OVH Groupe S.A. (OVH) Earnings Call Transcript & Summary

Hello, and welcome to the OVHcloud Q3 Fiscal Year 2022 Revenue Call. My name is Courtney, and I'll be your coordinator for today's event. [Operator Instructions] Please note that this conference is being recorded. Today's speakers will be Michel Paulin, CEO; and Yann Leca, CFO. And I now hand over to the OVH team to begin today's conference. Thank you.

Good morning, everyone. This is Benjamin speaking. I'm Head of Financial Communication at OVHcloud. We are delighted to have you on this call for the presentation of OVHcloud Q3 revenue. We will start with Michel Paulin, CEO, for the strategic and business update; and then Yann Leca, CFO, for the financial performance and outlook. You will have the opportunity to ask your question during the Q&A session after a few words of conclusion from Michel. Once again, thank you for joining. Michel, the floor is yours.

Hi, everybody. I'm Michel Paulin. I'm very pleased to be here with you this morning. I'll start with the first slide about the fact that OVHcloud delivered a strong growth quarter after quarter. In Q3 fiscal year '22, we have a revenue of EUR 202 million, which is a 25.9% reported due to the Strasbourg effect and a 11.7% like-for-like. The Public Cloud is still growing very high with 50% and like-for-like 19.4%. Private Cloud, as you know, a very strong asset of OVHcloud is growing by 32.5% and 14.6% like-for-like. Our net retention -- net revenue retention rate is up to 120% and like-for-like 107%. The slide after show that we continue to have a strong sales and marketing momentum. And we have won very interesting contracts. I will not highlight all of them. I just want to highlight a few things. I will come to Marine Nationale later, but Samsung and Cegid very interesting deals that we have signed with software editing companies. We already had a partnership with Samsung with Cegid and we extended that to add new software that will be hosted in OVHcloud. In the middle, I will start with the bottom with the fact that today we are very active with the start-up community, and we may go talk a little bit about the start-up situation right now, but we are preparing the future of the next generation of computing with the quantum computing. And we are very proud to have made strategic partnership with Atos with now [indiscernible] for the emulation and simulators of 128-qubit, but also, we have a strong partnership with companies such as Pasqal, C12, Quandela, which are today the leading start-up in the quantum and they have today a quantum computing capability. And for us, it's something that we will continue to develop operation, virtualization and automatization of usage of quantum technologies. On the upper of the middle of the slide, I just want to highlight one, which is Accenture. Last week, we have announced a worldwide partnership with Accenture. Accenture is going to resell OVHcloud solutions in what they call the trusted and [indiscernible] solutions in Europe and to the world. And we do believe this is for us a very potential accelerator of business. Thanks to the fact that Accenture has a coverage of the market, which is immense. Last, but not least, is continued to, as we already mentioned, to build our PaaS solutions. We have introduced the new enterprise level of MongoDB. We have introduced a few months ago, the entry-level MongoDB solutions. Now we have the enterprise MongoDB solutions. And we have launched now in General Availability, the Object Storage Standard and the Block Storage High-Performance solutions. And so we hope to have now a revenue creation starting now with these products. And also, we have announced the Atempo partnership with the Tape, which will be another block of solutions in the storage arena. In terms of what are the 4 pillars of our growth, I mean, acceleration, the first one is, of course, a business shift. We are growing very fast in Public Cloud and Private Cloud. I will not repeat the figures because you see that we have today a strong growth. We are preparing the future with a Move to PaaS. We have achieved the objective of having now 80 IaaS and PaaS solutions in Public and Private Cloud. So we have achieved our objective. And we will continue, of course, to enhance and to enlarge our PaaS solutions, thanks to the 3 layers strategy, our own R&D, potential acquisitions and also continue to have a partnership with some key and state-of-the-art solutions. The third one is, of course, international expansion. We continue to have a very high growth today in U.S. and APAC. This is the figures about the digital channel growing by 62% like-for-like in the U.S. and by 99% in APAC, and we will continue to invest to boost our growth. Thanks to the fact that we opened a new data center in Singapore very soon, a new data center in India, and we have also for next year, projects to open a new data center to accelerate our growth in Americas, in Toronto and in Germany. The last point is about the Data Sovereignty and the Hybrid, Multi-cloud. We just illustrate because sometimes there's a little bit of secret around the names we can disclose, but the Marine Nationale has agreed to disclose the name. We have won a contract with the French Marine and we have today a strong momentum in the domain, everything which is about trust. You see that the regulation is moving very fast and rather in the right directions to protect the data. And we do believe that OVHcloud is so well positioned to provide compelling and distinctive solutions in this domain. The last element, of course, is about Digital Market Act and the Digital Act, which are formally approved in July 2022 and will be an application in fall 2022. And we do believe for us, it will be, again, an additional argument to continue to provide data protection and data sovereignty solutions. Last mention I would like to do over that is about the new certification -- European certification. And we have already SecNumCloud certification, and we do believe it would be for us another argument. Very quickly, you see there the road map of the new solutions we have introduced on the market with -- we are on track on our road map, and we do believe that the next quarter and the first quarter of 2022 will continue to have enhanced solutions in the past. The next slide is about international. Just on the map, you see that today, we have very good growth in the U.S. and in APAC. We have today the ambition to continue to accelerate this growth, thanks to the investment we are making, either in the sales and marketing with especially the digital channels, which are still -- and still are very, very active, but also in the investment we've made. I already mentioned the data center that we are going to introduce and deploy beginning of the next year. Last, but not least, and just to repeat what has been said, we believe that OVHcloud is uniquely well positioned for the trusted cloud and all we see today the dynamics which is rising first in Europe, but also, very interestingly, in Canada, for example, with [indiscernible]. In India, in Japan, in Korea, we have today a very strong sales dynamics for Secure Cloud Solutions. First, the French Marine and Marine Nationale is an example. And we believe also that the new regulations, which will be introduced and decided for DMA, DSA and Data Act will be key arguments for OVHcloud to differentiate ourselves and to continue to propose trusted and sovereign solutions in Europe, but also outside of Europe. And now I let Yann to mention and to comment the financial results.

