SoftwareOne Holding AG (SWON) Earnings Call Transcript & Summary

Good day, and thank you for standing by. Welcome to the SoftwareONE Q1 trading update conference call. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions] I would now like to hand the conference over to your speaker today, Anna Engvall, Head of Investor Relations. Please go ahead.

Good morning, and thank you to everyone for joining SoftwareONE's Q1 trading update. My name is Anna Engvall, Head of Investor Relations at SoftwareONE. And joining me today are Dieter Schlosser, our CEO; and Rodolfo Savitzky, CFO. Before handing over to Dieter, let me draw your attention to the usual disclaimer regarding forward-looking statements and non-IFRS measures on Slide 2. With that, I'd like to hand over to Dieter.

Good morning. I'm pleased to welcome everyone to our first quarterly trading update. We have had a strong start to the year as our integrated model continues to deliver across all of our key markets. Gross profit growth for the group was nearly 15% year-on-year in constant currency to CHF 213 million. Taking a look at our 2 business lines, Solutions & Services delivered gross profit growth of nearly 40%, continuing its very strong growth trajectory. Our services portfolio is fully geared towards our customer needs and pain points. In particular, xSimples, our pay-as-you-go offering for our SME customer base, continued to deliver a phenomenal level of growth. Software & Cloud grew 1%, but it's important to view that number in the context of a strong comparative quarter due to an exceptional vendor payment last year. This is related to the Microsoft strategic agreement and co-investment announced in March 2021. Underlying gross profit growth for Software & Cloud was actually higher than in H2 '21. Furthermore, I'm really pleased that we are able to grow higher than the overall Microsoft market in Q1 2022 based on cross billings, which means we continue to achieve market share gains. Adjusted EBITDA margin was 19.8%, down 1.9%, again impacted by the exceptional vendor payment. It would, otherwise, have significantly improved compared to last year. Operating expenses remained broadly flat in Q1 '22 compared to Q4 '21, driven by the completion of Transformance, which you will recall is a program focused on maintaining a lean and agile organization paired with a high-performance team. And importantly, we are going beyond the scope of Transformance. We have launched a new program to further identify operational efficiencies and ways to increase productivity to ensure that we grow profitably. We will update you with more details at our H1 results. With this strong start to the year, we remain confident in our full year outlook as communicated in March: to deliver mid-teens gross profit growth and an adjusted EBITDA margin above 25%. I would now like to touch on our market environment. Overall, the market opportunity is massive. With a total addressable market of over $600 billion, the Software & Cloud market is expected to grow at 14% and our addressable services market at over 30% per annum at least until 2025. We continue to see a strong momentum across all of our markets. Organizations continue to invest in digital transformation and the cloud to drive innovation, create new business models and disrupt the old ones. As a global software and cloud-native business with a high proportion of recurring revenue and pricing flexibility to suit client needs, we are very well positioned to navigate the current environment and help our customers achieve their objectives. In a talent-scarce environment, our growth and success has also created a very strong culture, which allows us to continue to attract and retain talent to support our growth. On a different topic but related topic, I would like to say a few words regarding Ukraine. When the war broke out, our first priority was the safety of our people. We offer them and their families to relocate to a safe location, and I am very relieved that everyone is okay today considering the circumstances. We then suspended a significant part of our sales and business operations in Russia. And then, as an update, I can now confirm that we have now completely divested our Russian business and transitioned our employees to the new owner. Also, we wish the circumstances were different. We are happy that we have been able to find a new home for our valued team members in Russia. Furthermore, I can also confirm that so far, we have not seen a material impact of the war on the rest of our business globally. Now let's deep -- dive deeper into the performance of each of our business lines, starting with Solutions & Services, which delivered 40% gross profit growth. This performance was a broad-based, strong performance across service lines, customers and geographies. xSimples continues to be a great driver of growth, up over 70%, with AzureSimple reaching nearly 90% growth. As a result, we now support 7.3 million managed cloud users, up from 5.4 million in mid-'21 and from 1.7 million at the time of our IPO. This is clear evidence of exactly how we want to drive scalability in the business and create a much stickier revenue stream. I would also like to highlight our cloud services, in particular, Azure, which is nearly up 50% due to accelerating demand from our customers as well as the acquisition of Predica, which closed in February. Importantly, our cross-selling statistics, a key measure of the strength of our synergistic portfolio and customer relationships, continue to improve. Gross profit from customers purchasing both software and services increasing to 70% LTM, up from 66% 12 months ago. Now turning to Software & Cloud. The business line delivered gross profit growth of 1%, as previously highlighted. This should be seen in the context of a high comparative base as Q1 '21 included an exceptional vendor payment. Without this, underlying gross profit growth was higher than in H2 '21, driven by a sustained recovery of our hyperscaler practices. Total Microsoft billings reached close to USD 3.7 billion in Q1, growing faster than the overall Microsoft market at a rate of around 13% year-on-year, which means we are winning in the market and we are gaining share. We also see strong momentum in our ISV portfolio on the back of our platform, PyraCloud-Goatpath adoption and the demand for Digital Supply Chain. From a geographical perspective, there are 2 main aspects I want to share with you. Firstly, we are back to double-digit growth across all regions. And secondly, we have every region now achieving CHF 100 million gross profit run rate, allowing us to scale our business to a complete different level. As we shared earlier, with the globalization on the rise, customers demand more and more local delivery with global best practices. SoftwareONE is uniquely positioned to meet this expectation given our successful footprint in 90 markets. This has become a powerful competitive differentiator for us in today's and tomorrow's environment. With that, I would like to hand over to Rodolfo to take you through our financial performance in the first quarter.

