Legrand SA (LR) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen, and welcome to today's Legrand 2026 Half Year Results Conference Call. For your information, this conference is being recorded. [Operator Instructions] At this time, I would like to turn the call over to CEO, Mr. Benoit Coquart; and CFO, Mr. Franck Lemery. Please go ahead, sir.

Thank you very much. Good morning, everybody. Franck Lemery and myself are happy to welcome you to Legrand H1 2026 conference call and webcast. This morning, as usual, we published our press release, financial statements and the slide show that we will refer to during the call. After a few opening remarks, we will comment on the results in more details. Let me start on Page 4 with the key highlights of the quarter. First, Legrand delivered another period of record sales growth together with continued excellent profitability. Second, we are continuing to implement our 2030 strategic road map with determination. Third, we are raising our full year 2026 targets. Moving to Pages 6 and 7, I will start with an overview of sales. Sales delivered strong growth of plus 17.4% in H1 2026, excluding currency effects, comprising: first, an organic growth of plus 9.8%, driven by data centers and energy transition-related offerings. Second, growth from acquisitions with a positive scope effect of plus 6.9%. Based on acquisitions announced and their likely date of consolidation, the overall impact of acquisitions would be around plus 8% for the full year. The exchange rate effect was minus 3.7% in H1. Based on average exchange rates in June 2026, the full year currency effect would be around minus 1.5%. On Page 7, you will find the key takeaways by geographies on a like-for-like basis. Europe sales saw sales down minus 2.4% in a building market that remains as expected, contrasted. North and Central America increased sharply by plus 24.2%, driven by strong success of data center and energy transition solutions in the U.S. Lastly, Rest of the World grew by plus 2.3% in the first half with significant growth in India, Australia and several other Asian countries, while activity in China remained soft. Despite the geopolitical situation, sales in the Middle East grew in H1. These were the main comments I wanted to make on sales. I will now hand over to Franck for more color on our financial performance.

Thank you, Benoit, and good morning to all of you. I will start on Page 8 with adjusted operating profit. Profitability despite inflationary pressure remained very strong in H1 2026 with an adjusted operating margin of 20.8%. This is a high level, reflecting strong execution and adaptability, notably effective pricing and cost productivity as well as the quality of our recent acquisitions. Going now to Page 9, regarding value creation. First, net profit reached EUR 698 million, up plus 11.2% versus H1 2025. This increase was driven primarily by higher operating profit, a slightly lower corporate income tax of 27.5% and the negative evolution of the financial results. Second, free cash flow came to EUR 488 million, representing 9% of sales. This is it for the key financial topics. I'm now handing over back to Benoit.

Thank you, Franck. So during the first half of the year, we actively deployed a strategic road map. Let's take 3 examples, data centers, acquisitions and innovation. First, data centers on Page 11. The group's strong organic growth in the first half was driven in particular by its Data Center business, which delivered organic growth of above plus 30% and now accounts for 32% of Legrand's revenue. Legrand has built one of the broadest offerings in the industry from on-site power generation to installation testing. Its portfolio includes more than 140,000 product references and a growing range of services, including engineering services, on-site support, testing and commissioning. The group is particularly well positioned to support the development of high-density AI data centers through scalable, highly engineered solutions tailored to the specific needs of hyperscalers, co-location, new cloud providers and enterprise customers. Second example, acquisitions on Page 13. So far in 2026, we already announced 7 acquisitions so far including one today in Finland, all are focused in energy and digital transition, further strengthening the group's leadership position in high-growth markets. They represent a combined annual revenue of around EUR 450 million throughout the world. Third example, innovation on Pages 15 and 16. As you know, innovation and regular new product launches have always been and remain a key priority for Legrand. You can see once again our continuous strong innovation momentum with numerous product launches in all verticals since the beginning of the year. We can now move to Page 18 with our full year 2026 targets. Confident in our action plans, we are raising our full year 2026 targets. Based on its first half performance and the current global macroeconomic environment, Legrand is now targeting the following in 2026. Sales growth, excluding currency effects of between plus 16% and plus 19% versus plus 10% and plus 15% previously, comprising organic growth of between plus 8% and plus 10% versus plus 4% and plus 7% previously and growth through acquisitions of around plus 8% versus between plus 6% and plus 8% previously. Adjusted operating margin after acquisitions of between 20.5% and 21% of sales unchanged, CSR achievement rate of at least 100% for the second year of its 2025, road map. In conclusion, this first half highlights the strength of our business model and the acceleration of our momentum, strong growth, high profitability and disciplined execution. Our Capital Market Day on September 29, 2026, in Singapore will be an opportunity to provide an update on our 2030 ambitions with a particular focus on Data Centers. We would be very happy to welcome you there. Those were the key topics of this release. I suggest that we switch now to Q&A. Thank you.

