 36% from Q1 2022 to Q1 2024. A large part of this growth is attributed to an exceptional contribution from Q1 2023, notably with the impact of the supply chain. As a reminder, a large portion of the Q1 2023 growth in sales, close to 10% were related to nonrecurring drivers, such as the impact of our backlog Q4 2022 and the catch-up pricing effect. In this context of high basis of comparison, we still managed to post 7% growth like-for-like and 6% reported at EUR 1.255 billion.

To get a better feeling of our business activity level in Q1 2024, I would like to develop more of the growth headwinds and tailwinds. Growth was strongly driven by volumes from 9% in Q1 2024, close to double-digit growth, demonstrating the healthy activity levels and our strong positioning. However, 9% growth in volumes has been partially offset by some pricing headwinds leading to 7% growth at constant rate. Coming now to the standard drivers of our growth on the right side of the slide. So most of our growth close to 4% came from existing vendors in the geographies where we operate. 1.6% is attributed to vendor expansion, either from new geographies or new vendor relationships and the remaining 1% is thanks to the contribution of recent acquisitions in Ingecom and Consigas.

Moving now on to our original performance on Slide 12. To begin with, EMEA continues to be the driving force of the group. The region posted gross sales growth of 9% reported or 10% at constant currency. We experienced healthy demand, reflecting the strong positioning of the group in this region. Looking at the performance over the last 3 years, the region grew an impressive 38% from Q1 2022 to Q1 2024.

Moving now to Americas. Gross sales posted a stable growth at 1% reported or 2% constant rate after an outstanding 50% reported growth in Q1 2023 and showing 51% growth since Q1 2022. Softer growth is mainly driven by high basis of comparison from Q1 last year.

Finally, the APAC region continues its stabilization with sequential improvement on the back of a high basis of comparison, resulting in gross sales being down 9% reported and 8% at constant currency in Q1 2024. As a reminder, Q2 2023 was presented at the lowest point in business activity. After Q2 2023, the business has been stabilized and slowly recovering all following quarters being above Q2 2023 in absolute value. Q1 2024 shows again stabilization and progressive recovery. The increasing booking trend in this region erodes for future development in billings.

Additionally, as mentioned earlier by Jesper, we believe that NextGen Group is a strategic acquisition, which will consolidate our position in the region by driving more business and expanding our service offering. For a reminder, NextGen will be consolidated starting Q2 2024.

Moving now on the breakdown of our revenue per geography and deal size on Slide 13. In terms of our geographic split, EMEA grew by 2 points, driven by the lower growth of our North American region. This continues to stress the importance of our strong foothold in the most mature markets. In terms of this size, the share of deals above EUR 1 million was up by 4 points from 13% to 17%. We experienced fewer large deals above EUR 10 million, but much more deals between EUR 1 million and EUR 5 million. An increase in these above EUR 1 million shows our capability to be a major and global actor in this market.

Deals in between EUR 100,000 and EUR 500,000 remained stable at 33% in our gross sales mix, while small deals in between EUR 5,000 and EUR 1 million grew by 1 point, proving our good presence on the SME market.

With that, I want to thank you all for your time today. And I will now pass it over to Jesper for his final remarks.

[Jesper Trolle, executive]

Thank you, Nathalie. So let me wrap up before we take your questions. So -- it's true that the market has not rebounded yet completely, as I mentioned in my opening remarks. However, we all expect that this is going to take place in the second half globally. As you recall from what I said at the full year results in February, we have always known that Q1 would be somewhat in line with Q3 and Q4 of last year. Nevertheless, we are also fully confident, and so that's why we are confirming that we are on track to meet our full year guidance from 2024.

And lastly, we are very excited about the future, particularly with the recent addition of NextGen's capabilities, their IP and their fantastic teams. This strategic acquisition will set us up for a strong performance in APAC, while also giving us the opportunity to scale their IP and market creation capabilities across the rest of our business.

Thank you for the attention today, and we'll now open up to take your questions.

[Operator]

[Operator Instructions] The first question comes from the line of Balajee Tirupati calling from Citi.

[Balajee Tirupati, analyst]

Two from my side, if I may. Firstly, just a clarification on the unchanged guidance for this year. Is the guidance including the acquisition of NextGen? Given the size of acquisition, it will be contributing 2 percentage points -- more than 2 percentage points to your gross profit growth for the year. So a clarification there. And then I have a followup.

[Nathalie Buhnemann, executive]

There is only one question. I thought you said 2 questions.

[Balajee Tirupati, analyst]

I will ask my second question...

[Nathalie Buhnemann, executive]

Okay. But I can answer your first question. So the outlook does not take into account the NextGen. For the moment, we have just closed the deal. It's very recent. So we'll make an update at the point of time, but it's a very recent acquisition.

[Balajee Tirupati, analyst]

Understood. And the second question was on the change in revenue mix, with increasing share of software and decline in hardware initial. How should we think about implications for margin profile of the business? Would it be fair to think that hardware or firewall sales had a bit higher than the group average margin?