Good morning, everyone. My name is Yann Leca, I'm the CFO of OVHcloud. Happy to be with you today this morning. So this first chart is about revenue. And as you can see, we reported last year, EUR 161 million of revenue. That number needs to be increased by EUR 1 million to report the additional -- the acquisitions which we made later. This was the revenue then. ForEx impact, the U.S. dollar grew. So restated for the new U.S. dollar Q3 '22, that's an additional EUR 3 million to make it like-for-like. And of course, EUR 18 million, 1-8 of direct impact of Strasbourg which was at the time in the form of vouchers given of credit notes issued and of absence of revenue, that's EUR 18 million. So the comparable number is EUR 182 million. Therefore, the like-for-like revenue growth is EUR 21 million for this quarter or 11.7%, almost 12%, which is based on EUR 203 million this quarter, because we still have EUR 1 million of transfer direct impact this quarter. As you can see, this impact is fading away, and it will be finished at the end of this fiscal year, so another 2.5 months from now -- 2 months. An important element is that our net revenue retention rate in Q3 fiscal '22 was 120%, which is also like-for-like 107%, very much in line with previous quarter in the same vicinity. We continue to have excellent stickiness of our customers and to enjoy a good net revenue retention rate. On the next page, a word about the various product ranges as Michel indicated on Web Cloud & Other, we have stated EUR 44 million so like-for-like growth of 0%. The revenue share now -- of [ another ] is down 3 points versus last year at 22%, which is also as the result of the fast growth cloud divisions, cloud segments. Public Cloud grew from EUR 28 million up to EUR 33 million or 19% like-for-like and Private Cloud from EUR 110 million to EUR 126 million, which is a very good 15% growth. Private Cloud represents 62% of our total mix and that's 16% for Public Cloud. Basically, our performance acceleration is very strong in the Corporate segment. And we have also continued a very good ARPAC increase in Public Cloud and Private Cloud. A word about the outlook. We are happy this morning to increase our revenue guidance to a bracket of 16% to 18% growth which is up from 15% to 17% previously, reconfirming our adjusted EBITDA margin close to 40% and in terms of CapEx for this year, recurring CapEx to 16% to 20% and gross CapEx from 30% to 34%, excluding the acquisition of additional IPv4 addresses, which is a topic we addressed last quarter. And we are also happy to confirm the midterm 2025 targets, which are left unchanged. I want to add to finish on this guidance that our current trading in this Q4, we're not [ closing ] the first month. This last quarter remains consistent with the annual guidance I have just indicated. Michel over to you.

So just to key takeaways. We have a strong financial performance. We reached, as I already mentioned, revenue in this quarter of EUR 202 million, which is a 25.9% reported growth and a 120% net revenue retention rate. We are deploying our growth strategy. We have intensified our commercial momentum. We are today on track on our PaaS road map to serve and to be able to enter new markets for OVHcloud, and we are accelerating our international footprint. We continue to believe that we -- our revenue targets are today above what we already we said in the outlook. So our -- we have increased our revenue target to 16% to 18% growth versus last year. We have confirmed targets on the adjusted EBITDA margin and the midterm objective as today.

