Proact IT Group AB

STO:PACT

Earnings Call Transcript 2023-Q1

[Jonas Hasselberg, executive]

[Audio Gap]

The agenda, therefore, looks like this. It will be myself and Linda Holjo, our [ CFO ], that will present today also as normal. And we'll talk to Proact as a company, the market, what happened in the quarter and, like I said, the financial results.

And before I start, I just want to remind everyone that we are recording this session and also remind everybody to stay muted. And then we'll open up [ for questions ] at the end, and there will be plenty of time for that. So if you don't mind, please stay muted until the end, and we'll make sure there's plenty of time for questions.

All right. Most of you know this already. Who is Proact? Well, we are a European IT provider. We provide solutions to medium- and large-sized enterprises across 13 countries in Europe. We focus on medium- and large-sized enterprises in both public and private sectors. We're turning over just short of SEK 5 billion on a yearly basis, and we employ 1,200 highly skilled and very technically competent people across our properties here in Europe.

We live in a market that we think is growing, which, of course, the quarterly results is showing. And the growth is driven by a couple of key trends in the marketplace. These are not new trends. You've heard us talk about this for quite some time. The main business driver is all the customers' needs to transform their own business, transform the business to get better decisions made or to streamline their operations or to deliver better experience to the customers or automate their production, whatever it is, a lot of effort and investments going to using IT to transform the business.

And maybe one angle here that's unique and something that Proact is extra focused on, that in all these transformation, there's a lot of focus on leveraging the value of the data within the company. And obviously, we've been working with data storage, data management, information management for 30 years. So we think this is a competitive edge of ours.

The second trend, which is very important, is the trend of cloud. Again, nothing new. And maybe more specifically what we call hybrid cloud, and we'll dive into that a little bit more today, which enables our customers to get more flexible, more innovative and higher availability infrastructure to run their applications and systems on.

Security. Fortunately, I should say, the increase of security threats continue and the need and for good protection is important.

And then last, but definitely not least, and something we maybe haven't talked enough about, sustainability and how IT enables our customers to be even more sustainable. And obviously, we ourselves put a lot of effort into making sure that we are a sustainable company but also helping customers so that they can be more sustainable.

More short-term dynamics. Nothing new. You've seen this. There are some macro trends that are impacting us from inflation and recession, which we all try to navigate through in the best possible way. So those are driving our business and also a very, we believe, positive growth engine for Proact.

We continue to put our focus on our customers. They're always front and center. You've seen this picture many times. We deliver value in 5 core areas of our value proposition: strategic consulting services to help our customers on how to get their transformation going, how to get value out of their data, how to renovate their solutions for whatever they do in their business.

We store data on behalf of our customers. So databases, storage solutions, archiving solutions, connectivity, which is super important because nowadays the data is distributed across wide areas. The data centers can be in one end of the country, and the facilities or where the data is being used to crunch may be in another end of a country or maybe not even in the country. So connectivity, high-speed and highly secure connectivity, super important.

Workspace solutions. So for users, end users within a company or within a customer to being able to actually get access to and use the data, clearly also importing.

Protection. Anything from good old traditional backup, airgapped backups, being able to recover data and cybersecurity solutions is all in here.

And then last but not least, everything needed to get some value out of that data, whether it's compute platforms, analytics, data lake solutions or artificial intelligence platforms.

These are the 5 areas of our value proposition. And one key here is, of course, that we have a lot of services around this, consulting services, technical support services, and we can deliver this in a number of different ways. And we talk about this as hybrid cloud, which means that we can enable our customers to get the best of all the different cloud worlds, continue to run things in their own premises if they want to have high cost performance, higher security, better control of their data or in a public hyperscaler cloud because they want to get better scalability or being able to do some innovation based on latest and greatest technology for companies like Microsoft or Google or Amazon, for example.

And I just want to dive into that a little bit more because it's one of those things that are not necessarily super easy for people that are not spending all their days in the industry. So when we look at infrastructure, and by infrastructure, I mean basic IT solutions to the company, not simple, but basic, so storage, compute platforms, networking, workspace solutions, the basic building blocks for a customer to be able to run their IT. It can be hosted in their own facilities, can be hosted by us or can be hosted by what we call a hyperscaler, a public cloud provider like Microsoft or Amazon or Google.

