Insight Enterprises, Inc. (NSIT) Q1 2024 Earnings Report, Transcript and Summary

Hello, and welcome to the Insight Enterprises First Quarter 2024 Operating Results. My name is Alex. I'll be coordinating the call today. [Operator Instructions] I will now hand it over to your host, James Morgado, SVP of Finance and CFO of North America. Please go ahead.

Welcome, everyone, and thank you for joining the Insight Enterprises earnings conference call. Today, we will be discussing the company's operating results for the quarter ended March 31, 2024. I'm James Morgado, Senior Vice President of Finance and CFO of Insight North America. Joining me is Joyce Mullen, President and Chief Executive Officer and Glynis Bryan, Chief Financial Officer. If you do not have a copy of the earnings release or the accompanying slide presentation that was posted this morning and filed with the Securities and Exchange Commission on Form 8-K, you will find it on our website at insight.com under the Investor Relations section. Today's call, including the question-and-answer period, is being webcast live and can also be accessed via the Investor Relations page of our website at insight.com. An archived copy of this conference call will be available approximately 2 hours after completion of the call and will remain on our website for a limited time. This conference call and the associated webcast contain time-sensitive information that is accurate only as of today, May 2, 2024. This call is the property of Insight Enterprises. Any redistribution, retransmission or rebroadcast of this call in any form without the express written consent of Insight Enterprises is strictly prohibited. In today's conference call, we will be referring to non-GAAP financial measures, as we discuss the first quarter 2024 financial results. When discussing non-GAAP measures, we would refer to them as adjusted. You will find a reconciliation of these adjusted measures to our actual GAAP results, included in both the press release and the accompanying slide presentation issued earlier today. Please note that all growth comparisons we make on the call today relate to the corresponding period of last year, unless otherwise noted. Also, unless highlighted as constant currency, all amounts and growth rates discussed are in U.S. dollar terms. As a reminder, all forward-looking statements that are made during this conference call are subject to risks and uncertainties that could cause our actual results to differ materially. These risks are discussed in today's press release and in greater detail in our most recently filed periodic reports and subsequent filings with the SEC. All forward-looking statements are made as of the date of this call and except as required by law, we undertake no obligation to update any forward-looking statements made on this call whether as a result of new information, future events or otherwise. With that, I will now turn the call over to Joyce. And if you're following along with the slide presentation, we will begin on Slide 4. Joyce?