Courtney, Benjamin speaking again. Can you maybe proceed with the comments regarding the Q&A. What the analysts and attendees should do.

[Operator Instructions] And our first question comes in from the line of George Webb calling from Morgan Stanley.

Michel and Yann. I'll kick off with a couple of questions on revenues and top line. Firstly, just going back to the demand environment. You've obviously cited some weakness in the border macro, which I think we can all see, but your overall business growth so far has been pretty resilient. Can you talk through what you're expecting to see as you move through Q4 and beyond? And are you expecting to see any pockets of weakness so far for example, around kind of tech and software part of your customer base? And then secondly, on the Web Cloud business, the reasons in the reports seem to be fairly high level around why that business has slowed around improving the market offerings and to lessen connectivity. Can you go into a bit more detail on what the headwinds you're facing there are and what some of the measures are you taking to reaccelerate the growth?

Okay. About the macro, just to give a little bit perspective, it's clear that we are very confident in our strategy. And that's why we have decided to raise our I mean, revenue growth guidance for the next quarter. At the same time, we must admit that we start to see some concern to both of our [indiscernible]. I would divide it with the macro side what we see among our customers. The first one, the corporates and large customers. Today, we do not see yet any slowdown in demand on traffic. However, we have the perception that their [ tone ], their filling, their sentiment are showing a little bit of concern and sometime anxiety. However, and this is a second segment, which is important for OVHcloud, it's everything which is about the tech, the startup, the SaaS -- and there, it's really a little bit of wait and see attitude on some domains. And we see that their demand is flattening and sometimes decreasing. For instance, in the blockchain, crypto, all these type of technologies, we see clearly that there are more than anxiety, but there are a slowdown on demand. And some start-ups are also concerned about the potential funding in the coming month. And therefore, they are reducing their projects and sometimes spending. So we already have seen in the digital traffic that there is a slowing down for -- I mean, since a few -- for a few weeks. Especially, it's clear in the domain of the DPS and the Public Cloud. So it's definitely clearly mainly in the entry level services and solutions, where we see today a slowdown in the traffic and in the -- I mean, demand. On the demand about the macro, I just want to mention the Ukrainian and Russian. As you know, we are not very, very exposed. It does represent 1.5% of our revenues, however, we are impacted, and we have impact. I don't think it's really materialized, but we see clearly that Russian and Ukrainian, which was a fast-growing segment for our international growth is affected, and now we have a reduction. Not I mean substantial, but steadily every month, we see that there is less and less activity and some Russian customers or Ukrainian customers, I mean, are not maintaining their revenues. On the other points, I will let Yann to discuss about inflation and maybe cost over the macro. But to mention your question about the Web Cloud. In the Web Cloud we have 2 types of products. The first one is everything which is about telecom activity. So it's connectivity and telephony. So consumption of the phones, voice, data and the rest is more web hosting, so the domain and web hosting activity. Today, we have a decrease, which is something we anticipated because we do not invest in the infrastructure and the model in the telecommunication. However, we have seen an acceleration in the decrease and an acceleration on the -- with less usage of, I mean, telephony on our installed base. This is one factor. On the second factor, as I mentioned, we have seen a slowdown in the acquisition for domain and Web Cloud. I think there are a few factors for that. The first one, there is slow down due to the market. So we see that one way the market is slowing down in the number of new domains, for example, which are created, especially in Europe because we are mainly Europe driven for the Web Cloud. And also because we've seen that as of the COVID, a lot of new small SMEs companies have put digital activities. And we clearly see now that there is less demand that we had in the last 2 years. We have decided to put in place a few actions to correct that. The first one is definitely to review our marketing approach on the domain to maintain the capacity to have more traffic and more conversion. And we will introduce new offers on the web hosting before the end of the year to propose innovation and capacity to boost our acquisition level. It's a very fragmented, but very dynamic or competitive market, especially in Europe, with many local actors doing very, very things. So we have tuned now a marketing approach country by country and sector by sector, SMEs, individuals, independence to try to really fit very well to the market. And as there is a slowdown in the market to be able anyway to continue to capture the good market share and to increase our market share on this decreasing market. Maybe about the macro, about inflation and costs, Yann?