Thank you, Dieter. Good morning, and a warm welcome from my side as well. One of my priorities at SoftwareONE is to enhance communications with our investor community and increase transparency. Together with Dieter, we decided to introduce these quarterly trading update, and I'm pleased that we can report strong results in our inaugural one. Dieter has already shared the headline numbers with you, so let me provide a few additional insights and then dive into some other topics. On our Q1 P&L, I would like to emphasize our underlying performance. On Solutions & Services, we see continued strong momentum, with managed services representing a significant share of gross profit. This sticky recurring revenue stream provides a strong baseline for the coming quarters. Software & Cloud delivered 1.1% growth in constant currency, which does not reflect the strong recovery due to the exceptional vendor payment last year. While such payments are normal course of business for us, this one was significant for the quarterly result. Without it, Software & Cloud gross profit growth in Q1 2022 was higher than in H2 2021, driven by our hyperscaler practices and ISV portfolio. Let's move on to operating expenses. While the year-on-year growth of close to 18% is high, OpEx remained relatively flat compared to Q4 2021. The high year-on-year growth rate was the result of organic investments as well as acquisitions. OpEx growth will reduce as we have implemented both immediate cost-control measures and are evaluating further operating efficiencies. We delivered 19.8% adjusted EBITDA margin, which tracks well in relation to our full year guidance when considering seasonality. Adjusted EBITDA grew 3.1%. Both metrics were also significantly impacted by the exceptional vendor payment. Without this, the quarter would have shown strong operating leverage, with EBITDA growing faster than gross profit and margin increasing well ahead of last year. As we start disclosing quarterly information, I thought it would be important to review the seasonality in our business, which affects both business lines. Our commercial teams leveraged 2 key opportunities during the year to drive increased revenue and gross profit in Q2 and Q4: Microsoft's financial year-end in June and our customers' yearly budget flush in December. On the other hand, OpEx does not exhibit any particular seasonality as it needs to consistently support delivery throughout the year. As you can see from the chart, this P&L dynamic translates into 2 higher and 2 lower-margin quarters. Let's now turn to operational excellence. SoftwareONE business model offers very attractive growth fundamentals underpinned by market growth as Dieter explained earlier. Our business also has strong margin upside from efficiency and operating leverage as we grow. So let me dig deeper on the cost side. Firstly, we continuously look at portfolio optimization, not only in Solutions & Services through further standardization of our packages but also in Software & Cloud by tightening prioritization within our portfolio of around 10,000 vendors. Secondly, we can better leverage our local, regional and global resources to achieve optimal utilization. This is true for our operations delivery centers for each of the business lines as well as for our financial shared services. We can also better utilize our delivery centers in India, Leipzig and Mexico to further optimize costs. Another very important tool to improve productivity is process standardization and automation. We will have ample room to optimize processes in our operations and transactional activities. Finally, while we continue to fully believe in our global model, we also see scope for optimization of our geographical footprint. As Dieter mentioned, we have just launched an initiative to assess, in more detail, these efficiency opportunities, and we'll provide a more detailed update with the H1 results once the initial assessment has been completed. Let me now return to my initial comments regarding transparency, which is a key priority going forward. That's why we are here today providing this quarterly trading update and why we have also committed to reporting adjusted EBITDA by business line. Back in March, we promised to provide the business line reporting by the end of '22 at the latest. But today, I'm pleased to share that it will happen already from H1 2022 onwards. We're also taking this opportunity to adjust definitions of some of our non-IFRS financial metrics to better reflect performance of each business line. We currently classify some expenses in OpEx, which will be reflected in COGS, with the new business line reporting. These expenses are related to the delivery of our services or products. The changes will have no impact at the revenue and EBITDA level. Needless to say, we will, in due course, publish the revised definitions and restated historical financials to facilitate the transition. Coming back to our outlook for the year. Based on our performance year-to-date and the continued strong demand environment, we are confident in delivering our 2022 guidance of mid-teens gross profit growth in constant currency and adjusted EBITDA margin above 25%. Consistent with our communication in March, our adjusted EBITDA margin may be slightly below 25% in H1 2022, with further operational efficiencies underpinning our full year target. With that, I would like to hand back to Dieter for closing remarks.