Thank you very much, James. Good morning, everyone, and thank you for joining us today. We are pleased to announce another record setting Q1 with very strong performance in our key strategic areas of cloud and Insight Core services, fortified by continued SG&A discipline. Some key highlights. Gross profit grew 13% to $441 million, an all-time record for Insight. Adjusted earnings from operations increased double digits in all geos. Adjusted diluted earnings per share increased 33% to $2.37. Additionally, the following metrics represent Q1 record results. Gross margin expanded by 170 basis points to 18.5%. Cloud gross profit grew 33% to $117 million. Insight Core Services gross profit grew 24% to $76 million and adjusted EBITDA margin expanded by 130 basis points to 5.6%. These highlights demonstrate that we are executing well against our solutions in a greater strategy. In addition, on May 1, we acquired Infocenter, an elite ServiceNow partner and 2024 Partner of the Year for Americas Consulting and Implementation. Infocenter, a pure-play services company focused on implementing and developing ServiceNow solutions across all major workflows, has earned a reputation for delivering exceptional results. And since ServiceNow is a fundamental pillar of enterprise digital transformation, this capability complements our strength in cloud, data and AI and expands our ability to support our clients as a solutions integrator. As a reminder, our strategy is to become the leading solutions integrator by integrating hardware, software and services to drive business outcomes for our clients. They need a partner they can trust to navigate these new technologies and the infrastructure and workplace requirements to help them digitally transform. Our ambition is to be the partner our clients can't live without. I'd like to provide 2 examples of our solutions integrator strategy in action. First, I'll describe how our expertise in product sales led to services engagement. And in the second example, I'll describe how a services-led selling motion led to product sales. Our long-time client, a multinational conglomerate, has historically purchased a wide range of products from us, from software to devices to infrastructure. The client wanted to conserve capital and was looking to support their business units with improved agility and more disciplined cost management and accountability, specifically around data management. Through our discussions, we architected an effective solution, which included public cloud compute with on-prem storage sold as a service. To address their need for flexibility with minimal CapEx, we designed and implemented an environment that included multiyear storage-as-a-service with search capacity fully managed by Insight, including 24/7 monitoring of the capacity on hand and consumption usage. Our deep client relationship, supported by strong infrastructure expertise with our broad portfolio of products, enables us to create and deliver a solution that addressed their technical and financial needs. A driving factor for the client was the need for flexibility to support changing business requirements. They are impressed by the solution and they plan to add over 30 additional locations over the next 2 years. This is a perfect example of how we deliver results fast and earn the right to do more. The solution selling approach at Insight can also begin with a strong services relationship and expand to include products. Let's talk about one of these examples. Over several years, our longtime client, a leading manufacturer in the luxury appliances industry, engaged Insight to deliver on multiple initiatives from user experience enhancements and front-end application development to cloud integration and security. Projects included developing a connected home appliance solution and an app to enable customers to monitor their appliances. Recently, our clients faced a costly upgrade of their antiquated compute and storage environment to meet their business and security requirements. And because we have a strong relationship and a track record of delivering outcomes, they asked us for help. We assessed their platform and existing infrastructure and reviewed their requirements and ultimately migrated them to an optimized, scalable cloud solution that included modern infrastructure at a fraction of the cost. This engagement further deepened our relationship, which, in turn, has led to additional services projects. We cannot deliver these optimized solutions without strong relationships with our expansive partner network, and we are honored that our innovative partners continue to recognize insight for our expertise and our results. Insight was named NVIDIA's 2024 Americas Software Partner of the Year, for our exceptional work assisting clients across industries with software, systems and services to integrate AI into their businesses. As an elite partner, Insight engineers have incorporated the best of NVIDIA AI into deep learning solutions to help clients gain a competitive advantage seamlessly incorporating data analytics, machine learning and generative AI applications into business operations. Insight's AI proof-of-concept process, tests and validates solutions through our in-house research and innovation hubs. Additionally, as part of Broadcom's 2023 Partner Awards, Insight was recognized as VMware's Fastest Growth Partner of the Year for North America. We were also awarded 6 Partner of the Year awards from Broadcom, including North America's Cybersecurity Partner of the Year. You can see additional awards in the accompanying slide presentation. At Insight, we are passionate about using technology for good. We're proud to share the progress we've made toward our continued commitment to the UN Global Compact in our Sixth Annual Corporate Citizenship Report. And we are proud to be recognized as one of Barron's 100 Most Sustainable Companies for 2024. Overall, we are executing against our strategy and making good progress on our initiatives. We achieved strong Q1 results and are staying focused and disciplined in an uneven market. We have expanded our global services capabilities with the addition of Amdaris, SADA and Infocenter. Our improved e-commerce and digital engagement platforms deliver better client experiences. Our state-of-the-art integration center in Texas began shipping products last week and will continue to ramp throughout the year. And as the demand environment for devices improve, we remain ready to support our clients' needs with enhanced offerings such as device-as-a-service and storage-as-a-service. And we will continue to prudently manage operating expenses and gross margin with our pricing and profitability initiatives. As you are aware, we announced this morning that Glynis will be retiring at the end of this year. This has been part of an organized succession process with our Board. We have hired a top-tier executive search firm and are undertaking a thoughtful process to evaluate the internal and external candidates. Glynis will work with me and the team to identify the new CFO. And she has committed to continuing to lead the finance team until the right successor is appointed. I'll now turn the call over to Glynis to share key details of our financial and operating performance in Q1, as well as our outlook for 2024. Glynis?

