TD SYNNEX Corporation (SNX) Q3 2016 Earnings Report, Transcript and Summary

Good afternoon, my name is Laura, and I will be your conference operator today for the SYNNEX 2016 Third Quarter Earnings Call. [Operator Instructions] Today's conference is being recorded. If you have any objections, you may disconnect. Thank you. At this time I would like to pass the call over to Mr. Mike Vaishnav, Senior Vice President, Corporate Finance and Treasurer at SYNNEX Corporation. Sir, you may now begin.

Thank you, Laura. Good afternoon and welcome to SYNNEX Corporation's earnings call for the fiscal 2016 third quarter ended August 31, 2016. Joining us on today's call are Kevin Murai, President and CEO; Dennis Polk, COO; Marshall Witt, CFO; and Chris Caldwell, EVP and President of Concentrix Corporation. Please note that some of the information you will hear today consist of forward-looking statements within the meaning of the federal securities laws. Such statements may relate to, without limitation, market, demand, growth, non-GAAP net income and EPS, margin, profit, revenue, cost, shares, tax rate, seasonality, integration, impact of acquisition, contract terms and its effects, and dividends. Actual results or trends could differ materially from our expectations. For more information, please refer to the risk factors discussed in our Form 10-K for fiscal 2015 and the discussion of forward-looking statements in our earnings release and Form 8-K filed with the SEC today. SYNNEX assumes no obligation to update any forward-looking statements which speaks as of their respective date. Also during the call we will reference certain non-GAAP information. Reconciliation of non-GAAP and GAAP reporting is included in today's earnings release and related Form 8-K available on our website at www.synnex.com. This conference call is a property of SYNNEX Corporation and may not be recorded or rebroadcast without our specific written permission. Now I would like to turn over the call to Marshall for an update on our financial performance. Marshall?

Thanks, Mike. First I'll review our results of operations and key financial metrics and then I'll conclude with guidance for the fourth quarter of fiscal 2016, before turning the call over to Kevin. Our Q3 revenue, non-GAAP net income and non-GAAP EPS all exceeded our expectation. On a consolidated basis, total revenue was $3.7 billion, up 10.1%, compared to $3.3 billion in the same quarter of the prior year. Adjusting for FX of $16 million, revenue and constant currency was 9.6% higher compared to the prior-year quarter. Our gross profit on Q3 revenues was $326 million or 8.9% of revenues, compared to $290.8 million or 8.7% of revenues in Q3 of 2015. Technology Solutions segment revenues were $3.3 billion, representing an increase of 9.8% compared to the prior-year quarter. The TS revenue increase was mainly due to strong demand for our Hyve services, across-the-board growth in TS U.S. and Canada driven by great execution, and offset by negative growth in Japan Technology Solutions. On a constant currency basis, Technology Solutions segment revenues increased approximately 9% year over year. Concentrix revenues were $406.7 million, up 13.1% from $359.5 million in the year-ago quarter. The net acquisition contributed $36.2 million of revenue and $0.9 million of GAAP earnings to the Company's total consolidated results of operations. Adjusting for the acquisition and the negative impact of FX of $6.8 million, revenue in constant currency increased 5%. Q3 total selling, general and administrative expenses, excluding acquisition and other integration expenses, restructuring costs and amortization costs, were $212.3 million or 5.79% of our revenue, compared to 5.82% of revenue or $194 million in the third quarter of fiscal 2015. Consolidated non-GAAP operating income was $113.6 million or 3.1% of revenue, compared to $97 million or 2.91% of revenue in the prior-year third quarter. At the segment level, Q3 Technology Solutions non-GAAP operating income was $80.1 million or 2.45% of revenue, up 11.72% from the prior-year quarter result of $71.7 million or 2.41% of revenue. For Concentrix, non-GAAP operating income in the quarter was $33.5 million or 8.24% of revenue, up from the prior-year quarter result of $25.2 million or 7.02% of revenue, primarily due to the improved profit from the loss-making contract previously discussed. The Minacs acquisition contributed approximately $3.2 million of non-GAAP operating income. Net total interest expense and finance charges for Q3 were $7.5 million up from $6.8 million from the prior-year quarter due to higher borrowings to fund the Minacs acquisition and for growth in our Technology Solutions business. Net other expense was $0.4 million in the third quarter of 2016, compared $0.2 million in the prior-year quarter. The tax rate for the third quarter fiscal 2016 was 34.9%, compared to 35.2% in the prior-year period. For the remainder of fiscal 2016, we anticipate the annual tax rate to be in the range of 35.5% to 36.5%. Our third quarter non-GAAP net income attributable to SYNNEX Corporation was $68.9 million or $1.73 per diluted share. Turning to the balance sheet, our accounts receivable totaled $1.7 billion on August 31, 2016, for a DSO of 41 days, down 3 days from the prior-year quarter. Inventories totaled $1.6 billion or 43 days at the end of the third quarter, up 3 days from the third quarter of 2015. Days payable outstanding was 42 days, up 3 days from the prior-year third quarter. Hence, our overall cash conversion cycle for Q3 2016 was 42 days, representing an improvement of 3 days from Q3 of 2015. From a financing perspective, our debt-to-capitalization ratio this quarter was 29%. Preliminary cash flows used in operations were approximately $9 million for the third quarter. And at the end of Q3, between our cash and credit facility, SYNNEX had over $1.4 billion available to fund growth. Other financial data and metrics of note for the third quarter are as follows. Depreciation expense was $15 million, amortization expense was $13 million. HP, Inc. at approximately 16% of sales was the only vendor accounting for more than 10% of sales. Capital expenditures for the quarter were $28 million, primarily due to continued Concentrix facility expansion. Trailing four quarters ROIP was 9.6%. Excluding impact of one-time acquisition and other integration expenses, restructuring charges and amortization, the trailing four quarters ROIP was 10.6%. As described in our earnings release, the Board of Directors approved a regular quarterly cash dividend of $0.25 per common share to be paid on October 28, 2016 to stockholders of record as of the close of business on October 14, 2016. Now, moving to 2016 fourth quarter expectations. We expect revenue to be in the range of $3.83 billion to $3.93 billion. For non-GAAP net income, the forecast is expected to be in the range of $82.7 million to $84.7 million. Non-GAAP diluted EPS is anticipated to be in the range of $2.06 to $2.11. Non-GAAP net income and non-GAAP diluted EPS guidance excludes after-tax costs of approximately $10.2 million or $0.25 per share related to the amortization of intangibles, and approximately $7.7 million or $0.19 per share related to the acquisition, integration and restructuring expenses. We anticipate the majority of acquisition, integration and restructuring costs to be completed by the end of our fiscal fourth quarter 2016, and is primarily related to the Minacs acquisition. Weighted average shares estimated for diluted EPS were $39.8 million. Please note that these statements of Q4 expectations are forward-looking and actual results may differ materially. I will now turn the call over to Kevin.

