Hewlett Packard Enterprise Company (HPE) Earnings Call Transcript & Summary

All right. Well, hello, everyone. Happy Monday. Welcome. I'll give it a few more minutes just in case if people are just a little bit delayed. But while we wait, let's just go over some legal disclosures, just to get the regulatory friends out of the way. So this information presented today does not constitute an offer, sale or solicitation of any offer to buy or a recommendation to buy, sell, hold any investment or security or to engage in an investment strategy or a transaction. CapConnect+ eMarkets LLC does not represent that in securities, products or services discussed in this webinar are suitable for any particular investor. So let's get started. Hi. I'm Eric Thomson, Head of Sales at CapConnect+. I couldn't be more excited to have you all here with us today for Hewlett Packard Enterprise's first-ever non-deal roadshow exclusively for you, the debt investors. At our core CapConnectors transparency, connecting you to innovative executives and doing things direct, no middleman, we keep things simple. We spent the past few weeks with Andy and Kirt, and I couldn't be more excited to offer this opportunity and connect them directly with you all here today. We'll go through the state of their business and strategy, but it will be the unvarnished interactive conversation with you that will make this session so unique. If you everyone questions, just please raise your virtual hand and we'll get to you shortly. You can also e-mail them to [email protected], which I'll also place in the chat right now. But with that, it's my honor to introduce you to Andy Simanek, Head of Investor Relations, and Kirt Karros, Senior Vice President of Hewlett Packard Enterprises.

Great. Thanks, Eric. Appreciate it. So I have some -- few disclosures as well on the HPE side really quick and then we can jump in. But -- so you'll hear some forward-looking statements in today's discussion. These are based on risks and assumptions that are described in our annual report on Form 10-K and Form 10-Q. Our actual results could differ materially, and we assume no obligation to make updates. So more details can be found on our website at investors.hpe.com and our recent Q2 earnings announcement, press release dated June 1. So I just wanted to thank everybody for joining today. And really the genesis, we've been working with Eric and the CapConnect team in the last several weeks. And the idea was just to have open dialogue with our fixed income investors. Obviously, in the Investor Relations side, I think we spent a disproportionate amount of time with the equity investors, but debt investors are obviously very important as well. I mean, it's roughly half of our enterprise value. And so, we just wanted to take this opportunity to hear from you what questions you guys have top of mind. So we have our Treasurer as well to answer your questions. And so, I think with that, we just want to have an open dialogue and take the conversation whatever direction is most helpful for you guys. So with that, Eric, maybe I'll pass it back to you, and we can get rolling.

Yes, that's great. So through our conversations thus far with you all, we've had a couple of questions come in already. The consumptions and inflections in demand, how is the supply chain really kind of impacted your business? Why don't we just kick things off with that, and then we can gradually get down?

Sure. Yes. No, definitely. I think that's -- those are the sort of the top of mind questions that I'm hearing from investors every day is, what's happening in the demand environment. Supply chain has obviously been a challenge for some time now. And so, I think from our standpoint, I mean, demand has been quite strong throughout the last year. I mean, we've got 4 quarters in a row where we've been growing the orders north of 20%. And we're really seeing it across the entire business. I think it's strongest probably in our Networking and our Intelligent Edge business, but also seeing good growth on the Compute side, HPC and Storage as well. I think the big limiting factor that we have is supply chain, right? And so, that's been an issue for some time now. And we're not really expecting things to get better until probably the end of this calendar year. And I think it takes well into next year for it to fully kind of resolved itself. And so, we've discussed the backlog that we're sitting on. We haven't given a specific number, but we have said that it's roughly kind of 2.5 to 3x our normal levels. And so, there's no issues there. I think it's a very high-quality backlog, meaning that we're not seeing any material cancellations. I'm not really seeing any double ordering. I know in our markets, I mean, people are after a certain storage array or certain networking gear. But it's really just been a challenging supply environment. And I think last quarter in our Q2, we had the incremental impacts from the lockdowns in Shanghai and Shenzhen in China. I think that's improved. So that's getting better, but supply is still going to be sort of the gating element for us, at least in the near term. I think longer term, obviously, there's a lot of dynamics in the market in terms of talks about a recession. I mean, you've got [indiscernible] and interest rates on the rise. And so, we are taking a very close look at sort of what the macro environment. So like I said, I think for this year -- the rest of this fiscal year, sort of the gating item is supply. So that's really what's, I think, going to drive revenue. Longer term, we're basically planning for next year for fiscal year '23 now, and we're doing a pretty deep dive in terms of scenario planning, depending on, if we get into a recession, is it a global recession? How deep is it? That type of thing. And so, we're planning a number of different scenarios around that. I think one thing I would mention is that, I always like to highlight to folks is that, when you look at the recurring revenue in our business and even more so on the profitability side, it's quite strong. And so, if you look at our operational services business, which are all the support contracts for the hardware, if you look at our financial services business, those tend to be 3-year leases on average or our as-a-service business. Again, so that makes up roughly about 1/3 of our revenue. And more importantly, it's about 80% plus of our profitability is all recurring in nature. And so, that just brings quite a bit of stability to the business model. But why don't I leave it there, Eric, and I'll pass it back to you.