Thank you, Joyce. As Joyce mentioned, we started the year with excellent results. While hardware declined, our revenue, gross profit, adjusted earnings from operations and adjusted diluted earnings per share increased year-over-year. Cloud and Insight Core Services gross profit both grew double digits. The gross profit growth was largely attributable to acquisitions as well as our pricing and profitability initiatives. In addition, we benefited from a couple of large on-prem software deals in the quarter that delivered onetime gains. Moving on to Q1 results. In Q1, net revenue was $2.4 billion, an increase of 2% in U.S. dollar terms and also in constant currency. The increase was driven by software products and services, partially offset by a decline in hardware, specifically infrastructure. As we communicated last quarter, we're still seeing slight improvement in devices with subdued infrastructure demand. In Q1, Devices were up single digits and Infrastructure was down double digits. We continue to anticipate a modest second half improvement in Devices and believe Infrastructure demand will improve later in the year. Gross profit increased 13%, reflecting strong Cloud and Insight Core Services growth, partially offset by Hardware declines. Gross margin was 18.5%, an increase of 170 basis points and reflects a higher mix of Cloud and Insight Core Services. In addition, our profitability and pricing initiatives also contributed to higher hardware and services gross margin. Insight Core Services gross profit was $76 million, an increase of 24%. This performance reflects the benefits of acquisitions as well as growth in Cloud and Integration Services. Cloud gross profit was $117 million, an increase of 33%, reflecting higher growth in SaaS and infrastructure as a service. Adjusted SG&A grew 7%, primarily due to acquisitions, which was partially offset by the OpEx actions we took in North America last year. This resulted in adjusted EBITDA margin expanding 130 basis points to 5.6%. Adjusted earnings from operations were $122 million, up 30%. From a geo perspective, adjusted earnings from operations increased double digits in North America, EMEA and APAC at 31%, 22% and 20%, respectively. And adjusted diluted earnings per share were $2.37, up 33% in U.S. dollar terms and 32% in constant currency. In the quarter, we generated $247 million of cash flow from operations compared to $160 million in Q1 of 2023. This strength reflects favorable timing of client receipts versus partner payments that will normalize in Q2. We still expect that cash flow from operations for 2024 will be in the range of $300 million to $400 million. Our adjusted return on invested capital for the trailing 12 months ended March 31, 2024, was 18%, compared to 15.9% a year ago. This demonstrates good progress towards our long-term goal. We exited Q1 with debt of $550 million outstanding under our ABL. As of the end of Q1, we have $1.4 billion capacity under our $1.8 billion ABL facility, of which $900 million remains available. We continue to evaluate our options relative to the convertible notes. As a reminder, the notes mature in February 2025. Our presentation shows our trailing 12-month performance through Q1 2024 relative to the metrics that we described at our Investor Day in October 2022. We believe we are on track to hit these targets by 2027, as demonstrated by a strong start from Cloud gross profit growth of 26%, adjusted EBITDA margin expansion of 110 basis points to 6%, adjusted ROIC expansion of 210 basis points to 18% and adjusted free cash flow as a percentage of adjusted net income of 188%. Although we are pleased with the performance we saw in the first quarter, we're one quarter into the year and have considered the following factors in adjusting our guidance. We believe there is increased uncertainty in the macro environment that may further impact recovery in the overall IT market. We expect Hardware to improve modestly as the year progresses, primarily driven by device refreshes. We anticipate Cloud will remain strong and Core Services to improve, booted by the acquisitions of SADA, Amdaris and Infocenter. We continue to diligently manage our SG&A, while thoughtfully investing in sales, technical resources and systems to support our solutions integrated strategy. We have higher interest expense related to the Infocenter acquisition. Considering these factors, we now expect to deliver gross profit growth in the mid- to high teens range and that our gross margin will be approximately 19%. And we expect adjusted diluted earnings per share for the full year will be between $10.60 and $10.90. This guidance includes interest expense between $52 million to $54 million and effective tax rate of 26% for the full year, capital expenditures of $50 million to $55 million and an average share count for the full year of 35.3 million shares. This outlook excludes acquisition-related intangible amortization expense of approximately $60 million, assumes no acquisition-related or severance and restructuring and transformation expenses and assumes no meaningful change in our debt instruments or the macroeconomic outlook. As Joyce mentioned, I'm retiring at the end of this year. While I'm excited about what comes next, this was a difficult decision for me, as I care deeply about my Insight family and the people I've spent the last 17 years with. I'll miss the feeling of being part of something truly special. I am excited about Insight's trajectory and the progress we have made towards becoming the leading solutions integrator. We have a strong and talented management team, led by Joyce as our CEO and incredible teammates who believe in and execute our strategy every day. Insight is well positioned for the future. And after this year, I'll be cheering from the sidelines as the team continues to deliver impressive results. This is my 65th earnings call, and it has been a phenomenal experience for me. Thanks to all of you for your interest and on supporting Insight over the years. I will now turn the call back to Joyce.