Thank you, Marshall, and good afternoon to everyone on the call. I will begin with comments on our third quarter before turning the call over to Chris Caldwell for his comments on Concentrix. I will then discuss our views on the markets specific to our fourth quarter, as well as provide an update on our 2017 goals from our Analyst Day last year. Now, turning to the third quarter. I am thrilled with our performance. Strong execution and progress in our business strategy drove our solid results. Our fiscal third quarter revenue exceeded our expectations in both our Technology Solutions and Concentrix segments. Year-over-year revenue grew almost 9% to $3.7 billion excluding the Minacs acquisition and adjusting for currency. Our consolidated non-GAAP operating margin was 3.10%, representing a nearly 20-basis-point improvement compared to the prior year, reflecting the solid performance of our businesses. In our Q2 earnings call regarding Technology Solutions, I stated that we anticipated normal seasonality and that we expected to execute well in SMB and public sector. I also mentioned that the market was undergoing rapid change and that SYNNEX was well-positioned given its capabilities and business model. And as we progressed through the quarter, I believe we gained market share and achieved growth in emerging technology segments. Our Technology Solutions business in the U.S. produced solid results in public sector, enterprise and SMB. Our Hyve Solutions business was strong as we ramped business from our newer relationships and executed well with our core customer set. Our business in Canada had another good quarter, growing mid-single-digits, while Japan declined in sales with slightly negative profitability during its seasonally lower quarter and soft demand environment. From a product perspective, consistent with our view of the market, we continue to experience solid growth in higher-end technology products, including software, networking and security, as well as good performance in notebooks and other client devices. Our business in retail and consumer electronics was also a good performer. Softer product segments included printers and system components. In our Q2 earnings call regarding Concentrix, I stated that we expected to gain market share and grow adjusted operating margin, and we achieved our goals across the board. We announced that we closed the Minacs acquisition on August 1, which we believe will enhance our reach and capabilities, including a digital marketing practice and a strong footprint in the automotive sector. The people, culture and clients represent a great complement to the already strong Concentrix business. For more color on Concentrix, I will now turn the call over to Chris Caldwell. Chris?

