Earnings Call: Q2 2021

Jul 27, 2021

Thank you, and welcome everyone to this Q2 Interim Report 2021. And if we move to Slide 4, we can have an overview of the Q2 of 2021. We record sales of 20% and organic growth is 20% as well. And as you can see from the bridge on the right hand side of this slide, structure and currency was 4% and minus 4%, respectively, and total sales amounts to EUR 1,076,000,000. It is actually our strongest quarter ever with sales, earnings, margins and cash flow at an all time high. We saw very strong demand in Geosystems and Autonomy and Positioning, solid recovery in Mi recording 31%, 2018% and 24% organic growth, respectively. Safety and Infrastructure had tough comps, a very strong quarter in Q2 of 2020, but grew by 2% organic growth, PP and M was the only division that still declined in the quarter minus 4% organically and we saw a weak demand from primarily the oil and gas market. We do expect, though, PP and N to return to growth in the second half of twenty twenty one. Now if we turn to earnings, our adjusted operating earnings amounted to EUR 301,000,000 compared to $226,500,000 a year earlier, and that is an increase of 33%. Our operating margin was for the first time 28%. Now if we move to Slide 5%, this is just a reminder of the seasonality in our profit and earnings where Q1 is the weakest, Q3 second weakest, Q2 and Q4 are typically strong quarters. To Slide 6, an overview of the P and L statement. Net sales amounted to €1,076,000,000,000 which is 20% recorded as well as organic growth. And EBIT1 came in at 28%, as we've just stated, which is 33% better than the corresponding period last year. Slide 7 is for your reference. That is the first half of 2021 and if we turn to Slide 8, cash flow it was very strong in the quarter as well. And highlights to point out is that we had a positive change in working capital in spite of the 20% organic growth, cash conversion was 113% and operating cash low, grew by 15%. Slide 9, just to show the reduction in working capital over a longer period of time, we can see that historically, we were around 20% of sales in working capital. And in the Q2, we report 3.9% working capital to sales. Market development, if we move to Slide 11, looking at the geographic mix for the group in the Q2, we can see that China is returning to its historic 16% share of total sales and we see an improvement in Western Europe and a reduction in the mix from Asia Pac. Slide 12, also for your reference, all geographic regions grow above 8% in the quarter, thus all the green arrows and Slide 13 is an overview of the various segments that we serve and geographic to markets. Slide 14, diving into EMEA a bit. Western Europe record 25 percent organic growth. All major markets in Western Europe grew double digit. Strong demand in surveying, infrastructure and construction. And we also saw compared to Q1 a broad based recovery in our manufacturing industries that we serve. Eastern Europe, Russia, Middle East and Africa all record strong double digit organic growth in the quarter. Moving to Americas in the Q2, similar pattern to Europe, 14% organic growth in North America, broad based recovery in surveying infrastructure construction and manufacturing. The only segment that showed weakness was Power and Energy and Defense in the quarter. South America, strong double digit organic growth where we saw very strong organic growth from our Brazilian market. Moving on to Slide 16, Asia. China record 25% organic growth compared to a fairly normal a quarter in 2020, we saw strong demand in all segments: to manufacturing, infrastructure, construction and electronics. Australia and India record strong growth, supported by recovery in both manufacturing infrastructure and construction in both market, Eastern Asia, I. E, South Korea and Japan remained weak in the quarter. Reporting moving to Geospatial Enterprise Solutions on Slide 18. Geospatial reports an organic growth of 24%, where the shining star in the quarter is Geosystems with 31% organic growth, as I mentioned before, 2% organic growth, tough comparison numbers from the Q2 of 2020, but solid growth in Public Safety. Autonomy and positioning, 18% organic growth, and it was the agriculture business that fueled this growth, sales for the segment amount to €560,000,000 and EBIT is $176,000,000 which corresponds to an operating margin of 31.5 percent. Moving to Industrial Enterprise Solutions on Slide to 2019, organic growth amount to 16%, where Mi saw a broad based recovery in both Europe and North America and continuous strong growth in China and for its software business, PP and M, minus 4 percent organic decline, and that was mostly driven by decline in our oil and gas business. On the other hand, PP and M saw solid growth in Operations and Maintenance Solutions and its AEC portfolio, sales amounted to $515,000,000 and EBIT $130,000,000 corresponding to an EBIT margin of 25.2 percent. Slide 20. Our gross margin was at all time high. On a 12 month rolling basis, it's now 64%, and it's slightly higher in the second quarter. Moving on to our EBIT margin, our operating margin is now 27%, which is the lower end of our target for 2021, but in the quarter, we recorded 28% EBIT. And if you back out FX impact, it would have been at 29%, so a very strong margin. Moving on to the acquisition of in force EAM Business, just a reminder on Slide 23, that on July 6, Hexagon announced an agreement to acquire Inforce Global EAM, which stands for Enterprise Asset Management Business, for approximately US2.75 $1,000,000,000 we will also form a broader strategic relationship with both Infor and Coke Industries, the owner of the Infor. Typical profile or the profile of the acquired businesses, CAGR in our SaaS revenue, it's roughly 35%. Over the past 3 years, total revenue