Thanks, Glynis. We have started this year with very positive results. Cloud and Insight Core Services' gross profit growth remains strong. We are seeing slight improvement in Device revenue. Gross margin expanded, reflecting a favorable mix of Cloud and Insight Core Services and benefits from our pricing and profitability initiatives. And we remain disciplined with our SG&A management resulting in strong EBITDA margin performance. Our acquisition of Infocenter expands our expertise and capabilities across all major ServiceNow workflows and strategically positions us as a key ServiceNow partner and increases our relevance to our clients. I want to thank our teammates for their commitment to our clients, partners and each other, our clients for trusting Insight to help them with their transformational journeys, our partners for their continued collaboration and support in delivering innovative solutions to our clients. I would also like to thank Glynis for her leadership and energy over the last 65 earnings calls, and we will certainly have a few more of these together. So it is too soon to do a formal sendoff. Glynis has had an enormous impact at Insight over the past 65 quarters. She has led and supported 16 of the 18 acquisitions in the company's history. It was really that foundation that Glynis and team built that enabled us to accelerate our performance and adopt our strategy to become the leading solutions integrator. Glynis is loved and admired for her business acumen, strong leadership and very quick wit by our teammates, partners and clients. Glynis' partnership, support and friendship have been invaluable to me as I joined Insight. Thank you, Glynis. We will miss you, but not yet. This concludes my comments, and we will now open the line for your questions.

[Operator Instructions] Our first question for today comes from Samik Chatterjee from JPMorgan.

This is Joe Cardoso from JPMorgan. I appreciate that it's early in the year, but you had a very strong earnings beat this quarter. But you're only slightly raising the full year guide. Can you just help us bridge between those 2 dynamics? I guess, what are we not appreciating that keeps the full year raise more modest? And then, I guess, if I can tack along with that question, can you just help us with seasonality through the year given the 1Q performance? Are you still expecting the June and December quarter to be your strongest quarters? Or should we be thinking about that differently now? And then I have a quick follow-up.

Okay. Thanks, Joe. We did overperform clearly in the quarter. But we're not seeing a lot of strengthening in the overall demand, the IT demand environment. I think other people have mentioned that demand still remains muted. We are going to continue to prudently manage our SG&A, but we plan to make investments in sales and technical resources and systems throughout the year. Part of what we did was to actually to create room to do some of that investing. And the shape of our year is changing. We now believe that Q2 and Q4 will be more similar, more equal in terms of overall contribution for the year versus what we have said previously. Our original guidance had a little bit of a ramp in the second half of the year, and we don't think that ramp is going to be as strong as we had first anticipated. Infocenter is coming into our portfolio, and it's not anticipated to be accretive this year. It will be accretive next year. But it will have a little bit of an impact on us this year. And it's a combination of all those things, but primarily around the macro environment not being quite as strong as we had anticipated and maybe not strengthening as much as we had anticipated in the second half, specifically more around Hardware.

And that said, Joe, the overperformance in Q1 does increase our confidence that we'll be delivering our 2024 guidance. So we feel good about it.

No. Got it. I appreciate the color there. And then maybe just as a quick follow-up. There is obviously the strong uptick in Software revenue in the March quarter. You mentioned onetime deals. Maybe can you just elaborate on those onetime deals including the magnitude of them? And then how are you expecting software revenue to track going forward? And before I hop off, just wanted to send my congratulations on the retirement. Glynis, I really enjoyed working with you.

Thanks, Joe. I appreciate that. So on the onetime deal, you see it very much in revenue -- in our Software revenue, as you look on our Software revenue on a year-over-year basis, this is on-prem Software product. It's not Cloud related. So the -- it has revenue, it has COGS and it has a GP associated with that. The GP impact is a little bit more muted because it's on-prem software. The timing of these deals is not something that we necessarily control. There could be more of these deals in the year. We're not saying that they're not going to be any. But it's not something that we can control or something that we can rely on. So it's in this first quarter, more impactful on revenue than on GP, but it was a driver of performance this quarter.

Having said that, we expect Software to remain strong for the year, continue to be strong.

Just not at the pace of the expansion that we saw in Q1. And Cloud, of course, will continue to remain strong as well.

Our next question comes from Adam Tindle of Raymond James.

And my congrats to Glynis as well. Joyce, I wanted to start with you, if I could. I think in the answer to one of the last questions, Glynis was a little bit more muted on the IT spend environment. I just wanted to maybe kick it to you on IT spending. Obviously, we're not seeing the muted environment that you were talking about here in Q1 results. But your other peers are citing a lot of pausing going on. How would you characterize the overall IT spending environment now maybe versus the last couple of quarters? And how do you think it trends for the rest of the year?