Thanks, Kevin. This was a solid quarter for Concentrix. As you know, we closed on our acquisition of the Minacs business on August 1, and immediately started the integration work. We have been very pleased with the reception of the new client base to Concentrix and new offerings to our existing clients. We have added some very key capabilities around marketing optimization, telematics and Internet of Things to our portfolio of offerings. The talent and experience of our new staff brings to Concentrix as well as the additional delivery locations further enhances our global footprint, providing some very exciting opportunities for us. We are on track to have the business essentially integrated by the end of our Q4. Operationally, we also performed well. In the current third quarter results, we have one month of the Minacs business captured in our revenue of $406 million. The underlying Concentrix business pre-acquisition in constant currency, and accounting for the sun-setted government contract we have discussed in the past, grew 15.1%, well over three times faster than the market. We also had solid results in profit this quarter as our non-GAAP operating income was up over $8 million year over year and our adjusted EBITDA up over $10 million over the same period. As we had mentioned last quarter, we expect our trouble contract to break even for the year and make progress to the quarter to accomplish that. We now also have a firm end date of that contract which will be wrapped up early in the New Year. We believe that ending that contract won't have a material impact on our revenues and allows our resources to be redeployed on higher return programs going forward. From a sales perspective in this quarter, we added 12 new clients. That makes 26 new clients for the year, well up from last year. The value we drive for our clients does not go unnoticed with a record 25 industry awards this quarter, many won in partnership with our clients. It is also important that we support our communities we operate in and I'm happy to also congratulate our India team where Concentrix India became the first company in India to be certified ISO14001 for environmental stewardship. As I look forward to the fourth quarter, we expect to see a seasonal uptick in the business, along with the momentum of our newer client base from the Minacs acquisition. We expect Minacs to add approximately $113 million in revenue and $13 million in EBITDA to our business with the integration being complete this quarter, so it'll be the last quarter we break out the business. The investments we make in our business, our staff and clients continue to show benefits with our sales pipeline remaining healthy. I'd like to close by thanking all of our staff and clients around the globe for their commitment to excellence and passion that they demonstrate every day. Now I'll pass the call back to Kevin.

Thanks, Chris. Now I'd like to provide some highlights on our fourth quarter outlook. Overall we expect strong performance and above-market growth in both business segments. Within the Technology Solutions segment, we expect a flat but stable demand environment, with cloud and cloud-enabling technologies to grow faster than the overall market. We also expect healthy U.S. federal demand as well as continued strong execution in our Hyve business. We expect our Concentrix segment to continue to execute well and improve its profitability. And as Chris stated in his remarks, the Minacs acquisition is expected to be completed by the end of Q4. With our recent performance and the confidence we have in our growth and cash flow, today we also announced that we'll be increasing our quarterly dividend to $0.25 per share, representing a 25% increase from a year ago. And with 2017 just on the horizon, we are more convinced than ever before that the investments we have made over the past few quarters will provide new business models and capabilities that differentiate SYNNEX by targeting high-growth areas in the markets in which we operate. Beyond these investments, we continue to find opportunities in our business where we can better optimize our growth and profitability, such as efficiency improvements in Concentrix and profitability improvement in Japan. The performance goals that we outlined at our Analyst Day in 2015 are clearly in our view and we expect to achieve our operating margin goals as we exit our fiscal 2017. I am very happy about our third quarter results and fourth quarter outlook. Our teams have become even more effective to our growth and evolution, and without their hard work and dedication, we could not have achieved our goals. I would like to thank all of our associates around the world for their contributions in our success and also would like to thank our business partners and shareholders for their continued support and trust in SYNNEX. So with that, let's turn the call over to the operator for questions.

Thank you. We will now begin the question-and-answer session. [Operator Instructions] Our first question is from Brian Alexander from Raymond James. Your line is now open.

Okay. Thank you and good afternoon. This is Adam in for Brian. First question, I just wanted to make sure that we're not double-counting here, Kevin, when you just mentioned the fiscal 2017 targets. When we think about those targets in Concentrix specifically, 7% to 10% revenue growth and 9% to 11% operating margin, should we be thinking about those numbers organically in fiscal 2017 and add Minacs on top of this? Because I think most of us had over 20% operating profit dollar growth for Concentrix in fiscal 2017 before this, which I'm concerned that that's the wrong starting point.