Yes, of course. So as we all know, we're not in the inflationary environment. The first one that comes to mind is energy. And there is no doubt that energy costs are significantly higher today than they used to be. The 4 disruptive reasons as well as long-term trend reasons. As far as we are concerned, the year 2022 is almost entirely hedged. We have a little bit of increase where we are not hedged, but that will remain contained. As far as 2023 is concerned, and we are right now in the middle of our budget for next year, there will be an increase. It will be less significant than for our competitors because we basically consume less energy, thanks to our water cooling model, but there will be an increase because hedging does also not mean immunity against such increases. So there is also no doubt that we are going to be increasing our prices. This has been announced. Our entire competition is increasing its prices. We have started to announce it to the market, and we will continue to talk to the market about it. Everyone expected and it's what we're going to do. And we do have the sufficient pricing power to pass on at least the increase of our costs to the market. What's going to happen, basically, if you [ allow me ] this image is we are going to rise with the tide. We don't expect that our price performance ratio will be affected relative to competition and that price performance ratio is excellent. So we do not expect a deterioration of our competitive position. Maybe a word on the other expenses, we also expect the other expenses due to the overall inflationary environment to increase more than in previous years. Starting with personnel expenses, where we have a mixed level of [ warrant ] talents on the one hand, which is pushing, obviously, the salaries upwards. And at the same time, where we expect some talents to be released by the world of start-ups, which Michel was alluding to earlier. And therefore, we believe there can be a little bit of balance, but we do expect that on balance, there will be a higher increase than in previous years.

The next question comes in from the line of Toby Ogg calling from Credit Suisse.

Just one question from my side. Just on the Public Cloud growth looked like it decelerated a little bit again in the quarter. Could you just sort of help us understand exactly what the drivers of that are? When you would expect that to reaccelerate? And what would give you that immediate confidence that, that part of the business can accelerate?

Yes. As I mentioned in the previous question, in the Public Cloud we have what is everything about what we can compute and DPS virtual private servers and what we see is that the entry level of the Public Cloud, which means small computer as usage, which called instances, we definitely see today a decrease in demand. It's mainly digital. So we are talking about small ARPU and small SMEs players, but we see that, and we didn't anticipate that. I mean, a few months ago, clearly, it's a slowdown on demand on the SMEs market. We are still very confident today that our Public Cloud will remain a strong pillar of growth and growth acceleration for the future for 3 reasons. The first one is because we are enhancing the number of services that we propose and you give us new opportunities to be able to monetize Data as a Service, Security as a Service, Storage as a Service, high performing GPU, artificial intelligence and machine learning. So it's an extension for us to be able to address new markets and for us new opportunity. The second reason is that we are targeting more and more with the Public Cloud, the [ mid ] size, the partnerships and the large corporations. And today, we do not see slowdown as -- even there is a little bit of anxiety. We don't see today a slowdown in demand. And we do believe that thanks to the first factor of enlarging our solutions, we have been able to continue to accelerate in this segment. The third one is that we see also on our installed base, what we call the move to pass strategy of people, we were in the dedicated service private -- and now due to the fact that the people cost, the lack of resources in engineering, in the data scientists, they want to complement their offering with managed services such PaaS. And for us, it's an opportunity to have a cross-sell and therefore, an upsell on our installed base. So that's why we are very confident to be able to maintain a strong growth in Public Cloud. As I said, the DPS slowdown that we see and will be certainly something that we'll have for the next few quarters.

The next question comes in from the line of Varun Rajwanshi calling from JPMorgan.

I have a couple of questions. Firstly, just a clarification on your earlier answer, what is your revenue exposure to customers exposed to the crypto end market? And then secondly, Yann, thanks for your comments on the overall pricing environment, inflation, et cetera. Maybe a comment on how much flexibility do you have in terms of your cost base. Should the demand environment continue to be unfavorable for the next 6 to 12 months? And I also noticed that your [ tone ] in terms of your EBITDA margin guidance for the full year did change slightly. Now you're not expecting EBITDA margin to be close to 40% instead of approx 40%. So do you expect to fall short of that 40% number? So maybe you can clarify that point. And then lastly, progress with your enterprise customers, you called this out as a driver for your performance this quarter. Can you elaborate a bit on this? Are you seeing lower churn in this segment. Also, can you talk about the pace of new enterprise customer acquisition?

Okay. To answer to your first point about the revenue exposure to crypto currency. In fact, we do not do mining of cryptocurrencies in OVHcloud. It's not allowed and we are not today exposed to most of the crypto money sector because we do not allow. As you said now, it's not good for mining. It's not good for the longevity of the service. So -- what we see is more about the crypto technology that is using for things like NFL and NFT also all these type of encryption that can be used to do so. And there, clearly, we see a slowdown. Today, we are not at all exposed. It's very marginal, but it was clearly, I mean, a potential growth factor in the future because we've seen a lot of investment startup, but also solutions, which has been developed in the last PaaS. So we are not exposed, but we see -- we'll sell it slow down in this domain, what might be the potential for OVHcloud. So this is about the crypto. I will let Yann about the cost.