That's great. I mean, I think with all those points, I think it kind of leads us into another fantastic question, which is, has your appetite for M&A increased with the recent fall in market valuation? Can you talk to us a little about your M&A kind of thought process?

I'll touch this one first. So I think our discipline around capital allocation hasn't changed. We always maximize returns for our shareholders, cognizant of making sure that we have a very liquid balance sheet and we can take advantage of opportunities when they arise. But I think you've seen we've been very disciplined over the last several years. Look for tuck-in type acquisitions, but always looking and we'll listen for opportunities and evaluate them. Certainly, over the last several years, I think as valuations got stretched in the marketplace, it's more challenging to find opportunities that meet our hurdles for both -- obviously, has to meet a financial hurdle and be strategic, and in this environment, I think as you've said -- if you've seen some reset in valuations, I think it becomes more of a place where there's maybe a mismatch between buyers and sellers. And so, I think as you get through and you see where things settle out, I think you probably will see maybe more M&A opportunities. But has it really changed the way we look at things and maintain our discipline. And so, we maintain a solid balance sheet, and so we can take advantage of opportunities when they arise.

That's great, Kirt. I might just keep it there with you for a second. How do you expect the optimal capital structure? Do you have a target credit rating or leverage ratios that you guys are looking at?

Sure. I mean, as we've expressed, we consistently strive to maintain our investment-grade credit rating. It's very important for us, especially with our Financial Services business, maintaining ready access to the markets. We need to be -- have ready access to both CP markets and the investment-grade market to be competitive, obviously, with the financial business, it's very important to maintain competitive rates. So I think as -- since the spin, even HP legacy, we have a history of maintaining that investment-grade. We communicate that. And so, I think that is an objective and basically part of the overall evaluation when we look at opportunities is, we're targeting to maintain that investment-grade rating when we look at ultimate leverage that we might be able to take on in any scenario planning.

Well, now that we've warned you all up, is anybody from the attendance have any questions that they'd like to kind of throw their ways, please raise your hand virtually. I'll be happy to call on you, like we're back in school. All right. I see one coming in.

Great. Yes, absolutely. So I believe HP has been absent from unsecured market since August 2020 and it's since been able to raise a substantial amount in ABS, which better aligns with the receivable profile of the business. My main question is, how much is left for HP to do in the ABS market? And then subsequently, does that drive a pivot to the unsecured market, specifically relating to the October 2022 maturities of $1.35 billion? How are you thinking about that?