Thanks, Adam. Sorry. Thanks, Adam. As we said before, we expect to get to our operating margin goals not including the Minacs acquisition and we also expect to get to our revenue goals without including Minacs as well.

Okay. And I guess more of an industry question, how does Tech Data's acquisition of Avnet's computing business affect SYNNEX? Hoping that you can touch on both operationally and strategically.

Yeah. So I mean operationally and more short term, obviously we see opportunity to really demonstrate the value that we have in the marketplace and look to earn more share in the market as they go through that transition. From a strategic perspective, as you know, the technology market continues to evolve and evolve very rapidly. When you look at the combination of Avnet's TS business and Tech Data, it drives more towards the model that we've had for years which is our hybrid model where we've got a strong footprint both on the broadline side of the business as well as enterprise. But for SYNNEX, in addition to that, we've also made significant investments in other parts of our business that really play into technology change around cloud. Our Hyve Solutions business serves the market in the hyper-scale build-out - hyper-scale datacenter build-out, and significant investments in our cloud platform and community which really plays to the full as-a-service, the entire as-a-service cloud-based compute environment. So we believe that we're extremely well-positioned. We see change coming and we think we're very well-positioned for that.

Okay. Maybe just one quick clarification from Chris, that you had mentioned a seasonal uptick in Concentrix. Just wanted to understand - was that a comment on revenue and do you view revenue seasonality as similar to last year where you had a 4% sequential uptick? And then, Kevin, what does that, you know, that implies that TS is kind of half of normal seasonality from what we're used to in the November quarter? So maybe you could touch on how much of this is just lumpiness in Hyve or pull in to the August quarter?

Hi, Adam, it's Chris. Yeah, we do see the seasonality as similar to what we saw last year.

And regarding Technology Solutions, you know, we came off a very strong third quarter, certainly above our own expectations on where we would end up, but we do feel that we're performing well in the market. And frankly with the strong Q3, probably a combination of taking that into consideration as well as maybe being a little bit conservative on our guidance.

Thank you. Our next question is from Matt Sheerin from Stifel. Your line is now open.

Yes, thanks. Good afternoon. Just a couple of questions here. On the Concentrix business and that contract, the so-called trouble contract in the U.K., it sounds like that's going to -- did you say that's going to be ending in -- at the end of your fiscal year or will it be next May? And I know you talked about it being breakeven for the year. Given what's going on there, are there any additional costs that may prevent that from happening?

Hi, Matt, it's Chris. It's actually -- we didn't give a specified date, but it'll be early in the New Year when it'll be wrapped up. And it's within our guidance of being breakeven for the year. That's still our expectations as we budgeted all the puts and takes in those comments.

Okay. And the facility and the resources that support that contract, you're just basically going to use that for other programs and backfill that? Is that the plan? Or will there be any restructuring charges or anything related to that?

No. Our plan is to redeploy those staff members into other programs and also reuse the facilities as we have a demand for facilities out of that location.

Okay. Okay, great. And then, Kevin, on the Technology Solutions business, you talked about the share gains and obviously you're growing faster than the peer group and the overall market. So, just trying to figure out where that's coming. Is it across the board? It looks like your margins are holding up, although difficult to -- I know the gross margin was enhanced a little bit by Concentrix and the Minacs acquisition, but trying to figure out, are you still being aggressive on pricing to gain share and offsetting that with good cost control which is still driving the margin higher, or are you, based on your guidance, being a little more conservative in terms of how you're pricing things or weighing that against profitability?

Overall, you know, and I, you know, whenever I talk about share gains, I always talk about earning share gains. We don't like using price as a weapon. From time to time, Matt, we do have to protect our own territory and participate in that, but that really is not the way that we go to market. So as we go out and we earn share, it's really because of the differentiation that we have in the market, and in particular how we help our vendors grow. As I pointed out, we continue to perform very well in Canada and also in the U.S. But the market of course is not homogeneous. Where we did well was in SMB public sector, but certainly holding our own and holding share we believe pretty much across all business segments as well. It really comes down to strong execution on our part.

Got it. And then you said that on a year-over-year basis you got -- it looks like you got some sort of currency tailwind where that helped our revenue growth relative to ex FX. What region did that come from?

Matt, this is Marshall. It was pretty immaterial. And on the TS side, those influences come from Canada and Japan and Concentrix are kind of blended throughout the world.