Thank you, Rodolfo. As we reach the end of our prepared remarks, there are 3 messages that we would like you to take away today. Firstly, the underlying growth momentum in Q1 was very strong, and we are on track to meet 2022 guidance of mid-teens growth and an EBITDA margin of above 25%. Secondly, we remain fully committed to our growth strategy supported by operational efficiencies to deliver profitable growth. And thirdly, we are improving the level of transparency and consistency in our financial disclosure to provide an optimal understanding of our business model. I would now like to hand back to the operator for Q&A.

[Operator Instructions] And the first question comes from the line of Varun Rajwanshi from JPMorgan.

A couple of questions. Firstly, just a clarification on the magnitude of payments from Microsoft as part of the co-investment program. So this was roughly CHF 12 million, CHF 13 million in 1Q. Any exceptionals that we should keep in mind for subsequent quarters? Second, can you confirm the organic growth in the Solutions & Services business for 1Q? And then thirdly, on the new cost savings initiatives, what is the sort of cost savings that you're targeting with these new plans? And is there any scope for further margin upgrade as part of the new cost savings initiatives that you will be launching through the course of the year?

Yes. Thanks for the question, Varun. Good to hear you. On the first one, on the Microsoft exceptional vendor payments, let me just take it back a step and explain again the rationale behind this. As you remember, we have announced this in March 2021. Microsoft has selected us to capture a market opportunity, which was in this and for the next 10 years, very -- offers a tremendous market opportunity, which is application services and SAP. Why this is the case? It's very simple, there is a total addressable market, which is massive. And secondly, there is a burning platform. The customers have to move to the cloud. It's just a matter of time whether they do it this year or whether they do it in 3 to 5 years. So with the selection of Microsoft to choose SoftwareONE as a strategic partner to capture that opportunity, we built a plan and -- to build our global practices and bring in capabilities to facilitate that opportunity. In Q1, the payment which we have received was the ramp-up payment for that -- for that strategic cooperation. So whilst it would have not been significant for H1 because it was -- from a quarterly perspective, of course, it was a significant payment. Coming to your underlying question of whether we need to consider anything in the future, from an exceptional vendor payment, we always do have vendor payments. We also outlined that that's part of our business as usual and [ course ] of our business and -- but not in that magnitude. As I said, it was a ramp-up payment. So you don't need to consider for the future quarterly updates any significant payment. On the second question, what's the underlying organic growth on Solutions & Services, remember, the market is growing 30% on Solutions & Services. And we always say we will be above -- growing above the market. We have been growing last year over 50%. Of course, this was a lower base. We will be growing this year above the market. There is no doubt about that the underlying factors are absolutely there. Our backlog and pipeline are showing this growth momentum. In terms of what is organic and nonorganic, I do understand that you tightly differentiate this. For us, the majority of our acquisitions are actually bolt-on acquisitions, where we -- instead of hiring over a long -- prolonged period of time, we just buy a small outfit and ramp up the capabilities. So the fastest is not something which we would separate out and make -- put it as a transparent metric zone. If we have a transformational acquisition and a sizable -- there's a high complexity like we did with Comparex, like we did with InterGrupo, we will definitely reinvent that and make that transparent. Rodolfo, you want to add something on this as well as on the last question on the second initiative?