And typically, customers can -- traditionally have done it in their own data center. This is where we're coming from. This is where historically it's been done. And we help our customers design, provide a solution, implement them and support -- provide some technical support. And also if the customers want, we run it as a service for them, a managed cloud service. It can be hosted with the customer, but we run it on behalf of the customer. So this is the kind of first level of Proact providing a cloud service to the customer, hosted by the customer in their own data centers, but we run it and deliver it as a service.

The second level here is that we host it on behalf of our customers in our data centers or data centers where we rent space. So this is a direct cloud service provided to the customer. We own and manage the equipment that we sell it on as a function or as a service to the customer. And then obviously, we can help customers put some of their load, it could be applications, could be data loads, on a hyperscaler service. And we manage it on behalf of them. We have the skills. We have the processes. We have the tooling to make that cost efficient and in a high-quality way.

What happens typically though, and this is the important piece, is that most customers do all of the above. They will be running some of these solutions in their own data centers. It could be more cost efficient. It could be that they have old applications that they don't want to redesign. It could be for regulatory reasons. They want to put some in our data centers because we have local presence and [ Super Bowl ] solutions. It could be security solution, backup solutions, so-called airgapped backup solutions to backups that are disconnected from the Internet.

And they want to be able to use hyperscalers for flexibility or innovation, for instance. And this is what we call the hybrid cloud. And this is the very clear trend in the enterprise segment, that our customers do all of the above. And this becomes more complex than for our customers typically. This is a non-trivial setup from a technical perspective. Data should flow seamlessly between these different environments. Security should span across applications to be managed across these different types of clouds. So while it's good from a pure value proposition to the customer, it's a little bit more complex to manage. And this is one of the, let's say, trends that we believe that we can definitely help and serve our customers with.

So I just want to share that in a little bit more detail so you understand what hybrid cloud is and why this is important to Proact. And we put a lot of our product development and skills development into this.

We definitely let the customer choose. We love when they buy their systems and manage it and run it in their own data centers, and we love equally much if they let us run it for them either in our data centers or run it for them in the hyperscaler. So it's really up to the customer to design a solution with our help. That brings the best of all the cloud worlds to them.

So there's that, just to paint a little bit more of a picture around what is hybrid cloud. I hope that helps understanding where we're going and what we're doing.

Q1 in brief, a little bit of a mix. We're very proud of the growth. We continue to see a very strong market out there and a strong demand for all our services. The growth definitely driven by both systems but also services, so 15% with 8% organic growth is good. EBITA also growing but not at the same pace, so a little bit of pressure on our EBITA margins, and we'll dive into that a little bit, but a mix of things combined with a little bit of seasonality.

And as some of you who have been tracking us for some time, you know that the systems business is a little bit volatile. So when one business unit is going strong, another may be having a slightly weaker quarter. But also, we see some increase in costs driven by inflation, and we'll dive into where that is and what we're doing about here in a second.

Good growth also in what we call annualized recurring revenues. So this is the revenue under contract, both managed cloud services as well as our customer support, so up 15% year-over-year to just short of SEK 1.6 billion on a yearly basis. So that's also good. And we maintain or even grow a little bit our gross margins year-over-year to just short of 22%. So strong in terms of revenue, strong underlying market, a little bit of pressure on our COGS and SG&A, as you can see.

SG&A kind of -- sorry, TCV. So our new contracts, the total value of new contracts for cloud services, a little bit down from last year, mostly a seasonality effect. These are large contracts, and we can see some slightly extended sales cycles in some cases. But not a sign of an underlying market change, just rather more of a seasonality problem or challenge, as I mentioned.

So inflation. We see the impact on COGS and our SG&A. I think we have been good in countering the inflation in price increases. But we see a little bit of a negative impact here now in Q1 in the MCS business driven by COGS and also a little bit of an increase in SG&A. And therefore, we have initiated a cost program. We've always managed cost carefully. We've taken actions already before this, but we see the inflation is not bulging or going away. So we take a little bit of a tougher grip on this, and we will execute a program here during Q2.

Just the quarter very, very briefly. We'll dive into the numbers here in a second. I just want to highlight a couple of other positive things here in the quarter and just spend a little bit of time on partners. Partners is obviously super important to us. Everything we do is based on technology partners. And we got some really fine and good recognitions during this quarter.