[Operator Instructions] We will now take our first question from Andre Kukhnin from UBS.

Could we just start with comments on the Data Center specific growth in the second half, if you could specify that for Americas and maybe the Rest of the World as well, please?

Well, so in the first half, as I said, the Data Center business grew a little bit more than plus 30% on a worldwide basis with a growth which was stronger in North America than elsewhere. As far as the full year is concerned, you know that 3 months back, we're guiding for close to 20%. Now we believe that on a full year basis, our Data Center will grow between 25% and 30% organically for the full year, which you can do the math. But basically, it means in H2, it would be between 20% and 30%. So we expect to see the continuation of the strong growth in Data Center. And I have to say that the pace is not slowing down. We have very, very solid orders, a lot of discussions going on. And we are quite optimistic, I have to say, for the next couple of months.

Got it. And if I may just ask, I think during the quarter, you talked about working on the sidecar offering for the future 800VDC architectures. Could you talk about how long have you been working on that? And when do you expect that to be commercially available? And given that I think this is seen as a sort of a transfer step between the current architectures and the full solid-state setups, do you also intend to have an offering for what I think is going to be the battery rack in the full 800 VDC?

Well, Andre, I expected to have more questions on the results before getting into the LVDC topic, which the financial community is sort of obsessed by. I don't want to be too exhaustive on that because we have a CMD end of September. We'll spend a day together, and it will be the opportunity to go a lot deeper into those topics than during a call dedicated to the results. But to make a long story short, yes, we are working on the full hybrid architecture, including the side car, and we are not late compared to what we can see on the market. And yes, of course, we are also working on the next step, which is a full LVDC, even though there's now a consensus on the market that it won't come before some time. I remind you the sort of base scenario in which we work, which is that the so-called hybrid architecture, so with [ NEC, ] DC architecture could represent as much as maybe 10% or 20% of the new IT loads by 2030. As far as the full LVDC is concerned, now most people expect that it would represent at best 1% or 2% of the new IT loads by 2030. So those are the orders of magnitude that we've been talking about for almost a year now. And I can only note that more and more people are on the same page as us. So yes, we are working on both architecture, hybrid architecture and LVDC to answer your question. But once again, we'll give you a lot more color in September. And I hope, Andre, you will join us in Singapore.

Of course, yes, we'll be there.

And our next question comes from the line of Phil Buller of JPMorgan.

I'd like to start with another one on Data Center, if I may. It's 32% of your sales now, which is great on the one hand, but there are these growing concerns about a potential bubble or at least the medium to longer-term affordability of it also. So perhaps you can share what you're seeing on the ground in terms of the medium-term outlook? Are you concerned internally by the risk of a potential bubble beyond that near-term optimism. Just to start there, please.

Well, I've not heard much about a bubble as far as the AI was concerned. I heard a lot about bubble concerning potential valuations. What we see on the ground is that there is a huge demand, which is not slowing down at all, a sort of race to capacity, which is happening with orders coming to be delivered in '26, some of them in '27, some of them in '28. And frankly speaking, when I see the penetration rate of AI, which is still very low and the disruption potential it has on so many sectors, name software, traveling, financial services, health and many others. I think that we are just scratching the surface of what AI can bring as a benefit. And if we need -- if we think that AI will be almost everywhere and will impact all sectors, then you need a lot more computing capacities than is currently available. So I'm not saying that we will grow 30% forever. We won't, of course. But I still see a very, very positive momentum for a couple of years. Here again, we'll try to give you a bit more color on what we see ahead of us in terms of gigawatt market growth and so on in September. But again, I don't see a reason why given the low penetration rate of AI in many sectors, why the need for computing capabilities would slow down.