[Nathalie Buhnemann, executive]

Just before Jesper can add some comments from a pure financial communication, you know that we do not disclose margin by category of products. So we have not disclosed margin on hardware nor on software. So it's difficult to comment.

[Operator]

The next question comes from the line of Joe George calling from JPMorgan.

[Joseph George, analyst]

Just one from my side, please. Jesper, you mentioned that the market has not rebounded yet and you're expecting this to take place in H2. Can you just point us to what data gives you the confidence that a rebound is coming in H2? And is this rebound expected to be broad-based across the business or skewed to any certain areas with it?

[Jesper Trolle, executive]

Yes. Thanks, Joe. I appreciate the question. So when I track sort of the underlying dynamics of our business, the pipeline we are having, the view from the field, it makes me -- it gives me a certain level of confidence also when we look at new bookings. Secondly, I would say, obviously, the bar through the remainder of the year is very different from what we had in Q1, as you would recall, when you look at our quarterly performances last year. I believe we're going to see -- and Nathalie sort of alluded to that in her commentary that in APAC, we see stabilization.

Obviously, the addition of NextGen and that team and business will create a much more compelling business that will have a positive effect. And then in the U.S., I would say, we've launched some new vendors last year that we are in the process of sort of onboarding and ramping. And while it takes a little bit longer than maybe what we had anticipated, this ultimately leads to a much more diversified business and a much stronger business going forward.

[Operator]

The next question is from Balajee Tirupati as well again, calling from Citi.

[Balajee Tirupati, analyst]

My third question, in terms of [ trends ] at vendors, are you seeing any impact of consolidation by end customers are also the states of platformization by your vendors? How is that impacting your business?

[Jesper Trolle, executive]

Yes, it's a good question. So we tend to get this question quite a few times during these calls. So I would say our -- we have sort of a twofold strategy, right? On one hand, we are working with probably the main platform consolidators, a few same companies like Palo Alto Networks, Fortinet, CrowdStrike, SentinelOne that are having a broader solution offering. And they are certainly driving their abilities for consolidation wherever they can. We see this in the types of conversations that are with end customers and partners around selling more of that same portfolio into more of that customer. But the other part of our strategy is also working with best-of-breed vendors in each of the distinct areas of cybersecurity and whether it's an Okta or maybe a NetSkope or Proofpoint, as I called out before, these are companies that are very strong in that specific field and what I would call based on best of breed.

And so our strategy is sort of dual pronged. We have both the platform consolidators that are playing that card, and then we have the best of breed that obviously plays more on the depth of that technological offering for a specific either use case or attack vector within customers' cybersecurity infrastructure.

[Operator]

The next question comes from the line of Derric Marcon calling from Bernstein.

[Derric Marcon, analyst]

I have got four questions, if I may. The first one is on price effect. So you mentioned minus 2. Can we have the split between currency impact and increase of price list of the software under you work with? My second question is on the lending on the net margin. If I look to the mix of deal size in Q1, was it in line with your expectation? And the fact that you have so much big deals, does it put under pressure your net margin target for the year?

My third question is on network security, it's probably for Jesper. You said Jesper that the network security market today is growing in line with what we saw in the past. Don't you expect a rebound of customer demand later in the year, given the fact that we saw maybe a few investments on that part of the market in the last 12 to 18 months or let's say that's what the big vendor you work with are seeing? And the last question is on the mix -- business mix of NextGen. Can you help us to understand what's the proportion of presales, post-sales activity they have or, let's say, difference between professional services activity and software reselling business. And sorry for the numerous questions as usual.

[Jesper Trolle, executive]

Thank you, Derric. Appreciate all the questions to keep the call going. So I take -- Nathalie, you take the first two and I'll take the three and four.

[Nathalie Buhnemann, executive]

On the price effect, Derric, it's 1.7% for the negative price effect, which comes from 9% to 7% constant rate, and you have 1% effect on the fluctuation of the currencies to go to 6. Okay?

[Derric Marcon, analyst]

But you don't back out the minus 1.7%?

[Nathalie Buhnemann, executive]

So the 1.7% is price effect. And then you have 1% more for the fluctuation of the exchange rate because you have 7% constant rate and 6% reported. Okay?

Then the question on the margin. As you know, it's not a margin release. So we'll not disclose anything on the margin. But what I said on the size of the deal, and I'm sure you heard that, is that we don't have large deals as we had before, above EUR 10 million, which are the ones where you have very low margin. And we have much more deals between EUR 1 million to EUR 5 million, which are large deals, but smaller deals than the bigger, bigger one. So it can give you -- you can interpret it as whatever you want, but it should help you.

[Jesper Trolle, executive]

And then on the question on network security. So you're right, Derric. I mean, aligned with let's say, the two key network security vendors we have in this space, both Palo Alto networks and Fortinet, aligned with them we obviously also expect a level of rebound in the second half, which is also built into sort of our outlook. I'd mention it on Joe's question, but that's right.

And in terms of business mix of NextGen, so cyber is about 2/3 of their business. They also have a little bit of business in sort of what we call the Digital Enterprise. So some of the work they do with Oracle and IBM, they are but majority of the business is cybersecurity with very strong relationships with Crowdstrike, NetSkope, and Okta and also several of others of our vendors.