NetApp, which is an American provider of storage technology, awarded us Partner of the Year in Europe, which is great. Also good recognition from VMware, which is a large software provider of cloud software, highlighted in particular our efforts in Norway. Germany got awarded the best managed service -- or third place, I should say, in the best managed service provider in the German market. Quantum, Rubrik, also good awards. And Rubrik, in particular, a new group-wide partner agreement for their data security solutions. So some good progress here on the partner side and good recognitions of the work we do together with our key partners.

With that, let me hand over to you, Linda, and we can dive into the numbers in a little bit more detail.

[Linda Holjo, executive]

Thank you, Jonas. So highlights, I think you walked through them mostly. Good growth overall in revenues, 15%. About the same growth in both systems and services, so good growth in both areas. And then the adjusted EBITA growing slightly less to SEK 57 million or a margin of 4.7%. And then with the acquisitions we've made impacting amortization and increased interest rates, the profit before tax has been stable at SEK 37 million.

So as usual, we start with the revenue development. The revenue growth is 8% organic, typically -- or generally good demand. We see acquisitions, which was sepago that we bought in -- or acquired in July last year, contributing by -- approximately 3% in the quarter. Still the weak SEK gives us positive currency effects, about 4% in the quarter.

You see on the right-hand side here where we have the longer-term trends that from Q4, we had a very, very strong systems quarter in Q4. And Q1 typically can be a little bit lower seasonality-wise. But still, as we're saying, good demand.

The new cloud contracts, as Jonas was saying, down slightly from last quarter. As he was saying, we do -- it's typically not a huge amount of contracts. So depending on which quarter we close them, it can impact. So no big shift in demand as we see it.

If we go to the services then, 15% growth, of which 6% organically since sepago that we acquired, it was primarily a consulting company. So they have contributed to the consulting growth primarily. The cloud revenues, increasing 8% organically. Last year, we won quite a lot of new cloud contracts, so that's now translating into revenue growth as well as the price increases we have been doing.

Also see very, very strong support services growth, 15%. That's, of course, very related to that we've had last year strong system sales. Also here, we've been increasing prices that's translating into good growth. And then the area where we have organic decline is the consulting services. We still do not see that as a change in demand. We still see strong demand. And actually, one of the main reasons we're not growing is that for fewer consultants employed, we have vacancies that we're not able to fill. In a few isolated markets, we're seeing a little bit of lower utilization, but the main reason is that we're fewer people due to the war on talent. And in total then, the services revenues increased a little bit as a proportion of the total to 43% of revenues.

The lower slide shows the recurring revenues continuing as expected to grow quarter-over-quarter in a stable fashion, 8% organic growth, 15% total growth. And we're now at an annualized level of SEK 1.6 billion.

And then last, systems increase of 14% here, slightly higher organic growth, 10%. We see strong demand in all business units except U.K. And when we go into the business units, you will see that it's quite different reasons for the development for the different business units.

So after revenues, we move to profitability. We can see on the right-hand side here that quarter 1 EBITA is lower than the other quarters, and it's quite often the case from a seasonality perspective after a strong Q4 basing from last year, 8.5%. However, with especially the SG&A cost increase, the margins are going down slightly.

The gross margins, we are happy about that they are stable and even slightly increasing. It's primarily systems that is slightly increasing margins. So we can see that we're able to pass on price increases here. Also for services, the margins are unchanged. We do see, as Jonas mentioned, quite a lot of effects of cost inflation here, but we are working with both price increases and efficiencies. So we're able to keep them unchanged quarter-over-quarter. Still, we want to improve the margins here. So that's part of the cost program we're introducing.

And then the reason for the declining EBITA margin is the increase in SG&A costs. The organic increase is 15% for comparable units. It's primarily cost inflation, salary cost inflation, premises, et cetera, also a little bit of increased investments in sales as well as sales-related costs. When we sell a lot, we will have sales commissions, et cetera, that increase as well.

And then finally, the EPS on the rolling 12, it's decreasing a little bit but still on high levels. On the quarter-over-quarter, it is decreasing. I mentioned the PBT was flat. And then in addition, in the first quarter, we had an unusually low tax rate in the first quarter last year. But overall, the EBITA going up primarily with the strong revenues, margins going down a little bit due to the SG&A cost increase that we then will

[Audio Gap]

cost program that we are initiating.