Yes, that makes sense, and it's very clear. My follow-up is on the margin topic really. So clearly, a solid performance in Q2 or H1, given what's going on in the world. But by geography, it's really the U.S. that's driving that in North America, I assume, driven by the data center leverage. But perhaps you can talk to the margins in Europe and the rest of the world year-on-year. How should we think about that evolution in the second half in the context of the unchanged margin? And are there any AI benefits that you can touch on that you're able to achieve internally as well?

Well, as far as the margin is concerned, what happened in H1 is pretty clear. And you can see that we have 20 points decrease in operating margin, which is coming half organic -- basis points, sorry, 20 basis point decrease, half from acquisitions, half organic with a gross margin, which is down 130 bps coming mostly from acquisitions. And you know that the company we are acquiring tend to have a lower gross margin and lower SG&A base than the rest of the business. SG&A, which has a positive impact of 90 bps on our profitability, which is mostly leverage. And then other, which has a slight positive impact of 20 bps with the level of restructuring, EUR 1 million, which is similar to H1. So this is for the group. Of course, NCA, North and Central America has a very strong performance, which makes a lot of sense given the strong sales growth they are experiencing. And it compensates the decrease in Europe and in the Rest of the World, which is suffering from softer sales. And especially that in Europe, we are more integrated. Europe is bearing a number of central costs, holding costs as well as global centers for innovation. So when you don't have top line impact in Europe, it has, of course, a negative impact on the profitability. So this is for H1, no surprise, more or less a stable margin, let's say, with lower gross margin, positive impact from SG&A and a slight positive impact from others. As far as H2 is concerned, frankly speaking, we'll see. It will depend on the top line evolution we will have in the 3 areas. The bottom line is that we are confirming that despite inflation of purchase price, despite muted sales in Europe, despite the geopolitical situation, which remains somehow uncertain, we are fully confirming our guidance in margin, i.e., an adjusted EBIT margin of between 20.5% and 21%. But again, to see the difference from one zone to another, let's wait for H2 to happen and let's wait for the -- especially the top line in H2 to happen before commenting.

We will now proceed to the next question. And our next question comes from Daniela Costa of Goldman Sachs.

I will start my question and then I'll ask the follow-up after. But on the -- following up on this point on pricing into the second half, I guess that's within your round of control. If you could give us any idea of whether you've done any price increases in July or what do you see and especially differentiating between Data Centers and the rest would be very useful.

Well, it's difficult to differentiate from one time to another, from one business to another. I can give you the global numbers. So our price effect was plus 2.9% in H1. So you can see the acceleration between Q1 and Q2. Q1 was at plus 2.1%. Q2 was at plus 3.6% and globally, plus 2.9% for H1. And given the environment, especially the purchase price environment, we expect -- we now expect a price effect for the full year, which could be up to around plus 3%, having in mind that the price increases started in H2 last year. So the basic comparison in terms of pricing is a bit more demanding. So we were expecting 3 months back to be between plus 2% and plus 3%, and we are now confirming to be around plus 3% given the environment. Now if the situation of purchase price, so price of components was to worsen for whatever reason, of course, we would keep our ability to do a bit more pricing. When we entered the year, we thought we would do plus 1% to plus 2%. Now we are shooting for plus 3%. And if it was needed, we could do 2% more. This was for purchase price -- for selling price. As far as purchase price is concerned, I can also give you the data. In H1, it was plus 3%. Purchase price plus 2% in Q1, plus 4% in Q2. And we are now expecting an inflation to be probably a little bit higher than plus 4%. So expectations for the full year, purchase price of plus 4% plus, let's say, and selling price of about plus 3%, excluding tariff. This is what we are shooting for. But again, should we need to do more selling price, we would do more depending on the environment.

And then just as a follow-up in terms of the data center business, we are starting to see some announcements in Europe. I think we saw sort of SoftBank in France, but there's been others. I know that your portfolio is slightly different in Europe versus the U.S., but how should we think about -- should we just imagine you benefiting the same way you did in the U.S.? Or there are some things we should keep in mind on the difference in the portfolio?