Sure. So as you pointed out, we definitely as we launched the ABS program back in fall of 2019, the goal was to ramp that program up to get to a sufficient kind of scale that once we sort of reached our capacity in that. The idea was to continue basically accessing both markets. So we believe it's advantageous to have liquid ready access to 2 fairly diverse markets and investor bases. So we went about the ABS market by looking solely at the U.S. market. If you look at our overall portfolio, we've got about $4.5 billion of U.S. receivables. So the capacity in that market is probably touches on just under about $4 billion. We run about $2.5 billion of ABS. So the thought process is that, we probably have capacity for one more issue here. And so, when you're talking about specifically the October maturities, as you may have seen, we did put out the tender for the [indiscernible] last week. And so, the expectation is that, we would settle that with combination of cash on hand in the short term, but would likely go out to the markets in the near term. And so, that most likely will or we haven't made a definitive decision around that. We probably would access the ABS markets, but then I think when you look forward to '23 and '24, we would plan to be in both markets. So kind of a combination of time, what looks mostly advantageous, but recognize that we need to participate in both. So I think it's -- we really, over the last 2 years were ramping up the program. We took advantage, obviously, when financial or when COVID hit, like many of our competitors, kind of went out and accessed liquidity and hit the unsecured markets. And so, I think we probably took on more than what we absolutely needed at that time and then rotated back to the ABS over the last couple years to build that up. But going forward. I think you can -- the expectation would be that we'd be playing in both markets.

And again, Vince, from Wellington. Justin? How are you?

Eric, Andy, Kirt, I appreciate you guys taking the time for call and everything. A couple of questions on my end. I know you guys touched on supply chain [ component ] availability. I think those are, for the most part, at this point, widely understood. I think you mentioned demands remained relatively robust across most of the markets, but I was hoping like sort of double-click or unpack that a little more. What are you guys seeing on the -- in terms of market share competition side, particularly in, I guess, the storage business?

Yes. No. So -- I mean, so the demand environment, like I said, has been pretty strong across the entire portfolio. And as I mentioned, I think probably where we're seeing the most strength is in the Networking business, our Intelligent Edge space. I mean, we've got, I think, 5 quarters in a row thereof north of 35% growth. But it's also the same thing with like the Compute business. I think we've got 4 quarters in a row thereof north of 20%. I think Storage has probably been slightly less than that. And for us, the Storage business is a little bit unique compared to the market because we are going through a little bit of a transition where we're trying to emphasize our own intellectual property products, whereas in that business, we also do some third-party resale essentially. And so, we've been deemphasizing that, which is impacting our overall order growth rates. But I think if you look at our owned IP growth rates, they're probably relatively in line with what the market is. But that's also another business that has been impacted by supply chain to your point. And so, there is quite a big delta between orders and the actual revenue growth rate at the end of the day. So like I said, I think that takes sort of several quarters to work through before you start to get -- that picks up. The other thing I would say on just demand overall, we've got 4 quarters in a row now growing north of 20%. You're not going to see those growth rates continue indefinitely, right? I mean, just by the nature of coming up against tough compares, you're going to see that moderate quite significantly. But I still think, though, that the demand for digital transformation is there. I think if anything, the pandemic taught us, you look at the companies that did well, they had largely digitally transformed, those that struggled and not. And so, if you are seeing -- digital transformation spend be more of a strategic imperative than it was a couple of quarters ago. So like I said, we've got to keep a close eye on what the macro environment does and that's what we're taking into account when we looked at fiscal year '23. But overall, I think we feel pretty good about the portfolio. And like I said, there's some differences amongst the segments, but it's still fairly broad-based.

Got it. Okay. I appreciate that level of detail and everything, too, Andrew. That's super helpful. Then sort of last one for me. I think a prior question already sort of hashed out what was the balance sheet and everything so let's keep this operational. Thinking through the business and everything, is the current supply chain environment, is that having any bearing or impact on margins currently also? Would you expect a supply vulnerability comes back online? Any impact up or down to the margins across the 4 businesses? Or is that sort of not really an impact at all?