Yes. It's really hard to read, Adam. I mean we still see a fair amount of uncertainty. We definitely see a careful, cautious spending. But it's not -- I mean, obviously, we delivered some pretty good results for the quarter. So we're having a lot more conversations now about hardware -- device refresh. Our Infrastructure bookings are up again in Q2, but modestly, and we expect more recovery on Infrastructure in the back half. Software and Cloud remains strong. I'd say you see the caution in big services engagement. You see the caution in sort of big CapEx deals. It's been there, just taking longer to close. But I feel like we've been saying that now for quite some time. So I don't really know how different it is. I think what's different is there's been a little bit more caution from the Fed around when interest cuts are coming and things like that. And I think that is weighing on some of our clients as they think about how to manage their spend. But it's sort of more of the same. And I guess we were expecting this to improve a bit more, sooner in this year. So not a great answer. It's more uncertainty.

Okay. That's fair. And I guess if we were trying to look at the 13% gross profit dollar growth, is there a way for us to maybe strip out that onetime Software deal and the SADA contribution? What would you say is a better reflection of sort of organic gross profit dollar growth in the quarter?

So let's just talk about the overperformance for a second. I mean we had a very strong quarter, solid performance across all geos and all major client groups. So I don't want you to think that this is really onetime deals. We did have a couple of very large deals in the quarter. But across all client groups, all geos, we had some really strong performance. This was primarily driven by Software and, frankly, our OpEx management, SG&A performance. SADA did not contribute to the overperformance. Software growth was driven by a couple of large deals and the timing of those deals, what I said, is a little uneven. Gross margins were higher than our expectations in Services and Hardware gross margins expanded. So we feel really good about those. Those are sustainable. And as we talked about it in the answer to the last question, we're -- given the uncertainty in the macro environment, we expect to continue managing our OpEx really closely. And we're going to continue to invest in the business because we have the opportunity to do that. The other thing that's a little bit different from what we talked about at the end of the year is we no longer expect SG&A to grow faster than GP in 2024. So we think -- we're really pleased with our performance. We're pleased with the foundational improvements we've been driving in the business over the past several years, and we expect to continue to deliver that in terms of expanded margins and growth in the areas we've been talking about.

Our next question comes from Anthony Lebiedzinski from Sidoti & Company.

Congratulations, Glynis, on your pending retirement. I have enjoyed working with you for the last few years. So I guess, first, just in terms of SADA, I think when you announced the deal, you had mentioned that the business obviously is highly seasonal. It would be a drag, I believe, in the first quarter and I think most of the year. So was that the case here, now that you already have gone through integrating SADA into your business?

Yes. So SADA was accretive to our earnings per share in Q1, as we said. And in Q1, they performed slightly below our expectations. But we're really focused on figuring out how to make sure we continue to improve throughout the year, and there is seasonality there. As Glynis mentioned, we don't think the seasonality is going to be quite as stark as we talked about in our last earnings call. So we expect that to even out a little bit more throughout the year. We're really very happy strategically with the acquisition. We think this gives us great capabilities, lots of interest from our clients in these capabilities and our ability to support multi-cloud environment has been dramatically improved. And so really, really happy about that, and we're going to continue to work on smoothing out that seasonality and improving the overall performance.

Got it. Okay. That's good to hear. And then you mentioned along with some of your peers about the uneven demand in the marketplace. So I guess when you look at your different client groups, are you seeing any notable differences as far as customer buying behavior or just in terms of the sales cycles?

Yes. For us, all client segments grew on the GP line, and that was terrific because we haven't seen that kind of consistent performance for a while. As I said, all geos also grew. And I guess we see a bit more caution, though, throughout -- we see continued caution, I should say, not a bit more, but continued caution and big spend across all client groups. Yes. And we don't have the same mix as everybody else. So that might be part of the deal.

Okay. Got you. And then lastly for me, as far as SG&A, so it looks like there was some good management there in the quarter. Are you looking to do -- you mentioned I think part of your guidance adjustment is your SG&A. So are you -- is it just a function of -- are you looking to reduce personnel or is just tighter cost management? What was driving that?