So then if we move to the different business units. Nordics and Baltics, revenue-wise, you can see they had an extremely strong fourth quarter, continuing with the seasonality adjusted strong first quarter as well, 22% organic growth because it's systems here driving a large part of the growth and especially Sweden and Denmark that's delivering strong results here and generally continued high demand. Services also growing well organically, 14%, very good growth in support as well as cloud services in particular here. And then the EBITA margin is increasing. We see both the revenue growth impacting increased gross margins, especially in services here. We do see quite increase in sales cost with a strong revenue development and inflation here, but EBITA margin overall increasing from last year.

Okay. So next business unit is U.K. This is the business unit with a revenue decrease, 25% organic revenue decrease. It's the systems revenues that are decreasing. You can see on the graph on the right-hand side here that we had a very, very strong first quarter last year. So from that, the revenue is going down 45%. It's primarily we see longer sales cycles. So some deals were slipping into the next quarter. So at this time, we don't see this as a sign of decreased demand. Services growing organically 4%. Here, it's cloud -- both cloud and consulting services growing well. Support is lower here with lower systems revenues impacting also the product mix where we've sold systems that have slightly less of our support services attached. And with that significant decrease in revenues, we see EBITA going down and EBITA margins going down. We have reduced SG&A costs in the business unit but not enough to counter the 25% decrease in revenues.

Okay. So business unit West. Here, revenues are growing 7% organically. We see continued growth in systems. We had some weaker quarters in 2021, 2022. And now it's growing 20% organically. Service is also growing a little bit. Here is one of the business units where we see consulting revenues decreasing, and it's primarily due to lack of staff, where we're putting continued efforts into recruiting the right type of competence here. Support and cloud showing good growth. And then the EBITA margins are going down. We do see with increased costs in our services in particular, the gross margin is going down. We're also relying on external resources since we haven't been able to recruit as we want, and they are more expensive. And other inflation-related costs are impacting SG&A. Same issue here, especially cost inflation impacting, and that's taking down the EBITA and EBITA margin for West.

Okay. So if we move to Central. Here is where we have sepago contributing to revenue growth. So quite strong, 41% overall revenue growth. Organically, it's 16% with systems growing well, 24%. Service is also growing at slightly lower rate, 6%. The systems, we saw quite a lot of deals delivered in the quarter, also continued strong demand. When we look at [ BUC ] side, it's -- in particular, support services is growing quickly, connected to the system sales we've done. Consulting services decreasing organically. Here is one of the areas where it's also a little bit of lower utilization and then fewer projects delivered in the quarter. EBITA margin on low levels, just as they were first quarter last year, so it's still an improvement from last year. We do see the increased revenues contributing positively. Gross margins have been going up, but we had quite a lot of sales and admin costs in the quarter, some of them related to the integrations of ahd and sepago that are ongoing at full speed. So that was the last business unit.

So if we look at the cash flow then. We had positive cash flow from current operations of SEK 90 million, partly offset by a change -- increase in working capital. This is primarily related to our accounts payable going down after a very strong Q4. Our receivables are also going down, not as much though.

A little bit of investments in fixed assets. We did also buy out the minority shareholding we had in our Czech subsidiary in the quarter, so we now own 100% of that. And then when it comes to the financing activities, it's primarily the leasing liabilities of SEK 16 million impacting. Overall, still very strong cash position and good cash development.

Then quickly, if we look at the balance sheet. Strong equity ratio at 24%. Net debt, if we include our leasing liabilities of SEK 250 million approximately, so same level as last year. And we had, during the last year, both acquired sepago and dividends. So strong underlying cash flow generation. As most of you know who've been following us, it's volatile on a quarterly basis due to the big shifts we can have in working capital. But over time, we see that we are generating good cash. We still have unutilized overdrafts and unutilized portion of our credit facilities. So quite a lot of capital if we need to for acquisitions and other things.

Okay. So then we, as usual, follow up on our long-term financial goals. Here, it's the 12-month rolling data we're looking at. So our 12-month rolling sales growth is 33%, very strong, quite a lot higher than our target. Our EBITA margin, we still have a gap to our target. So this is one of our key focus areas, and as we mentioned now several times, something we will take action on to continue improving in the coming quarters. Net debt-to-EBITDA, quite a lot below our target.

Return on capital employed is in line with where we were end of December. Still some way to go to reach our target of 20%, which, if you remember, we did decrease last quarter from 25%. Our dividend, which we expect our Annual General Meeting to approve today, is 27% of last year's net income. So quite in line with our target.

Okay. So I think that was the last slide. You want to summarize, Jonas?