In terms of the services, I mean, I can't break out today what is the size of it. But as I kind of laid out in the prepared remarks, their services focus have very much been on the front part of the business. So what we classify as sort of the presales part where they build very strong capabilities around digital marketing, demand generation, lead generation based on sort of own developed AI solutions. And these are chargeable services that they are charging for to their ecosystem. And obviously, we look forward to be able to take that and deploy it on our platform. Then we have a much larger post-sale services business, and these capabilities, whether it's training, whether it's implementation and support, we look forward to be able to take this to their ecosystem. So -- that's part of the reason why we feel this transaction is so compelling for our company and ultimately also for our shareholders.

[Derric Marcon, analyst]

Very clear. Can I add just a follow-up on the pricing for Nathalie. Or will it include the minus 1.7%, does it include the change in mix? Or is that constant mix of product? I'm just surprised...

[Nathalie Buhnemann, executive]

No, right now, it's not a constant mix of -- we cannot do that kind of analysis, it's the global impact.

[Operator]

The next question comes from the line of David Vignon calling from Stifel.

[David Vignon, analyst]

I have two. The first one is a follow-up on pricing effect that you mentioned. Was it felt across the board, i.e., in all regions and all verticals or only specific ones? And the second question is about the cloud services provided by NextGen. I just want to have more details about that and your strategy around the rollout of those services. Is this something that you expect to roll out in other regions and potentially with other hyperscalers as well? And could you comment on the net margins that you can expect with those cloud services?

[Nathalie Buhnemann, executive]

Thank you for your question. Just the first one. We do not disclose the margin per vertical or per region or whatever. So I cannot comment on that. I'm really sorry, but we do not disclose this information.

[Jesper Trolle, executive]

I mean we gave you at the half and full year, we give you the sales and the EBIT, but the margin is something we keep at our global level.

On the NextGen services. So a lot of it was laid out in the press release and also in the prepared remarks. These are absolutely services that we expect to be able to roll out over time on our platform. Some of the things that they are doing depending on which type of services -- it really comes down to lead gen digital marketing and cloud services, and we are working on all 3 streams to take these services and deploy them onto the platform. Some of these are easier to scale. Others require a little bit of investments, but we feel confident that we can make this work.

In terms of the margin profile of their services, it is not something we break out at this point in time, at least.

[Operator]

The next question -- another question calling, coming from Joe George from JPMorgan.

[Joseph George, analyst]

I just had one more question. Could you please give us a feel for the trends you're seeing currently in the firewall market? And just given the very high comps, a lot of vendors saw through the sort of 2021 to 2023 period. Is it fair maybe to assume that we might now have a longer digestion period, and therefore, it might take growth slightly longer to accelerate versus prior cycles? And then secondly, could you just give us any color on what firewall equipment you're seeing being deployed into new generation Gen AI data centers or any retrofitted data centers, please?

[Jesper Trolle, executive]

Yes. I think I gave the answer to that question to -- when David was from SE, I know it's not called SE anymore, but was raising that question. So -- there is certainly a piece of comps here. This is what we have said in our prepared remarks, right? There was a lot of firewalls that were built out the hardware components in Q1 of '23, which were basically orders that actually were booked in some cases, a lot earlier than that. And so we do expect that comes to start to get easier from here. And then similar to, as laid out by -- but in our case, Fortinet Empower, we do expect to see a rebound in the future quarters.

In terms of where our spending goes in, there are some big data center projects. But there is also still a lot of upgrades happening for customers that need more throughput and therefore need faster performance in their firewalls as well. So it's kind of -- it's not one use case or one vertical, we see it sort of across the board.

[Operator]

[Operator Instructions] We have another question coming from Derric Marcon from Bernstein.

[Derric Marcon, analyst]

Sorry, guys, to come back. Just one follow-up for you, Jesper. When you look to the conversion of your pipe into revenue. Does it make a difference to when you got a hardware deal or contract versus software deal, i.e., do you think with more software in your business mix, the visibility is increasing or it does not change at all the stories here?

[Jesper Trolle, executive]

No, it is increasing a little bit because the time from book-to-bill is shorter with software than it is for sort of multi-projects that has a hardware component in it. Sometimes depending on the product and the customer, we might have that closer to the market where it is needed. But sometimes we'll need to do back to back and then, of course, supply chain plays in. So I actually believe that as we move gradually to more software, we will get an even better visibility of our business going forward as the book-to-bill time is shortened.

[Operator]

There are no further questions, so I'll hand you back to your host to conclude today's conference. Thank you.

[Jesper Trolle, executive]

Yes. So thank you for all the questions. This was a rather short earnings call, so I appreciate all the questions and interest in our business. I'll just wrap up where I started to say first of all, thank you to all of our people across the world. I mean they truly are the secret sauce in our business, and they have done a tremendous work to get us where we are here. Secondly, as we said, we feel confident for the year. We are reiterating our full year guidance. And we believe that we will see a further acceleration of Q1 of this year. So thank you again and wishing everyone a good evening.

[Operator]

Thank you for joining today's call. You may now disconnect.