Okay. And just lastly, just on the business in Japan. I know you're coming off of a seasonally weak quarter, but it doesn't look like that's profitable at this point and I know that there's been ebbs and flows in that business since you've owned it. What's the kind of near long-term prospect for that business, what you can do to that? Does it make sense to continuing to run that business, or is it not big enough where it's going to move the needle one way or the other now?

It's a very important part of our distribution portfolio. Frankly, we're continuing to invest more resources from North America over to help the Japanese business on process. But we have such a large share gain opportunity in Japan because of our relative market position, that we believe we have continued opportunity there. And in particular, even as well as we've done from a growth and profitability results perspective in Technology Solutions, that's one of the areas where we see even greater opportunity to continue to enhance our overall business.

Thank you. Our next question is from Ananda Baruah from Brean Capital. Your line is now open.

Hey. Thanks guys for taking the question. Hey, congrats on pretty strong results. A few for me if I could. I guess the first is with regards to the TS results and then I guess the guide, Kevin, your comments on, perhaps a tad of prudence. If I just do the sequential for August, I think it was the strongest sequential results you guys have had since 2011, maybe 2010. And you ran through a handful of buckets that were pretty solid. Can you talk to the extent that's useful for us to view it as sort of the strongest sequential August in kind of the five or six years, what incrementally did you see kind of as you went through the Q that might have I guess inflected a little bit to cause that kind of growth? And then I have a couple of follow-ups, thanks.

Yeah. Well, you know, it is a number of things, Ananda. Number one is we did execute extremely well, and as I said, I think we believe that we did gain share through the quarter. Over the past years in particular, as you look at what's been going on, both on a sequential as well as on a year-on-year basis, we have had changes in foreign exchange that have changed those dynamics as well, and certainly have helped. But also other parts of our business where we've been investing in, in new technology, our cloud based business continues to grow at a very rapid rate. And as I mentioned in my prepared remarks as well, our Hyve Solutions business would be ramping up of some new customers and just strong execution also performed well too. So it really is a combination of all of the above.

Got it. And what's the -- just with regards to your comment around the prudence in the November Q guide, and I think there was a subsequent comment about just sort of generically the August Q being stronger than anticipated, was -- is there anything specifically, Kevin, that you would think that wouldn't have follow through? I mean, what would be sort of a dynamic that underpins stronger than expected demand that wouldn't follow through? Was there any like large projects or large orders or anything like that?

There are always those, Ananda, and it's hard to actually pinpoint any one thing. At the beginning of any period, certainly at the beginning of any month, there are plenty of opportunities that we have in our pipeline, and it is a competitive environment. So, you know, sometimes we're able to convert our pipeline into sales, other times we are. So we really go based on what our historical averages have been and from time to time, like in our past quarter, we won a lot more than we didn't.

Was there, with regards to the share gains, was there anything -- was it just sort of just like legit vanilla execution [inaudible] quarter or is there anything that sort of happened contextually as you went through the quarter that put you guys in a position as distinct from your own, you know, what you controlled, that kind of let the share gains or at least sort of put you in the position to gain share?

Again, Ananda, it's hard for me to pinpoint everything -- anything, but -- anything specific, but execution is really something that can't be downplayed at all. We continue to execute very, very well in the marketplace. I do view us and I do view that many of our vendors come to us as their go-to distributor. And so where they need to grow, where they need help in targeting specific markets, they come to us first in general and we're able to execute with them. That really does play a lot into our success, not just this past quarter but how we've been able to grow faster than market for a long period of time.

Long period. Thanks. Okay, one last one for me for Chris. Chris, just on the Concentrix margins, did you outperform your internal target? You outperformed our expectations, so I'm just trying to calibrate our thinking with what you guys had planned internally. And that's it, thanks.

Hey, Ananda, it's Chris. We came in line with our expectations internally and start to get some of the leverage we expected out of the business that we've been ramping and putting into production.

Thank you. Our next question is from Osten Bernardez from Cross Research. Your line is now open.

Hi, yes, good afternoon. Thanks for taking my questions.

Hey, Osten.

Just the Minacs --

Hey, Osten, we -- you're coming across very light. We cannot hear you --

Hello? Is that better?

That is way, that's much better, thank you.

Sorry about that. With respect to Concentrix, could you just highlight for us what kind of growth Minacs has had over the past year and also highlight what type of customer overlap there might be with the legacy, if you will, or traditional Concentrix business? I understand not much, but they do -- there is some regional overlap there. So, how should we be thinking about how you intend to grow that business going forward? Thank you.