[Jonas Hasselberg, executive]

Yes. So growth continues to be good. We're, in particular, a little bit extra proud of the annualized recurring revenue, a very important part of our business and strategically something we focus a lot on. Good growth both year-over-year but also from just the previous quarter in Q4. And then the cost increases here in SG&A a little bit higher than we want. So we are initiating a cost program to make sure that we get back on track on our margin journey as well.

So that's the quick summary. And thank you, Linda, for sharing the numbers in more detail. So with that, we will stop sharing and open up for questions.

[Jonas Hasselberg, executive]

And it looks like Daniel was the fastest. So Daniel, go ahead.

[Daniel Thorsson, analyst]

Yes. Do you hear me clear?

[Jonas Hasselberg, executive]

Yes.

[Linda Holjo, executive]

Yes.

[Daniel Thorsson, analyst]

Okay. Excellent. So a question on the cost reduction program. I mean the costs were obviously up 22% roughly year-over-year in Q1. Employees up 5% driven by sepago acquisition. What in practice is going to be the cost reduction program? Is it going to be number of headcount? Or is it going to be costs around like sales activities? Or where should we expect to see them?

[Jonas Hasselberg, executive]

You will expect to see them across the board, but it will be efficiencies in our service delivery, a reduction of SG&A costs. It can be headcount and OpEx around that.

[Daniel Thorsson, analyst]

Okay. And the timing and the magnitude of the program, something you can share?

[Jonas Hasselberg, executive]

We will execute the program during Q2 and try to get effect of that already here in Q2 so we can benefit from for the rest of the year. We won't comment on the magnitude of the program. But I mentioned already the ambition of the program is to get back on track on our EBITA journey. So that's the ambition level. By that, I do not mean that we're going to get to 8% this year, but this year being a step on that journey.

[Daniel Thorsson, analyst]

I see. I see. Any costs for the program we should expect?

[Jonas Hasselberg, executive]

We'll have to come back to that.

[Daniel Thorsson, analyst]

No problem. In terms of demand and sales here, I mean, it was good in the quarter, as you said. You were able to increase prices, et cetera. But you're also partly a reseller of third-party hardware from, for example, NetApp. And when I look at their forward-looking comments and expectations from the market, they indicate a decline in growth rate into negative territory in the coming quarters. Is that something that could happen to you in system sales in 2023 given that you had a very strong growth in '22 and lead times have probably prolonged a little bit here and one can expect CapEx investments to come down among enterprises?

[Jonas Hasselberg, executive]

There's the [ uncertainty ] in the market for maybe second half of this year. I think the underlying demand is still there, and we've always built our business plans, as you know, on a slow growth on the systems business. I think we see both NetApp but also their competitors to really double down on their portfolio and adding products in their portfolio to drive growth but also their sales efforts. So I think it's a little bit too early to tell that they are going to be in decline. We believe in growth.

So the main uncertainty for us is, of course, if the general macro level takes an even more negative turn. But it's -- we don't see anything better there or more, I should say, than you do. Currently, the demand is good, and we know that the underlying demand with our customers is strong. So it's more temporarily driven then by uncertainty around the macroeconomics.

[Daniel Thorsson, analyst]

Okay. So if we see negative growth in the coming quarters, we should also see accelerated negative view on the macro, not as it is right now, I guess.

[Jonas Hasselberg, executive]

That's our view, yes.

[Daniel Thorsson, analyst]

Okay. Fair. Regarding cloud revenues here, we see large cloud providers raising prices at the moment and going into '23. Is that helping your growth rate in this environment right now? Or how does it affect you?

[Jonas Hasselberg, executive]

An increase in sorry, say again, Daniel. I missed the part...

[Daniel Thorsson, analyst]

The increased prices on cloud space. So we see Microsoft Azure increasing prices, et cetera, and you are partly reselling their cloud space, obviously. So how is that going to drive the growth rate for 2023? I guess that's going to have a positive impact.

[Jonas Hasselberg, executive]

It does have a positive impact actually in 2 ways. So reselling of cloud licenses, so Microsoft licenses is not a huge part of our business. It's not 0, but it's not where we focus. So we will get some benefit there of their increase in pricing. But more importantly, it actually increases the competitiveness of our own services or customers staying with some sort of what we then call hybrid cloud solution. So it also drive customers to be a little bit more careful in moving to the public cloud or putting all their workloads in the public cloud. So it both drives positive effect on the reselling of licenses but equally so on an increased demand of our own cloud services. Does that make sense?