Yes, Varun. Regarding.

You give the guidance.

Yes. And first of all, Varun. Regarding your question about the variable part of our costs, we estimate that about 1/3 of our total cost base is entirely variable to revenue. So that's a significant change. Now about the rest, it's fixed, but it has been increasing a lot in the past few years in the wake of growth, and we definitely have an ability even though it is from the book, not defined as variable to adjust it and in particular, to adjust the growth. And I mentioned earlier that we're in the middle of our budget preparation and we obviously have several options considered depending on how the growth continues to be sustained. So even though our guidance remains the same, it's very natural as the management -- responsible management of this company that we consider alternative options if the current economic and geopolitical environment continues to deteriorate or if there is a sudden deterioration. So we can obviously adjust our -- the growth of our personnel base, for instance, personnel expenses, which, as you know, is about half of our total cost base. And we can also make various other adjustments depending on the circumstances. And I'm talking over and about the variable part of our cost base, which is, as I said, 20%. Now to respond to your observation of the very slight change we've made. You can take this as a reflection of the extraordinary times and extraordinary uncertainty -- uncertain times we are going through. I also believe that it's only prudent on our behalf. And as you know, we like to stick or exceed the expectations and to stick to what we said. So this is only a reflection of what is going on outside. Last point regarding churn. We enjoy, as I said, a very low churn, very good stickiness of our customers. In terms of acquisition, there is no doubt that in the Digital segment, which Michel covered earlier, we see a little bit of a slowdown in demand. So numerically, the acquisitions are in the Digital segment not as high as they used to be. But on the other hand, we performed extremely well in the Corporate segment. Each corporate is equal to a multiple of digital on this [ mix ]. So that is delivering us on balance, continued growth, as you could see.

The next question comes in from the line of Amit Harchandani calling from Citi Group.

Thank you. Thanks for letting me ask the questions. Two, if I may. My first question goes to your thinking around clearly, the rising risks of recession. You've talked about demand slowing down. Can you give us a sense for how has OVH dealt with recessions or recession-like situations in the past? How do you go about navigating through adjusting your CapEx, dealing with your suppliers, customers? I guess what I'm trying to get a sense for is what could be the potential options on the table? And how quickly could you action them this time based on what you have done in the past, that would be helpful. And secondly, if I may, you talked about the regulatory backdrop and sovereignty and some of the tailwinds there. Clearly, a lot of debate going on out there in terms of closer collaboration between Europe and the U.S. on the back of the recent conflict. Some parts of the community talking about even a dilution of data rules, which would allow U.S. and Europe to collaborate closer. Could you give us a sense for how do you see the data sovereignty backdrop today? And do you still anticipate that to be same tailwind and even stronger tailwind or less of a tailwind? So would be keen to know your thoughts on that.

I think about your fourth question, the OVHcloud is due -- thanks to this vertically integrated model, has the capacity to have a fast quick decision-making and [ implementation ] making to adapt this CapEx to demand. And this is something that, thanks to the fact that also we have decided on purpose to have enough stock, the first semester of 2022 to be able to produce what we think was necessary for the next few months due to the supply issue. We believe today that we have the capacity if there is more macro [ bad ] news coming to adapt our strategy to be able to continue to have really in line between our revenues, our profitability and our CapEx level. So this is something that we have this change to have really a very, very strong flexibility in our production model and we are not stuck with long-term supply terms of food servers. We just have -- I mean, today, the capacity to cover, I mean, either growth, but also to adapt our cost structure and our CapEx structure. And we believe that we have shown that 2 times in the history, the first one, unfortunately, during this past [indiscernible] event, but also during the COVID where we have seen a surge in demand especially in the small and medium for digitization of the operations, and we were able to respond very quickly to this demand 2 years ago. So I think we are very confident still about our resilient model if the bad news increase and if the -- we are talking more about recession than only slowdown. So this is something that gives us really a strong confidence about our model. The second question was about.

Maybe a word before we move to the second question, 2 points. First of all, from a macro standpoint, just a reminder that we're talking about the cloud industry, which is on the secular significant growth. So we do expect to continue to grow, and we do expect the market to continue to grow. But admittedly, there can be under extraordinary circumstances that can be variations and as Michel explained, we have a CapEx as you grow model. And just one point to elaborate on that. In the unlikely event that the growth will go down to 0, we will then be able to live on our existing [ parts ] of servers with only our 16% to 20% recurring CapEx which we can also minimize to a certain extent, and that would leave us with a significant positive cash flow production. So we believe that from a CapEx standpoint, we are well hedged. From an operating expense standpoint, I believe this was covered previously. You asked what was OVHcloud's behavior in previous recessionary environment. I'm afraid the company is a bit too young to have lived at that scale, a recession. However, I must confess that the management team, and that includes Michel and myself are not as young as OVHcloud and therefore, have gone through, and I might add successfully as the entire [ commits ] through several recessions already. Michel?