Well, no benefit yet in 2026 so far because of the time difference between announcement and an actual Data Center setup. You know that because of permitting, because of access to electricity, access to the grid, it can take up to 3, 4, 5 years before a project is announced and the time that the Data Center is effectively open, and we are late cycle in the data center. We start to do some sales a few months before the Data Center is open. So we're not yet seeing the same amount of business as we see in the U.S., but it's not specific to Legrand. I mean it's a whole market. Our core assumption is that it should help us in the years to come. But so far, in 2026, the most exciting market, faster growing remains the U.S. Now the day it will come a bigger scale in Europe, it will be a good news because theoretically, we have the ability to sell more dollar per megawatt in Europe than in the U.S. because there are a number of product families that we have in Europe and not in the U.S. So it would be a good news, but we're not seeing that yet. And the vast majority of our business of the market and of the growth is still coming from the U.S.

We will now proceed to take our next question. And our next question comes from the line of George Featherstone of Barclays.

First one would just be on the non-data center business and kind of a little bit of an update about what you're seeing there and what you're implying for the rest of the year in terms of that non-data center business and the growth embedded in that.

Well, we're not really seeing an improvement between Q1 and Q2 in the building market. So the underlying building markets remain not very supportive, and this is the case both in the U.S. and Europe, which is not a surprise again because from the very beginning, we told you that, especially in Europe, the statistics were supposed to show some market improvement, but that it wouldn't come before the end of the year and that it still has to be demonstrated. So it's not a surprise, but no improvement between Q1 and Q2. The good news, if I may say, that within this building market, which remains somehow a bit depressed, we see a number of product families, especially those related to energy transition, which are doing better than the traditional so-called essential product families. So all products related to the electrification. So for us, it's transformers, circuit breakers, measure, load shedding and a few others are a few points better than light switches, lighting, AV, floor boxes and all this kind of stuff. So it shows that even in a difficult building environment, we have some businesses that have the ability to overperform the market. What will it be for the rest of the year? Well, if we listen to specialists, most people expect the U.S. building market to remain quite depressed. And there's no short-term positive signals coming from the experts, especially on resi, even though it's less than 10% of our sales now in the U.S., nobody expects the resi market to rebound in '26. Most experts believe that Europe should progressively improve with a number of uncertainties related to consumer confidence, geopolitics, the cost of energy, blah, blah, blah, but at a slow pace. This is a sort of macro scenario. What have we included into our guidance? Well, as you could see, we have included data center market, strong growth, 25% to 30% like-for-like. And the rest of the business growing low single digit as it grew in H1. So we haven't incorporated into our guidance a sharp rebound in the building market either in the U.S. nor in Europe.

Okay. That's really helpful. And then just a couple of follow-ups on the data center conversations we've been having. First one would be, you spoke about confidence in the demand outlook. Are you able to put some context around that, maybe give us a growth rate you're seeing in orders? Is it above the sales growth rate, for example? And then the second thing on your acquisitions you've made there recently, there's perhaps a consistent theme forming, which is you're buying more businesses within the testing and commissioning space. Can you perhaps talk to the opportunity that you're seeing there?

Well, I'm not sure I can give you a lot more color on the data center growth by geographies, by customers, by product types. I can maybe tell you that if we look at the product families, of course, when you grow more than 30%, it means that you have some product families growing 50%, 60%, 70%, 100%. Those growing the most are probably cooling, testing, commissioning and part of the powertrain. So they correspond to some of the acquisitions we've made in the last 2 or 3 years. But again, we are seeing very, very good growth and very solid order inflow across most of our product families. As far as the latest acquisitions are concerned, well, the objective was to build a significant market position in critical power in the U.S. And for those of you who know Legrand for quite some time, you know that we've been trying to enter the energy transition/critical power in the U.S. for quite some time. But this was a market which was occupied by big guys. And for years, we didn't find the right way to enter. Well, interestingly, data centers provide us a very good entry point. And we've bought a number of companies active in powertrain. So power generation with turbine packaged in a container on site to do power generation whenever -- either actually as a backup power or as a main generator. Medium voltage switch gear, low-voltage switchgear, busway, busbar, testing and commissioning. So the whole powertrain. And what is of interest is that most of those acquisitions have something like half of their sales in data center and half of their sales in the other type of verticals, could be building, could be renewables, could be infra, could be industries, could be health. So by entering into the critical power in the U.S., we also enter into other verticals, and we have started to build a meaningful and significant position in energy transition in those other verticals. So it's not only about testing and commissioning, it's mostly about critical power in the U.S., and it is a very interesting position, growing nicely and not only growing nicely in data centers, but also growing nicely in other verticals. If I zoom on testing and commissioning, well, Avtron, which is the company you referred to is a world leader in load banks, has very strong market share in the U.S. and elsewhere. It will prove to be one of the most exciting acquisitions of Legrand, very good multiple, very strong growth, very nice profitability. And indeed, it is for us, a way to be even more involved on the high-density AI data center because when you have 1 gigawatt, 2, 3 gigawatt data center, when you have a 1-megawatt rack, for example, which is liquid cooled, not only you need to test the loads, but you also need to test the liquid cooling systems. So the higher the density, the more liquid cooled data center the more testing you need, the more commissioning you need and the more sales with Avtron will do. So it's a very, very interesting acquisition. Again, I hope, George, that you will come to Singapore because we'll have more opportunity to discuss that, and we will even display some Avtron product, and we have some Avtron people. So we'll be able to talk directly to them.