[Daniel Thorsson, analyst]

Yes, absolutely, it does. And then I was a little bit interested around the gross margin here. I mean it's up year-over-year despite systems growing faster than services, et cetera. Is that sustainable going ahead?

[Jonas Hasselberg, executive]

The gross margins, yes, they should be sustainable. Yes, they should be sustainable. We definitely -- and we talked about this for some time, that part of our journey towards the 8% EBITA is to improve gross margins and particularly in our services. And so a lot of the work we do around both scaling that business but also improving our internal efficiency is to drive gross margin improvements.

Then I think, Fredrik, you were second on the trigger.

[Fredrik Nilsson, analyst]

Fredrik Nilsson from Redeye here. I mean I suppose that you would have needed to increase your prices even more to compensate for inflation. Is that anything you believe you can do going forward?

[Jonas Hasselberg, executive]

I think we can. I think the trickiest thing with price increases -- let me flip that around. The easiest thing with the price increases is reselling of the systems business where we can do immediate price changes, consulting where we can do immediate changes to hourly rates and new cloud contracts where we can make -- increase our list pricing.

The biggest challenge is increasing the prices of existing contracts. Some of our contracts have indexation clauses, which we obviously have executed. Some of them have not. And we've actually tried to increase prices there as well but have not come as far as we would have needed to. So this is, I think, where we have the biggest challenge. So installed base of cloud contracts. But everything else, we continue to increase pricing to the level we can.

[Fredrik Nilsson, analyst]

Okay. So the recurring revenue grew by 8% organically. Could you elaborate a bit on the mix of volume and pricing in that growth?

[Jonas Hasselberg, executive]

Linda, do you want to give it a try? We don't have hard facts on it.

[Linda Holjo, executive]

Yes. Because since we're selling not identical products or services, it's on a case-by-case basis. But I would say the larger part is probably still volume. But definitely, it's a combination, Fredrik.

Any other questions?

[Daniel Thorsson, analyst]

I can follow up with another one, Daniel from ABG. Okay. So when we look at your consulting business, you said that it's declining because you reduced number of headcount. Do you also see a pressure on possibility to raise prices versus salary inflation that is kicking in this year, the possibility to increase utilization as demand may come down? We hear those trends from the pure consulting companies in their Q1 reports at least.

[Linda Holjo, executive]

So we haven't really seen it yet. I think we are -- but it's a little bit different in different markets and different competence groups. But the majority, we still see strong demand, hard to recruit and thus also quite -- prices up in line with salary inflation. Now we have pockets where it's softening a little bit, but we think it's too early to tell if that's a sort of trend that will be sustained or if it's something we can counteract now.

[Daniel Thorsson, analyst]

Okay. So it's more a fact that you have less people, as you said. Okay. And then secondly, in terms of M&A going into this year, will this market create more opportunities and targets that may be up for sale at price levels that are more in line with your preferences? Or how does it look, the pipeline?

[Jonas Hasselberg, executive]

Pipeline is pretty good, and I think with one positive development we've seen after being active in M&A last year or the last few years is we definitely get involved and get introduced a lot of more opportunities. So I think the pipeline is good. I don't think we've seen the reduction of at least expected price as much as we maybe expected. I think we talked about that before as well. A lot of the sellers are founders, and they've got an expectation level set by previous years. So we still have not seen pricing coming down. And I think in the case of where there has been transactions, price is still aggressive. So definitely good pipeline, plenty of targets out there, not a significant decline in price levels visible to us.

And actually just clarify one more thing on that question, Daniel. I think we've been pretty good in getting decent price levels. We've been purchasing at levels around 7, 8x. I think we maxed out at 10x. So those are the levels we try to aim for. So it's coming down from that level.

Good. Any more questions? I hope we tried to paint clear pictures. Revenues are good. Inflation driving up costs a little bit. What we call the war on talent puts also a little bit of pressure here, both a little bit more difficult to hire consultants, so a decline in consulting revenues, but also increasing cost then by subcontractors into some of our operations. But we have actions in place to counter the cost increases, and we're positive about the future.

All right. Thank you for calling in. We will see you again on July 14, maybe.

[Linda Holjo, executive]

Yes.

[Jonas Hasselberg, executive]

July 14. All right. Take care, and I'll see you then.

[Linda Holjo, executive]

Thank you very much.

[Jonas Hasselberg, executive]

Thank you.

[Linda Holjo, executive]

Bye.