Yes. Your last question was about data protection and what's going on with the regulation. You mentioned, yes, there is a draft of agreement between the European Commission and the American government about data export, I think it's unlikely that it will happen for different reason. The first one is because there is a legal issue that today, and it has been reiterated many times that there is incompatibility, I would say, drastic incompatibility between the CLOUD Act and the GDPR. And unless there is no changes either on the U.S. side, on the CLOUD Act, either on the European side with the GDPR. I don't see how we can, I would say, put mitigation between these 2 incompatible laws. So the draft of the, I mean the agreement, which has been signed when Joe Biden came to Europe, has already been, I mean, I would say, challenge by the data protection bodies in Europe. The third point I want to mention is that we see that the contrary that there is a reinforcement of the data protection, and it's coming from the U.S. And you have certainly seen what is going on with TikTok in the U.S., while the U.S. wants -- they want to create new legislation, while you -- it will be impossible to export data out of the U.S., especially in China. So in fact, they are asking -- they are going to implement laws that did not fulfill in Europe. So I think on the contrary, there is summary, I would say, a reinforcement. You're certainly aware also what's going on in Canada with [indiscernible] which are rather reinforcement of these type of things. So I doubt today that they would have a stop. I would also give a proof that for me, there is -- and that the gap I'm not trying to find a way to bypass is that they are making a lot of marketing to show that now they can bypass the data protection by doing alliances with [indiscernible] because I do believe the legislation, the regulation, the certifications will be tougher and tougher against these type of practices of data exporting or potential data exporting.

Thank you, Michel and Yann. Very helpful.

[Operator Instructions] The next question comes in from the line of [ Lucas Woezik ] calling from Goldman Sachs.

Michel, Yann, congratulations on the quarter. Two questions from me. First one would be on the churn evolution you sort of the vouchers from the fire running off. So could you comment how has churn progressed? And second one on your total revenue, could you give us roughly in percentage points the exposure of revenue to more stable government spending to sort of larger enterprises and then what would be linked to early-stage finance startups.

Thank you. On -- on your first question, the churn post transfer, I'm trying to think the best way to answer this, maybe if we go back to a year ago, a bit more than a year ago, we have made simulations of how churn would turn out. And I must say that now almost 15 months later, we are clearly significantly above our most optimistic projection, which we have been made. We have not suffered any particular churn at the end of this period, which we can attribute to Strasbourg, which would have had an important impact on the ongoing revenue today. Of course, it has affected somewhat revenue growth in France. In particular, especially in the smaller segment, Michel mentioned VPS earlier. But we cannot see anymore or any particular or significant churn impact of Strasbourg.

On your second question about the start-up exposure, today, we are not very exposed to the start-up sector because this is a sector that we have decided to address a few years ago with a program called [ starter ] program. And today, it's not where we have the strongest today position in our product portfolio. So we do not see heavy risk. Even so, we are convinced that the funding issues, also the global outlook of the economy, the start-up will be affected. We mentioned the blockchain technology, but we see that in other domains also, there's certainly less appetite. And for us, it's clearly something that we are very vigilant to select the right targets to be able to continue and to be sure that startup are well funded and not to propose services. As you know, we are also very prudent about the voucher and the cloud credit, which are given of free by most of our competitors. This is the practice that we have heavily in OVHcloud. So we believe that we are rather well protected and rather -- and we will stay very vigilant on that. I think the -- on the other customer segments, as I said, I think we are a little bit more concerned by the SMEs, which are in -- which were in the process to be digitalized and especially in the Web Cloud with domain names, things like this, we see a slowdown. In the small tech companies, not start up, a small tech companies, we see a little bit of anxiety also, as I said, software editors. And so we are there very vigilant. And we've seen that small web agencies, small tech companies are really reviewing their outlook in the future. For the other markets, which are the larger mid-size software editors, tech companies and everything with our corporates. Today, we do not see slowdown. As we already mentioned, we addressed the corporate market mainly through partners. So we work with Accenture, with a new one. So it's a new announcement, but also with Capgemini, [ zzoota ], [indiscernible] Anthos as partner and for the moment, as we disclosed, we have rather good results, good momentum. Even so, we believe that the -- of course, the large organizations are really thinking about what would be the consequences of the global economy on their own activities. So we are there, again, I mean, prudent, but rather, I would say, we believe that we have a strong strategy due to the fact that thanks to the capacity with the partner to cover more over the Corporate segment, we will continue to be able to grow, thanks to that, that this business is much more resilient most of the time than the small and very small businesses.