Yes. Thanks, Dieter. Yes, happy to provide additional -- I think you covered very well the first 2 questions. So on the target cost-reduction or cost-optimization initiatives, as I mentioned in my presentation, we're taking really a very broad-based approach, going from looking at the portfolio, what are the areas where we can optimize profitability within the portfolio, [ when ] we call it 80 for the 20. Also, even though for us, the geographic footprint is a key competitive advantage. Again, is there room for optimization there? And I would say, very importantly, we are very proud of our local-global delivery model. I think we definitely will maintain that in the future, but we would look at opportunities to realize synergies between local, regional and global delivery in our operations for software and cloud and services as well as for internal services that we provide in the company. And then last but not least, we will be doing benchmarking of certain functions. The company has grown very fast, and this has been needed, right, to support the higher scale. But I think it's a good opportunity now to step back and check whether, in some areas, we may need more resources and probably, in some areas, we don't need as many resources. We'll have the initial assessment in the coming months. And we would be happy to provide it, and I would be happy to provide an update with the H1 communication.

Next question comes from the line of Ross Jobber from Citi.

Two questions. First, a very quick one. Can you give us a rough idea of what sort of wage inflation you're expecting this year? And secondly, a more general question. Can you say a little bit about how your conversations with your customers are being affected by the growing uncertainty and darkness around the macro picture and inflation? You haven't really mentioned anything about how your customers are talking to you about the fact that, for example, they want to particularly protect their cyber spending and are there other areas of IT that they might be prepared to spend less on in order to continue to spend on cyber at a time when their businesses are facing such uncertainty or whether or not indeed their IT budgets, as a whole, are being -- are under discussion for being reduced. So can you just say a bit about how your customers are talking to you about how they can continue to maintain what they'd like to invest in, given the outlook looks very uncertain?

Yes. Thanks, Ross. Do you want to take the first one, Rodolfo, on the wage?

So on the wage inflation side, despite, let's say, everything we read on the media every day, what we're seeing here in SoftwareONE is pockets, for sure, of wage inflation in certain areas. And of course, we have had to make some adjustments in order to ensure retention of key talent or attraction of key talent. But I would say when you look at the average across our company -- and also keep in mind that we have big pockets of population in some of our delivery centers in Mexico, in Leipzig, in India and so forth. We continue to see that, let's say, the wage projections are roughly in line with the plan for the year, and this is in the lower single-digit range. So, so far, when we look at the overall picture for SoftwareONE, we have made adjustments, of course, where needed, but this is not, in any way, at this stage, a material deviation of the initial plan we put together last year for the budget.

Yes. Thanks, Rodolfo. And on your second question Ross, on the conversation with the customer. Technology is not -- is actually not that complicated if you look at the customer landscape, right? There's always 3 buckets which you are talking about. The first bucket is just keeping the lights on. The second bucket is making the lights brighter. And the third bucket, innovate new lights. And I highly oversimplify it, but just to make it crystal clear, right? And your question, the conversation is completely different in those 3 buckets, right? McKinsey would call it horizon 1 to 3. On the -- on keeping the lights on, exactly what you said. It's the robustness, the resilience which counts, which they continue to invest and the cybersecurity, the parameter security, which they are pulling in. There, we see -- on top of the maintenance, we see that improvement in robustness. The second pillar, making the lights brighter, is really capturing the opportunities to move to the cloud and what scalable effect and optimization that can bring. But over there, it has become now a combination that is not just simply a technical conversation, but it's also a commercial conversation on how do I do it in the right way and manage the ongoing OpEx concern in the future. So the swap has slightly been moving to a higher emphasis on commercial with the technology transformation. On the third one, which is the innovative part, over there, you see quite a big focus now on insights, data, analytics and so on coming through, particular when you look at the trend of the anti-globalization and deglobalization and the impact of the supply chain, that's where they are focusing, of course, completely dependent on what industry they are. But many are affected by, obviously, supply chain situations and that's where they drive innovation into it. So again, overall, the momentum is there. Overall, the growth is there, but it's very different depending on which segment or which bucket of the vendor portfolio -- customer portfolio you look at.