We will now take our next question from the line of Max Yates from Morgan Stanley.

Maybe if I could just start on the margins. So I noticed you had higher restructuring costs above the line this quarter. So I just wanted to ask about some of the moving pieces. What is your expectation for restructuring as we go through the full year? Was that a temporary kind of higher restructuring of Europe? Or is that something you expect to be higher for the full year and therefore, a drag on margins? And then also if you could comment on whether there were any tariff refunds during the quarter because that's a consistent theme we've heard across a number of companies.

Yes. So as far as restructuring is concerned, well, we're not much commenting by zone. At group level, we had a restructuring of EUR 33 million in H1 which was very much in line with what we had in H1 2025 because we had EUR 34 million restructuring in H1 2025. So yes, we remain very active. While it's not a surprise to see a lot of restructuring in Europe because typically, that's where we lack sales. And when we have -- when our volumes are not growing, we tend, of course, to do restructuring, footprint optimization, blah, blah, blah. As far as the full year is concerned, our main assumption is that it could be close in terms of EUR 1 million to 2025. I remind you that in 2025, it was EUR 65 million. So I cannot commit on a precise number, but it will be around this number. As far as the tariff refund is concerned, well, tariff has become a very complex issue. I have to admit. So even though we are tracking that very carefully, the potential refund, whether you ask it or not, new tariff, tariffs that are canceled, that are replaced, it has become a very, very complex topic. I have to say that in H1, tariff did not have a material impact, either positive or negative. And that's it. And if we can get a bit of refund, we will. But frankly speaking, it is not a strategic topic for us. It would be a onetime benefit, not huge. So it is not a topic on which we are spending a lot of time. We are focusing on a lot more in the U.S. on how can we cope with this data center hyper growth, how can we better serve our customers rather than on tariff. So we don't expect it to have a very meaningful impact one way or the other on the 2026 accounts.

No, no, sure. I was just trying to understand whether the margin was clean or not. The second...

I can answer, yes, the margins are clean. they will be clean for the full year.

Okay. So the second question, and I think it was something kind of George was trying to get at. But I think you've previously talked about around 6 months visibility in your data center business. You kind of talked earlier in the call about some of your orders were now kind of extending into '27 or maybe '28. Could you maybe give us a feel of kind of how long your backlog is today, has that meaningfully exposed? And any commentary on how much of your revenues for '27 might already be locked in by your order backlog would be really helpful context.

Well, I don't really like this concept of 2027 being locked in by backlog because we've been consistently telling you that backlog is more for us, an indication of which customer we have to serve and when and which supply chain investments we have to make in order to make sure that we deliver probably more than a leading indicator of what our sales in 2027 is going to be because the backlog can be canceled, can be delayed, can be modified, can be -- so of course, we start to have orders for 2027. On some very specific businesses where the lead time are longer, we even have a few orders for '28 and sometimes '29. But does it give us a lot of visibility. The answer is no, again, because we are not counting on this backlog to make our assumptions. What gives us confidence on the fact that the data center market will continue to grow. It's more the gigawatts that were announced for '27, '28 and beyond. There are tens and tens of gigawatts. And each time there is a gigawatt being built, I remind you that 1 gigawatt, we could potentially sell EUR 2 billion to EUR 3 billion of sales per gigawatt, so EUR 2 million to EUR 3 million per megawatt. So this is more the kind of leading indicators we are tracking rather than a backlog because, again, backlog can be changed. By the way, the total CapEx from our customers. And to this extent, the recent announcements from some of the hyperscalers on the fact that they were even increasing their CapEx plans for '26, '27, '28 is quite a good news for Legrand, of course.