And maybe just one title point there is no exposure to crypto currencies. I always been very prudent on that metrics.

The next question comes in from the line of Ben Castillo calling from BNP Paribas.

Two for me. If I just look forward to 2023, I know you're not giving a formal guide on that today. But just taking into account the macro risks that you flagged as well as your raise to this year's guidance. Can you just talk about your confidence level for revenue growth, taking those factors into account into 2023? And if you look at, say, where market expectations are for roughly 16% growth next year, that would be helpful. Second comment was on we've seen the Google Cloud opening that France, a cloud region today, Capgemini and Orange announcing that Bleu will be going to customers by the end of this year. So the question is, do you believe these sort of hyperscale software and cloud offerings will become increasingly competitive and what's the impact to you? Or is it a case of this fast-growing market should benefit all participants?

I will start with the last question about the recent announcement made by Bleu and by [indiscernible]. First up, for me, it was disappointing in the sense for the market, not for us. It was an encouraging announcement in the sense that everything -- nothing will be ready before 2024 and mid-2024. So the reality of this offering will be only available on the market in -- I mean, at the end of mid-2024. So for us, there is really a window of opportunity to be able to catch now because our solutions are ready and they are fully serving. So for us, it's surprisingly, I say it's good for us, and this is why we believe we have still a strong differentiator, and we are able to differentiate ourselves now because our solutions are ready, we have the certifications. And with the winnings we have today and the strong momentum we have today with the significant offer shows that it creates a little bit of, I would say, waiting or a little bit of skepticism or so everything is done to try to slow down the market. But for us, we believe that as soon as we continue to execute our plan to propose [ Soren ] solutions, we will be able to capture a part of the market. The second is that there is more and more doubt about the fact that these solutions are technology's [ Soren ] for Europe. And there is a rising concern, I was in Italy in the beginning of this week, I was also visiting different countries during the last few weeks, even European Commission. I said that this proposal are reselling 100% of the [ gas ] I'm offering and there is very marginal value-added bring by Thales of our Orange. So I think there is also a question mark about the business model, does it make sense and did that bring value for Orange or for Thales. This is something that is questionable. And second, overall from a geopolitical standpoint, the R&D, the value-added, which is brought by Europe in this product is very small, if not 0. And so some people are concerned that, in fact, this is not the answer. This is only a way for the hyperscaler to try to bypass regulations and to pretend as [indiscernible] that they are also in. But the first point, which is we do not give outlook for next year yet. Of course, we are in the process to review all our [indiscernible] and I just want to give a few elements of what we are trying. First one, of course, is to really understand what is the macro region by region because we see that Europe, Asia and North America have different like dynamics today in the demand. The second is what is the inflation which will have impact on our costs, but also on the pricing, competitive pricing and our pricing. That's why we are today preparing some scenarios, and we announced the principle that we will increase the prices to be able to adapt to maintain our profitability and to maintain what we announced in our previous outlook. So today, this is the type of scenario. It's clear that the environment is moving very fast right now. And energy cost, inflation, recession or not, interest rates and creating strong uncertainties, but we are very -- working very hard. And we do believe that we have strong pillars to be able to adapt very -- with a very high level of flexibility. Our capacity to increase pricing, to modify if we have to do our go-to-market strategy in the differentiation we are and thanks to the fact that we have today, 3 major regions we are able to adapt our go-to-market to where we do believe we can catch more opportunities and also thanks to our vertically integrated model to adapt our cost structure and our CapEx structure to be ready for any type of scenarios.

I appreciate the color. Thank you.

The final question comes in from the line of Derric Marcon calling from Societe Generale.

I've got 3. [ If you allow me ] The first one is about price increase. Michel, you just talked about that in your previous answer. But can you quantify the price increase that you would like to see happen next year or at least give us a range of what could be [indiscernible] based on the different scenarios that you have? My second question is does the concern on [indiscernible] certain categories of customer or the weakness of demand that you see in respect customer according to question the scenario of linear acceleration. I know that you will not give a guidance today for next year. That's obvious. But at the time of the IPO, the plan was a linear acceleration for year after year. So is it still possible to see that? And the last question, it's about your journey in the past industry based on what you have seen with the available products already in the market, have you identified any upside potential compared to the plan you had a year ago.