And do you have a sense of how much of your revenues are supporting customers maintaining their infrastructure and how much, at the moment, is helping them to improve it? Do you have a sense of that?

Yes. Yes, I do have a sense of it, Ross. We haven't disclosed this number, and we haven't really engineered this number. But from a simple mathematic, you can look at it. On Software & Cloud, you're always -- sorry for using all these 3 buckets, but you have again 3 buckets, right? You have the infrastructure bucket. You have the horizontal software, which is like a ServiceNow or SaaS applications and Office365. And then you have the vertical solutions, which is like because I'm in construction, I have X, Y, Z vertical solution. So on the infrastructure side, of course, a lot of them -- half is still on-premise, right, which you would see -- which is reflected on Software & Cloud. On Solutions & Services, remember, we are cloud-native, right? We don't do things on premise. We understand the on-premise, but we do not want to do work on premise. We want to help the customer to move to the cloud. So everything, what we do in Solutions & Services is in the direction of the second bucket or the third bucket, which means making the lights brighter or innovating new lights.

Next question comes from the line of Knut Woller from Baader Bank.

A couple of questions. First, just a clarification question. Did I understand it correctly that adjusted for the vendor payment, the gross profit grew in Q1 higher or faster than in the second half 2021? Then secondly, on the Transformance cost, they have been CHF 6.4 million in Q1. Is that now behind us with you saying that 600 FTEs have been basically made redundant? Or should we expect any further costs? And will your new efficiency measures result in any comparable extraordinary costs? And then thirdly, on the inflation side, we already touched wage inflation. But on the other hand, are you able to do price increases in your service part? And do you have any CPI clauses factored into the cloud contracts that help you to offset wage inflation?

Yes, Knut. Thanks for the questions. On the comparison, yes, so if you adjust it, we have been growing higher than H2 2021. On the second, I hand over later to Rodolfo, but then let me take the third one, which you mentioned on the CPI or the price increase. So that's relevant to, again, Solutions & Services, where you have a differentiation between professional services and managed services. On professional services, usually, those are timebox projects, right, where you have between 1 month and 9 months projects. So over there, it's -- our base is the daily rate, the cost base, and then we move this into a fixed rate. So we are always able to adjust. On the managed services, we have -- the standard of our contract clause has cost adjustments and collar adjustments in there. So that's basically what they do in a 3 or 5 years managed service contract, yes.

And then coming back to Transformance, yes, this is correct. With the additional provision, we -- the program we communicated in March is completed. This is associated with around 600 separations. And the expectation is that this would generate the separation itself. The cost is around CHF 30 million to CHF 40 million, let's say, savings. Of course, I need to emphasize that Transformance as such, it was not a program to eliminate the position from our organization and really bring the savings to the bottom line as such. It was more around improving performance in the organization. So making sure that the lower performers were moved out. And of course, the expectation is that if you move, let's say, too low performance, you probably won't need to replace with the same number of resources. So this program is completed. As we look forward, we will need to see the scope of the efficiency measures that we will discuss later with all of you in H1, and there may be the need then to establish a provision or not. We don't know at this stage. We will assess once we have understood the scope of savings and what is required to achieve the same.

But maybe you want to say something on the ROI of the provision versus what we are actually reducing on operating expenses.

Yes, the ROI is extremely high, right? Of course, if we take the overall provision, which is the CHF 9 million plus the CHF 6 million, and then we generate -- we associate that with the savings that have been created. It's very high.

Next question comes from the line of Jad Younes from UBS.