Yes. I mean, I would say, generally, component costs get passed through over time, either on the upside or downside. I do think that, that is a very important point. When you listen to Antonio, our CEO, or Tarek speak, they'll talk about the high-quality of our backlog. And by that, they mean a couple of things. So one, like I said earlier, we're not really seeing any cancellations. But more importantly, the backlog has been priced appropriately to preserve margins, because basically, when we take an order today, we effectively have to honor that price when we deliver it if it's a quarter or 2 quarters from now. And so, it's very important that we take into account to the best of our ability, what the component cost but the logistic costs are going to be when we actually deliver that product, right? And so, we feel like we've done a lot of work in terms of processes and systems to get that right. And I mean, if you look at the margin performance, the business over the last couple of quarters has been quite strong. I mean, we've been kind of holding in the 34% range. That's increased sequentially a couple of quarters in a row. So, I think we're quite pleased with what we've been able to do from a pricing standpoint. And like I said, we'll have to see where components go over time. They can have some short-term impact positive or negative to margins, but generally, it gets priced away over time.

Justin, that's great. That's Justin from PIMCO. I'm going to go ahead and call on Colton Dye from DMBA right now.

Also go ahead. Yes. Can you hear me?

Yes, sir.

So switching to kind of to the labor side. Kind of curious about how you're seeing things as far as employee, talent, acquisition, retention, wage pressures right now and just so much pressure there potentially on margin going forward.

Yes. No. I mean, certainly, an issue that I think that every company is having to deal with right now, right, big resignation and just inflation and wages and so forth. So we've definitely seen elevated levels of attrition over the last year plus, but we're still quite far below the industry average. So I think it's a testament to sort of the employee-based management team, what they've done around the culture and so forth. I think the other thing, too, is we've made some changes in terms of -- we moved our corporate headquarters from -- previously, we were in the Bay Area, then San Jose. Now it's in Houston, that has opened up a whole another large talent pool available to us. And so, I think we're certainly seeing it, but I think we're being impacted less potentially than the industry as a whole. In terms of getting the talent that we need, I think largely we are. But again, it's -- we've had to do things on the wage side just as everybody else has. So it's keeping a close eye on it, but it's manageable, I guess, I would say.

All right. Here we go. Vince is back.

I'll ask another one. So the H3C put now expires on 10/31, what's the rationale for continuing the JV? And if the put were be exercised, how much would that imply in proceeds and how would that amount potentially be deployed?

Yes, I can take that. Yes. So I think certainly, as you know, the put has been extended to the end of October. I think part of that was simply we had a new shareholder that was entering into the joint venture. And so, we needed to extend the put to give us sufficient time to have a viable negotiation with the partner. I think as we communicated, the asset remains very strategic for us. I mean, clearly, the rationale for when we entered into the joint venture hasn't changed from inception. I mean, we view that as a very important strategic play into China, very important to have an indigenous partner there, and we remain that. And so, the partnership has worked very successfully. So our, I think, initial thoughts on it is that, that's a valuable asset that will continue to accrete valuable dividends to our shareholders long term. And so, we simply are in the process of engaging in those negotiations. And I think we'll -- as this play out over the next couple of months, we'll obviously have an order to stay on that as the put -- we're very cognizant, obviously, of the exploration data in there and trying to maximize the value. So we'll look at both coming to a successful conclusions around those negotiations, but ultimately know that there is the opportunity to try to monetize that asset if it need be. But we've recognized that it's -- again it's a strategic asset for us and we think very valuable going forward.

Okay. Some are related in the past to more aggressive capital allocation strategy specific to repurchasing HP shares have been viewed as less favorable as the company desire to maintain flexibility relating to both organic and inorganic growth. If HPE were to become more aggressive as it pertains to buybacks, should we assume that this potentially implies less desire in growing inorganically?