I think it's 2 things. One is the rollover effect of the reductions that we took last year and the SG&A initiatives that we put in place last year. That's definitely playing through in the numbers this year as well as the improvements that we've made in some of our underlying operations, moving some work to Manila, relative to keeping it in here in the U.S. or in other high cost locations. So it is a combination of some of the initiatives we started last year and the acceleration as we continue to execute against those in 2024. We will also continue to invest, as I said, in the sales and technical resources and continue to invest in systems, but we are seeing the play-through of the initiatives that we started last year and that we're continuing.

Our next question comes from Victor Santiago of Stifel.

This is Victor on for Matt Sheerin. And congrats Glynis on the announcement of your retirement. On the growth we saw in Devices during the quarter, could you give us any color on what drove that demand in regards to the customer type?

I think it was really across the Board.

Yes.

And it was -- we're not talking big numbers. It was very muted growth, but it was great to see because it changes the trajectory. But it was across the board. I dont know -- maybe -- can I just say one more thing about Devices for a second? What we're seeing right now is a lot of interest in refresh. We're also seeing lots of discussion about AI PCs. So we do expect that Devices will continue to strengthen throughout the year. And we do think part of that, but a very small part of that, is going to be due to AI PCs. I just wanted to -- I do think most of it is going to be driven by Refresh. So we haven't changed our view on that.

Got it. That's helpful. And as a quick follow-up, could you give us an idea on how much the Infocenter acquisition adds to your ServiceNow capabilities? What did your capabilities look like before that acquisition and how much will it grow thereby?

Yes. So we use ServiceNow internally as part of our managed services offering. So we have a lot of familiarity with ServiceNow. We had some resale and some very small, sort of, services engagement. But I would say we have dramatically changed our capabilities around providing our clients with services around ServiceNow. And Infocenter has developed an incredible reputation. They have a great level of customer sat, best in the ecosystem in North America. And ServiceNow is very pervasive. So we think that is a great platform for us to expand -- to include in terms of the relevance to our customers and our services capability. So we are very, very excited about this acquisition and very excited about the leadership of the Infocenter. We're pretty impressed overall with how they run their businesses and how that will help us expand our capabilities. They also have a very, very strong relationship with Microsoft and Azure AI, and that's obviously a strength of ours. So we think that's going to be a force multiplier.

[Operator Instructions] Our next question comes from Vincent Colicchio of Barrington Research.

Is there any more color on the weak SADA performance, any integration issues, higher-than-expected turnover, things like that?

Yes. So I mean, so SADA performed slightly below our expectations in Q1. And we have no concerns about the relevance of Google to our clients or the offerings that we have with SADA. It really is -- just depending on kind of when basically renewals and recommit for resale of Google Cloud happened to hit in a period. So, I would say we haven't seen increased attrition. There's been no issues with that. The team is fantastic. The leadership team is very excited and committed. We just didn't see exactly the same level of resale of Google Cloud that we expected in Q1.

And how far along -- could you update us on how far long you are in implementing your pricing and profitability initiatives maybe in terms of innings?

In terms of innings. So it would vary. So I'd say in North America, we are in may be in the fifth inning, if you want to think about it that way? In North America, we've recently started -- not recently, the back half of last year. We started a similar program in EMEA. So that's maybe in the third inning. So I think there's still some runway that we have to go in both of those areas. And as we think about our Services business and the profitability there. We're leveraging our offshore capability across all of our Services businesses as well as leveraging both SADA and Infocenter as well as Amdaris have back-office operations in lower-costs geos, India or Eastern Europe, and we're going to be leveraging those as well, too, in terms of profitability -- further profitability initiatives in our Services Infrastructure or portfolio, I should say. And I would just say, I mean, I think we're really excited about it. Sorry, Anthony, what we're really excited about is the fact that we are positioned well for the rebound on the Hardware side. So we've taken a lot of these actions during a period where we haven't seen very robust demand, especially for Devices.

Okay. And has there been any change in the economic expectations for your different geographies?

No. I think no, no change in expectations there. I guess that's a simple answer. Our business in Europe is right, in EMEA, in the U.K., it looks very much like North America. The rest of Europe is software related. Most of APAC is software and software services related. And Services is a little soft, but other than that, the geos, there's not much change in our expectations in terms of how the geos are going to perform.

At this time, we currently have no further questions. So I'll hand back to Joyce for any further remarks.

All right. Well, thank you very much to all of you for your questions and your interest. We are very excited about the continued opportunities ahead of us and really are looking forward to sharing our continued progress on our journey to become the leading solutions integrator with you. So thank you, Alex. You can close the call now. Appreciate you all. Thanks very much.

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