No, I will not, of course, disclose any number about the pricing increase. We already have an [ end of tab ] as treated, and we have made blog, and we have already informed some customers that we will be selected type of pricing to, at the same time, maintain price performance competitiveness, but at the same time to adapt our pricing strategy to maintain the high profitability and this is, I would say, a very sophisticated balance between price increase and also a growth acceleration. So I will not quantify that. I can say because it's public that we have announced that we will increase the price of [ IP ], for example, addresses that we are going to increase also some domain names because some costs have moved or some licenses also will be increased because in some cases, we have, for example, costs associated and therefore, we reflect to our customer base, the increase of the licenses. And in the other domains, we decided to increase because we do believe for a long-term vision, like IP addresses, due to the fact that the cost of the IP prices are really sky bumping and growing like very, very fast. So however, this is a different type of scenario we're working in. And we do believe today that it will help us to maintain the capacity to accelerate our growth accordingly to what was our initial plan. Your second question was about .

Weakness of demands.

Yes, weakness of demands. I don't know to continue to -- because I already mentioned a lot of elements about what I said. I think, again, what is important for us is to really continue to work, tune our go-to-market strategy, our product strategy that we will enhance or we will reshuffle to be able to continue to promote in the right geographies, in the right segments because there are still areas where we have a strong growth. And so this is really a question of flexibility, and we do believe that we have the capacity and the flexibility really to readdress the market by country, by region, by subsegment because what I mentioned is that today, it's affecting mainly the small and medium type of customers where we see a slowdown after the COVID crisis. But that's why we believe that, thanks to our agility and our model, thanks to also a strong digital channel, we will be able to reassess what is the best way to continue to capture growth in by products by segments and by solutions. About the past. As we mentioned, we have now closed the first phase of PaaS development. We have 80 solutions. We will continue because we have already announced that we want to reach up to 120 services in the next few semesters because it's important. Today, we see a strong dynamic in the Database as a Service and [indiscernible] domain, but today, we have introduced is offering very recently. But we see that today, we have a strong momentum either in customer acquisition and more important in customer usage because we are Platform as a Service, which is in fact, Platform as a Demand in the sense that you grow with the customer. They don't buy immediately. They just grow small and after you issue you -- I mean help them well, you grow with them. So today on these 2 domains, we see, I mean, a very interesting, I would say, perspective. We have launched recently the high-performance storage. So it's more recent. You've seen that we've launched that in the last weeks, in fact. We are going to enhance the offering with the complementary offering. We are going to scrutinize in details what would be the results in the next few weeks because we believe, again, that we have a very compelling offering with very high performance pricing I mean -- and moreover, due to the fact that the major competitors are using egress fees, locking strategy. Our solution is open, reversible, very pricing, I would say, effective. And in this period where the cost will become even more important, we believe it's a very good argument. And so Storage as a Service, high-performance Storage as a Service might be -- despite the overall, I would say, not very exciting micro perspective, it might be for us an opportunity because there, some of our customers are concerned by the price increase and also a cost increase for them in the storage where you have petabytes of data. And therefore, for us, it might be a very interesting opportunity, and now we have the full portfolio to address this market as the most performance and the most price-performance offering today for objects, block and archive storage.

Now I might add, Derric, on a more general note, that in times when companies are going to or have started scrutinizing their costs, you could expect it to be natural for them to challenge the very high spend they have with some of our competitors and to reconsider the amount they're spending and to move to companies cloud suppliers, cloud being an absolutely necessary spend for them to move to suppliers who have the best price performance ratio in the industry, which means that OVHcloud is in an enhanced competitive position in difficult times.

I think we are the period of the conclusion. I will not repeat the key takeaways. I just want to reiterate that we are confident today that we have a strong strategy, and we have a capacity to execute and despite the outlook of the economy, we believe that OVHcloud has a capacity due to this vertically integrated model, due to the agility of this management team, to be able to address -- I mean, quickly and fastly all the potential changes that might occur in the next few weeks, months. External, I would say, economical, geopolitical and we believe today that we have strong foundations to be able to adapt and to continue to pursue and accelerate our growth. Thanks to a very strong innovation and solutions portfolio, thanks to a vertical model, which allow us to have a high level of resiliency and adaptability in terms of costs and in terms of demand. And it's also thanks to our capacity because we are present in 3 regions to adapt our go-to-market to where we can find the highest level of growth for the company. So despite sometimes not easy environment, we believe that OVH has strong strength to continue to actuate growth.

Thank you. That does conclude today's conference. Thank you for joining, and you may now disconnect your handsets. Speakers, please remain connected and await further instruction.