Yes. Again, I think we view our capital allocation -- listen again, we try to put the money to work where we see the best overall return. So whether that's investing in the business organically, which traditionally or historically has been the best risk reward opportunity. We have a view of where we think our own R&D dollars can go. I think we have been very disciplined on that front and allocate it as part of our overall long-term planning process. And then to the extent we have excess liquidity or excess funds, we'll look to deploy those. We don't, as a strategy, look to sit on idle cash per se. So we will return that cash in the form of it could be dividends, it could be, as you had indicated, share repurchases, we could pay down debt. And so, we look at all of those along with M&A. And so, I don't think you necessarily should view one to the exclusion of the other. We'll look at all opportunities afforded us. And I think we view a proper return to shareholders as part of the overall attractiveness of the equity story. So we'll look to maintain certainly the dividend. I think the share repurchase is more of a -- there's more flexibility around that. And so, the last couple of years, certainly, we've been more muted on the share repurchase activity as we look to bolster the balance sheet coming through COVID. And I want to make sure we do have flexibility for M&A opportunities, maintaining the investment-grade status throughout. And so, at this point, we're going through -- I think Andy alluded to, we're going through our kind of long-term planning process for next year. We'll develop that. And we'll have more to say probably at our Securities Analyst Meeting on what the specific objectives probably are around share repurchase.

So we have a question from the Q&A function, so I appreciate you all utilizing that. We have Kevin Christiano from Northwestern asks, almost 40% of revenues in EMEA. Are you seeing any stress from customers in those markets due to the Ukraine conflict?

Yes. I mean, I think definitely, that's probably in terms of concerns over recession and so forth, more of the hot spot, right, because of what's going on over there. But like I said, I mean, I think we haven't really seen significant changes in buying patterns yet. I think there's chatter out there for sure. And that's probably an area where again you're going to see it first, right? But I do think, like I said before, I mean, customers are still definitely making the investments in digital transformation. And when you do enter a recessionary environment, a lot of times IT spend can help you become more efficient, right? And so, I mean, we're certainly not insulated, but I do think that there is some protection there. And so that's what we've got to keep a close eye on. I would say, like I said, in the near term, I mean, we have a very large elevated levels of backlog that we need to work through with the supply chain. So I think the concern is not so much in the short term here. I think it's -- to Kirt's point, as we're looking to fiscal year '23, what are the potential scenarios that could play out? And so, that's something that we're taking a close look at and say, if we do enter a recessionary environment, how deep is it? How long does it last, type of thing? Does it spread more broadly around the globe? Or is it more kind of in certain pockets? And so, that's what we're taking a look at as we think about next year. But at least in the short term, like I said, we've got the supply to work through so that we can start working down that backlog. I think we are probably relatively close if we're not there already in terms of peak backlog. So I think that will start to work down. But again, it's probably well into 2023 that that really takes place.

We'll go Ellen Li from Eagle Asset now.

I have a question mainly from the ESG front. You guys are committed to net zero plans by 2040 and then that was approved by the science-based target initiative. So I was wondering, especially for Scope 3 emissions, you guys are committed to reduce the Scope 3 emissions by 42%. And I understand that's kind of unique collaborations across supply chain. Could you speak more about what is the status of this collaboration? What are some strategies that you guys are having in that front?

Yes. No, great question. And so that's something that's -- I mean, when I think about the environmental impact, it's really built in kind of the strategy of the company. And so, the Board spends quite a bit of time around this. As we design our products, we take a lot of that into account, as well as the go-to-market. And so, we did just move our target up. Originally, it was 2050. Now it's 2040, essentially, to your point. And when you just think about the strategic changes the company is making, I mean, historically, we're always very much kind of a traditional transactional-type of model. Now we're moving the business to as-a-service with our GreenLake offering. And one of the things that GreenLake does is it really helps the customers prevent overprovisioning. And so, you're getting much more efficiency out of the IT assets you have because historically, a lot of times, if customers were doing this on their own, they would basically build their IT for Sunday mass essentially for basically max capacity, whereas in most cases, they don't need that, right, on any given day. And so, with the GreenLake model, they basically just pay for what they consume. And we spend a lot of time analyzing workloads and data sets and figuring out how much capacity is actually needed. And so, it prevents sort of that overprovisioning. And so, that's one of the things that we've been working on to help achieve the targets that we've set out there. So I mean, I certainly think that there's quite a bit of work to do to get there. But we're well on our way. I mean, we've been doing this for several years, types of thing. And then the other thing I would mention, too, is with our Financial Services business, we recycle almost -- it's north of 90%. I think it's actually north of 95% of the assets at the end of the day. And so, that's just another thing that helps us achieve those types of targets. And so, I think the company spends a lot of time and efforts in these areas. And it's -- I think it's the right thing to do, and frankly, it makes a lot of business sense, too. And so, like I would recommend take a look at our Living Progress Report that we just published a few weeks back. You'll find a whole host of information in there about more specifically what we're doing, there's a ton of data that supports all of this. So I would take a look at that and let us know if you have any questions, I'm happy to do a follow-up there.