And our next question comes from Alasdair Leslie from Bernstein.

So I wanted to follow up, I suppose, on what you were discussing previously around U.S. data center acquisitions, but maybe focusing more on the Girtz acquisition, your strategy there, but perhaps more in the context of how you're looking at the opportunity in prefabricated modular data centers now. Is the plan to develop dedicated Legrand power pods and maybe even kind of modular IT pods? And maybe also if you could reflect on how this fits in with that partnership you have with Siemens and Cadolto in -- I guess maybe that's focused more on Europe. Maybe you could confirm that. And if you have any kind of estimate on how big the kind of modular prefabricated market in the U.S. is right now, perhaps as a share of additions?

No, it is a fact that prefab, even though within this world, you have different type of systems, is gaining ground because it helps our customers to shorten -- I mean, to optimize their supply chain and to open faster data centers. So it's getting around worldwide. We do have already modular capabilities in a number of geographies. So in the U.S., for example, we are able to provide genset modules with Girtz indeed, which are gas-powered or diesel powered and which can be used even as a main source of power, especially in zones such as Texas and elsewhere. We are also providing skid, so premounted critical powertrain with Kratos in the U.S. In Colombia, we have a unit fully dedicated to modules, which is called Teknica. In Europe, we have a couple of units doing that, especially a new unit in Ireland called TES and so on and so forth. In Malaysia, we just acquired SRS, which has the ability to do skids and modules for power, medium voltage and the voltage. So we have progressively acquired a number of capabilities to do modules, not to mention our ability to do full rack hot air containment, including racks, busway, type of boxes and so on. So we do have these capabilities, not everywhere, but at least in the U.S., in Southeast Asia and in Europe. And it's part of the nice growth we have. It's not the only one. So that's it. I don't know what else I can tell you, except that once again, I would invite you to come to Singapore. And I feel that it's probably the right time to do a CMD dedicated to data centers given a lot of number of questions we have. And again, you have the ability to talk face-to-face to the teams in charge of all those businesses, and they will give you as much information as you can as you want on those modules, skids, prefabricated product lines and customer expectations.

And our next question comes from Gael de-Bray from Deutsche Bank.

Can I get back maybe to the question around the company's execution during the quarter? I mean, if there were any specific challenges beyond the price cost dynamics that you've met to deliver that very strong growth in the quarter? And why specifically did you see both margins and free cash flow trending a bit down on a year-on-year basis and whether you expect that to reverse maybe more positively into the second half? So that's question number one.

Well, if I have to name one operating challenge, it would definitely be how to cope with the hyper growth of our data center business. Not to say that we have any margin issue on data center, but our teams are spending a lot of time optimizing the supply chain, speeding up development process of new product, shipping on time, sending people on site to help the installation and commissioning and so on and so forth. So it has clearly been a challenge. Did it have an impact on cost? Yes, probably. Our cost is not as optimized as if we're growing 10% when you grow 30% plus, which again means 50%, 60%, 70% in some geographies in some product families, it comes with a number of additional costs. Now again, it's a pretty good news for Legrand. As far as the difference between Q1 and Q2, I will let maybe Franck to give you more color.

Yes. And especially on the cash flow, Gael, the question you asked. So cash flow at the end of H1 is at 9%. H1 is always soft. 9% is not unusual, and you know very well why it is soft. At 9%, it's not unusual. If I look back at the last years, almost 1 year out of 2 was below or equal 9%. It's a little bit soft on the back of higher working capital requirements, which are around 14%, where the typical working capital requirement for the group would be 12%. 1/3 of that is totally mechanical, scope conversion, all that. 2/3 is -- I wouldn't call that company execution, but the current backdrop, which is a little bit more inventory, a little bit more accounts receivable and also on the opposite, a little bit more account payable. All that is the current picture. Looking ahead on the full year basis, we really think that we -- working cap will be normalized. And accordingly, full year free cash flow should be the usual one between 13% to 15%.

So H1 is challenging, of course, in terms of managing the strong growth in data center. But whether in terms of margin or in terms of cash flow, nothing special, and we are confirming for the profitability of 20.5% to 21% yearly guidance, and we are confirming for the free cash flow 13% to 15% long-term guidance.