Hi, Osten, it's Chris. So, over the last year or so, Minacs has been growing at higher single-digit growth rates, and there is some overlap but it's relatively small. We have two customers that really are the bulk of that, and the customers were aware of the transaction and supported the transaction and frankly allow us to grow with the combined business going forward.

Got it. And then when I think about the performance from the TS side, obviously with Hyve being -- Hyve obviously had a pretty strong quarter, but usually that carries with it pretty decent operating leverage. So, is the offset to that mainly coming from the issues in Japan or is the offset to the operating leverage, does that come from the -- sort of the mix shift, if you will, from the rest of the TS business?

Hey, Osten, it's Dennis. Yes, it's a combination of factors. I think mix is probably the biggest one to point out. Japan having a loss-making quarter obviously dragged down the margins a little bit, and then also just the mix between the three countries as well and the volumes and others as the reason for the margin change.

All right. And I guess it might be just too early to discuss, but with Hyve being a lumpy business but this year has been -- so far has been a pretty dynamic for you guys, is it too early to sort of think about, well, I understand that Hyve is a long-term growth business for you, but would you say that, when we're looking about -- when we're thinking about Hyve in fiscal 2017, that, will we be -- will there just be -- will the comps be too tough for you to anticipate the growth to be sort of steady state at the high level that it's been?

I'll tell you, Osten, we're always focused on growth. And you probably could have said -- made the same comment last year and the year before, not just about Hyve, but any business we have. So, obviously we don't sit on our laurels. As we continue to earn more and more business, we continue to look for more growth opportunities too. So we don't look at that as a headwind.

Thank you.

Thank you.

Thank you. Our next question is from James Suva from Citi. Your line is now open.

Great. Thank you very much and congratulations on the quarter. The question is on Concentrix. It looks like you improved in margins quarter over quarter and year over year, which is great. I'm realizing that you had some challenges in the past with that one. Can you venture, as you look forward, to say if you have a visibility that all those had been resolved, are you looking at like at the end of the year coming to some make-or-break decisions? How should we think about the visibility? And again, congratulations on the good results.

Hi, Jim. Clearly we continue to work on the business quarter on quarter on quarter, improving it, both getting better leverage out of our investments as well as streamlining some processes and driving efficiencies, as Kevin has mentioned. We also tend to get more leverage within our business in Q3 and Q4, which you saw last year, and our expectations is you'll see this year ago. But we don't stop. We continue to figure out how to make better improvements. And as Kevin mentioned, we're on path to our double-digit operating income expectations for 2017, as we made the announcement at the Analyst Day, and that's what we're focused on achieving.

Thanks very much and congratulations.

Thank you, Jim.

Thank you. Our next question is from Garrett Hinds from CLSA. Your line is now open.

Hi, this is Garrett Hinds for Lou Miscioscia. I just had a quick question on HP buying Samsung's printing business. Is that an opportunity for you guys?

I think anything that's good for HP, Inc. usually translates in being good for us as well. I think what's behind it though, when you look at the, really, the business that they bought, which is the, you know, which is really an enhancement to the A3 business and the A3 supply chain, because of the specialty businesses that we have and certainly one focused on the business component of the higher-end printer and copier business, I think that plays very, very well into one of the strong capabilities that we have in the marketplace. So, yes, I think it's going to benefit us certainly very well.

Thank you, that's helpful. And then another one, on services, how are you guys applying robotic process automation or scripting, some of the things you're doing, in your contracts and outlook for bidding things? Do you think that's going to be a positive and how do you see it affecting the services business in the next couple of years? It just seems like that area is growing a lot with all the new capabilities.

Hi, Garrett. Yeah, it's Chris. So we do that now. We, you know, forecast so much of our revenue that's going to be cannibalized by ourselves, driving better processes, which can come out of robotics and automation that we do. We primarily see that more in our healthcare and banking and financial services business, which tends to have some more complicated mature systems with multiple legacy systems to get to a work product, which is where we see a lot of value. We see it as a differentiator from us offering it to our clients and taking share from our competitors who are not offering it. And we also see it as being able to drive more margin enhancement as clearly it allows us to do more with less as we drive better efficiencies for our clients. So we continue to invest in that area and we're doing it now, we see some good payback, and we'll continue to drive it forward.

Thank you very much. Very helpful.

Thanks, Garrett.

At this time, speakers, I show no further questions in queue.

All right. Thank you everybody for joining our call.