We are going to pass it over to Teresa Lee from Jane Street.

To the extent that we do and are what looks more like a recessionary scenario in '23, maybe going into '24, can you remind us again what your CapEx spend would look like in those scenarios? And maybe just give us a little bit more detail about your ongoing sort of annual CapEx spend at current levels?

Sure. Yes. I mean, if you think about our CapEx, we run anywhere from $2 billion, $2.5 billion of -- sort of $2.5 billion spend in CapEx. The vast majority of that is related to our Financial Services business. So it's funding our operating leases. So in the order of about $2 billion annually. So I think you can think about that business as -- that obviously could flex with the environment. So it's highly dependent upon equipment sales and so forth. So as equipment sales may either -- if they decrease, then I would expect to see a commensurate decrease probably in our overall volumes of that business. But by and large, it's -- these are clients that are a lot of recurring clients, refreshing equipment, that number through various cycles tends to remain fairly consistent. So I wouldn't expect a dramatic movement in the overall CapEx volumes. But again, those are revenue-generating assets that that CapEx is deployed into. And the remainder of it then is in the business units, there's high priority kind of spend and obviously, in a recessionary environment like any environment as you go through the LTP process, there's -- we make sure that each investment reach certain return metrics. And I would think in a recessionary environment, we should obviously modulate that some if return profile comes down. So again, kind of $2.5 billion plus or minus, some but probably not material swings.

I'm going to go ahead with another question that has come through. How do you expect HPE Financial Services, your captive financial business, performed in the rising interest rate environment? And do you see any additional credit risk in a recessionary environment?

Sure. I mean, I think if you look through the history of HPFS, I think the overall credit losses have been best-in-class. I think the business has run fairly well, that being said, clearly, if you point to the financial crisis of 2007-2008, overall reserves spiked up, but still very low from any type of benchmark status. So I think the underwriting criteria is quite stringent. When you think about these assets, again, these are critical use assets. These are -- we're basically underwriting key strategic IT equipment that's utilized in the business. And so, where you could -- in any one particular scenario, you'll have one-off, obviously, credit losses. But I think overall, history has shown that the asset performs fairly well. I think to the point about a rising interest rate environment, we manage that business like any other financial institution. So it's a spread business. So we -- specifically, that's why I think maybe to the earlier question, we started out the conversation in terms of trying to match maturities of our overall debt portfolio to the asset duration, it tends to be shorter in nature because we're trying to match as best we can, the underlying asset portfolio. And so, as assets reprice, as leases come due, we obviously will reprice those assets with the current interest rate environment. And likewise, as the debt rolls off, will be repriced into -- it's now a higher interest rate environment than what we've observed in the last several years. So overall, the strategy is such to position us that we're somewhat indifferent to the overall interest rate environment to the extent that, that portfolio is backed by the HPFS assets, which today when you think about our overall debt profile, by and large, it is. We provided the disclosure around kind of OpCo, FinCo. At the OpCo level, we're slightly net cash. And so, our expectation, again, would be -- while you might see some small discrepancies, the rising interest rate environment should not have any negative impact overall to HPE.

And a couple of more questions are coming through. What has your recent interactions with rating agencies been?

Honestly, not any different than it's been historically. We have very, I'd say, good relationships with them, consistently dialogue with them throughout the year. I think the most recent communication publicly with Fitch just came out and reaffirmed our rating and upgraded the outlook from negative to stable. So again, I think everybody is looking out and trying to determine what the -- that rephasing a recessionary environment as such. I think our balance sheet has been such that we -- because we've prepared it to withstand recessionary environments and such and maintain the liquidity, our expectation and hope that is, we will be able to weather through any type of environment that we face. And so, no real change to the level and types of questions and communication we've had with the rating agencies.