A couple from my side. So first of all, regarding headcount versus year-end, are there any numbers that you can share around what was the headcount at the end of Q1 and what the attrition was? Secondly, can you give us any sort of insight about what we should expect from the Transformance program on exceptionals for the rest of the year? Should we be expecting similar to Q1 in Q2 and Q3 and Q4? And lastly, on the buybacks, are there any plans to undertake further buybacks and further sale of the Crayon stake? And maybe you can comment as well on the -- if you've seen any change in the Microsoft reseller terms as well.

Sorry, I didn't get the last one, Jad.

On the Microsoft reseller terms, have you seen any changes there on the commission structure of -- that Microsoft has given?

Yes. So let me just take this on the -- let me take the last one first, and then I hand over to Rodolfo for the headcount and [indiscernible] and the capital allocation. On the reseller incentives program with Microsoft, as you know, there's a yearly change. It always kicks in October. We usually have a preview of that, which we, of course, cannot disclose. But unfortunately, actually, yesterday, there has been already a block published from Microsoft on that with that -- with the partner community. So what my sense of it, there are no negative impact on the incentives, and it rotates around the various buckets, Jad. But overall, it's not going down. I see a slight increase in it. But this really depends on your portfolio. Every partner of Microsoft has a different focus on a different portfolio. And for us, I see it rather positive.

On the headcount, of course, we -- with this quarterly trading update, we are limiting the amount of information. We [ just thought ] we want to still provide meaningful information but not every detail. So I would not give you the precise number, but what I can indicate is that as mentioned during my note, quarter 1 2022, from an OpEx point of view, was pretty much in line with quarter 4 2021. And most of our OpEx is driven by FTEs and personnel expenses. So the implication -- the clear implication of the headcount was pretty much flat compared to the exit headcount that we had in 2021. Then related to your question on Transformance, we will not have more provisions related to Transformance. The program itself is closed. Of course, we will not make it a recurring-now Transformance program. It was otherwise. Then the provisions will go into our regular operating expenses. However, as I mentioned before, as we assess now this bigger program of efficiency opportunities, we will assess whether there's a need to create a provision or not. But this would be a separate provision, nothing to -- with Transformance is associated with a broader efficiency initiative that we are driving as an Executive Board here in SoftwareONE. Then in terms -- sorry, go ahead.

So on the number of employees, I think it was around 600 that were supposed to leave under the Transformance program. Have they now left? Or is there still more to go in Q2? I mean [indiscernible] higher.

All the people who were part of Transformance have been communicated the separation. And then the terms of separation vary depending on the different individuals. I would say the vast majority have left the company. But again, keep in mind that this is a company that is also growing very fast, and it's a company where we need to replace FTEs in order to support our growth in services. So here you have the leavers, but you have the joiners as well, right? But the net result for quarter 1 is what I said before. Then going back to Crayon. I think here, the story is straightforward. Initially when we built the position of owning roughly 12 -- over 12% of Crayon shares, there was a strategic intent behind that move. Today, we don't see it as a strategic investment anymore. It's a tactical investment. And like -- I mean, all of you in the call would also immediately agree when you have a very concentrating holding of one particular position, you want to sell down and diversify. We have done that. I cannot disclose what we will do in the future. It will all depend on the market dynamics. And so we will continue to monitor and reassess our investment portfolio, which is the same answer I need to give you on the share buyback. We heard loud and clear from investors, from many of you that this is something we should consider. And as such, we regularly assess the -- we weighed against our strategy, which includes bolt-ons and some M&A. And at this stage, the only thing I can say is we -- this is something we are regularly reassessing, and whenever there's a change, we will communicate it back to the market.

And on attrition, is there anything you can give us there? Is it up, down?

Yes, maybe I can on this, Rodolfo. So we see actually a very heterogeneous picture on that, Jad. We had, in Q1, the highest attrition in North America. And in other markets, there were a little bit of a spike but not as visible as it was in North America. So it's really different per geography and also, of course, related to the portfolio as well. So it's our normal attrition ratio otherwise, but in the U.S., we had -- in the Q1, we had seen up to 20%.

Next question comes from the line of Ben Castillo from BNP Paribas.