It looks like we have one from Anthony from HIMCO.

Can you hear me okay?

Yes.

I just wanted to expand on maybe the cash usage question from earlier, specifically on M&A, and I guess it's sort of a returns analysis. But given sort of the high-end worry and growing worry about recession and when that happens and how deep it is, has the pipeline changed in terms of what you're looking at for opportunities? And are you on the Board level or in the C-suite worried about -- obviously worried about that and does that change your appetite and sort of made the underwriting even more stringent as you go forward? Or are we not there yet in your sort of business as usual in terms of how you analyze deals?

Yes, sure. I think all that obviously goes into the analysis, right? I mean, scenario planning when you look at any asset, clearly, you look at the overall valuation. And so, you can run DCF models, if you look at near-term impact to liquidity, earnings, et cetera. So that hasn't changed. I think, to your point, certainly, there's going back 12 months ago from now, the near-term expectations for a lot of assets, their targets out there have changed, right? The market is probably reset some of the -- especially in some of the growthier assets, those projections have come down. And so, I think we just take a stringent view when we're planning and run the various scenarios. And I think it's always that combination of trying to make sure that there's obviously a benefit, there has to be a willing seller and a buyer. And so, where a year ago, certainly projections could have been more robust and valuations be more stretched. And so, in today's environment, valuations have come down, but also the financial profile, at least the near-term outlook has come down commensurate. So constant evaluation, constant balance, certainly, I think it's probably, to your point, a little bit more dynamic in terms of the near-term outlook, it's probably become a little bit more uncertain than maybe people's view a year ago or so.

And as the number of deals that comes across the desk changed at all?

Again, we're always -- look, like any corporate, I mean, deals are always coming across the table, right? I think, again, it's whether our appetite changes or not, I think you can just look at our history there. And it's our overall strategy on how we evaluate potentially targets really hasn't changed. And so, we'll have to see, I think sometimes these types of environments can either present opportunities and if companies are sufficiently capitalized, you can take advantage of it. But we're not -- again, we're very disciplined on how we look at these things. So I wouldn't say that the volume has necessarily changed dramatically from where we were a year ago or so.

So it looks like we're coming to our time. I just want to, first off, thank you, everybody, and for the participants who came with some questions. I think that was extremely valuable and exactly what we're trying to accomplish here is connecting our investors, our CapConnectors directly with management. Andy, I want to pass it off to you if you have any closing remarks, you and Kirt, but I want to also thank you both. You've been fantastic. We are absolutely honored to have you guys at our inaugural CapConnect direct featured guests and very much looking forward to having you guys participate in the future as well.

Definitely, Eric, thank you very much, and appreciate everybody for joining the call. I mean, we've got a great list of investors here. And just I really appreciate the questions you guys have. I mean, feel free to reach out to myself, the Investor Relations team any time. And Eric, we would love to do the event again. I mean, I think this was definitely positive for everybody all around. So we just want to make sure that we're on a regular basis in front of our fixed income investors. So we'll figure out the right cadence, whether it's once a quarter, a few times a year, but really looking forward to doing it again. So thank you.

Yes. And I'll just reiterate Andy's comments. Appreciate all of you taking the time and hope to engage in the future. And as Andy said, reach out any time, we'd like to continue this dialogue and encourage it. So thanks a lot.

Thanks, Kirt. Thanks, Andy. And for everybody on the line, if you have any other further questions, as Andy and Kirt mentioned, please reach out, we could facilitate a follow-up call on a one-on-one basis. And additionally, we can also facilitate any potential reverse inquiries. So that's something that will provide a little bit more information on. And our follow-up call, my follow-up call on conversations with you all, but very much looking forward to those dialogues. But thank you, Andy, and Kirt really for today. I look forward to seeing everybody at our next event. Thank you, everybody.

That's great. Cheers.

Thank you. Bye everyone.