Really focused on the additional cost savings program that you sort of talked to on Slide 12. I guess how do we -- how should we think about the roughly CHF 170 million of OpEx, the run rate you've seen in Q1 and what we're seeing in Q4 end of last year? How should we think about the OpEx run rate through the rest of the year? Any color would be helpful there. And then secondly, on the Software & Cloud business growing ahead of the H2 2021 growth rate, which sounds positive, would you say we've now turned the corner there? Obviously, you had the headwind from the shift to subscription revenues that's been happening. Should we expect that to start to become a tailwind in 2022? Or is that still sort of further out narrative?

Ben, I'll take the second one. Rodolfo, you take the first one on the OpEx on this.

Yes. So Ben, when it comes to the OpEx for the year, as you can imagine, it is tightly correlated to the GP growth. We have guided on the GP. We said mid-teens in constant currency. And again, while there's -- we have a clear focus on trying to grow OpEx lower than the GP growth, we expect in the year a relatively good correlation there. And this is the logic behind our guidance on the margin where we say clearly above the 25%. And as you remember, we closed with 25.7% last year. So this is the message we can give at this stage. The efficiency program that we will assess over the coming weeks and we will communicate in H1, of course, the expectation here is that there will be some low-hanging fruit that can be implemented, right? But for such a program, the likelihood is that we would implement most of the measures either very late in this year or in 2023.

Right. And on the second one, whether we -- now out of the woods on Software & Cloud and in a recovery phase, we strongly believe so, right? As you rightfully said, we have been growing above H2 2021 on the back of multiple things, right? So the demand, of course, has increased and the market coming out post COVID, but also, we leveraged our subscription portfolio in a different way. We have put a higher focus on specific ISVs. There's a different tiering. And we have seen now a steady incentive phase, particularly with the top 1, like Microsoft for the time being, right? And there's always -- of course, there's always a margin pressure, as you know, but we are able to navigate around this with our portfolio, with our examples and with our approach. I would be not overly aggressive on it, Ben, because the market is growing 14%, as you know. So if we are in -- and we always said we are in the high single digits in that space. We see a huge uptake on the Digital Supply Chain, our offering, DSC. So that is a fundamental shift, which is positive. But we haven't baked in any disruptions to our platform yet. And as we shared with you before, that's something where we test the waters in this year. And if we are going, as per plan, as a successful digitization of that space, then I would be more bullish on it and say this is exactly what the future would be in terms of a potential double-digit growth on an ongoing basis.

And the last question comes from the line of Alastair Nolan from Morgan Stanley.

Great. I think most of my questions have already been asked, but maybe just one follow-up on the disposal in Russia or the divestment. Just wanted to check, is that -- the impact there, is that kind of accounted for within your full year guidance? Or is there going to be any adjustment there? And is there any exceptional or one-off charges associated with the disposal?

Yes. So it's baked -- Alastair, first, it's good to be the last one, right? The Russia divestment, so that's -- from the numbers, you remember, we said it's not material. Russia, Ukraine was like 1.5% of our total GP. So it's already baked into our guidance. There will be no adjustment through that on the exceptional provisions. Rodolfo, you want to say something on that?

Yes. Again, in due course, once we publish the H1 numbers, as you can imagine, there's some write-offs associated with our goodwill, let's say, or intangibles that we have in Russia. We will publish that. But from a, call it, adjusted EBITDA point of view and from a cash flow point of view, there is a limited impact. Of course, we do have a net working capital in Russia. We're trying to -- we have payables and receivables there. We're trying to net off the position, and there's some obligations from the buyer of our business. But I would say, in a nutshell, we expect a minimal cash impact. We will have some write-offs. As you can imagine, this will not affect neither the guidance nor adjusted EBITDA, and we will publish that in due course with our financial numbers in H1.

All right. I think we are at the end of the Q&A.

Yes, there are no more questions at this time.

All right. Perfect. So thanks, everyone, for participating today, and we have, later on, another call with our analysts, which is great. So looking forward to speak to you more in more detail. Thanks for participating, and have a good day.

That does conclude our conference for today. Thank you for participating. You may all disconnect.