is expected to land at $184,000,000 for fiscal 2021, cash conversion of 110% and an adjusted EBIT of 40%. Now on Slide 24, we talk about why we do this. It is to continue to drive the digital transformation across our customer base, EAM will be combined with both Geosystems, PP and M, MI and SI, so we will have solutions for industrial facilities, for manufacturing, for infrastructure as well as buildings. And we believe a gradual synergy opportunity, that will grow from obviously 0 this year to $100,000,000 in revenue by 20 to 26. Talking about M and A, other M and A orders and product releases in the Q2, if we start at Slide 26, we acquired a company called CADLM, which is a pioneer in computer aided engineering, so called CAE, combined with artificial intelligence and machine learning to revolutionize the impact of simulation in product development processes and life cycles in discrete manufacturing. Slide 27. We launched Hexagon Connect, which is a new SaaS based software workspace for citywide collaboration between agencies, could be public safety agencies, transportation, utilities and other related organization. We already have good traction for this new suite of software products from SI. Another product we launched on Slide 28 is Hexagon Mass Transit. It's a new geospatial transportation infrastructure management system for monitoring to field operations using 3 d AI and mobile capabilities. To Slide 29, we launched the Absolute Scanner AS1. It's a product from our Mi division. This is a 7 axis system that has cutting edge blue laser technology. And it's going to be used to deliver high productivity non contact 3 d measurement in discrete manufacturing. To Slide 30, enabling aerospace manufacturers to reduce BLISQ inspection times. Blisk Inspection is a sort of bottleneck in the next generation aero engines for commercial airliners and we launched a solution where we can reduce the Blisk inspection time by as much as 50%, improving the quality and the output for the next generation aero engines. To Slide 31, we have worked with an OEM around a new card for ADAS, which stands for Advanced Driver Assistance System, the card is called PIN to 22A and it's got significant functionality in advanced driving systems and we are now ready with the price point that would support mass deployment of this GNSS system in auto applications. Slide 32, talking about autonomous cars, this is a project which will develop automated driving systems, so called ADS, for rural applications, it's been fairly advanced development, driving autonomously on proper roads with road lines and so on, but one of the problems have been dirt roads, snowed roads or rural roads, and this project is all about developing automated driving systems for rural roads. To slide 33, this is another technology that will enable automation. It's gadget 410MS, which will be deployed both in commercial and defense marine applications, the uniqueness about this product is that it will combat intentional or unintentional interference with a ship's navigation system. And this is a problem that is becoming more and more frequent, both for commercial and defense related naval activities. Slide 34. Continued momentum for the newly launched Hexagon Oncald that was launched last year, we got 2 good orders in the quarter, 1 from INCOM, which is the U. S. Army Installation Management Command, and also an order from North Wales Police in United Kingdom for this dispatch system. To Slide 35, we expand public safety efforts in Manaus, which is a large city in the midst of Amazonas, they are building on our computer aided dispatch system and they will also deploy Smart Advisor, which is an AI guided insight a system that we developed last year that works in real time and helps for better informed decisions during day to day dispatch operations. To Slide 36, Rock Science and Hexagon continue to strengthen relations in applications primarily in mines for rock slides, this will also to close the loop between radar monitoring and slope stability monitoring modeling, and this could be very helpful in the ever increasing problem with landslides around the world. To Slide 37, the Hexagon Content Program is signing a 5 year partnership with Ecopia, which is a leading provider of HD vector maps, and they use AI to convert high resolution images of the Earth and Ecopia will use our content program over the next 5 years. Slide 38, helping building a bridge between architecture, civil engineering, construction and computer science, we've entered into a partnership with ETH in Zurich and Design plus plus and the idea is to develop augmented design in the field for Architecture, Engineering and Construction. Slide 39. We've also landed an order with ZF Windpower that will use our durability and structure where to analyze stress and how you optimize gear loading and reduce transmission errors in wind turbines. And that was it. And we also would like to announce that we will host a Capital Markets Day. We're on Slide 41. The Capital Markets they will take place on the 30th September, and we will present various growth opportunities and trends and our key strategic focus areas for the future, the event will be held in person if commissions permit, which we certainly hope for. Otherwise, we will have a virtual event. But we will announce that later on. It all, as you know, depends on the COVID situation at the time. Finally, if we summarize on to Slide 43, it's our strongest quarter ever. Record sales, operating earnings and margins, continuous solid cash conversion of 113%. And in July post the end of the quarter, we signed an agreement to acquire in force EAN Business. And with that, operator, I am ready to answer questions and start the Q and A session. Thank you. 1. Our first question comes from the line of Magnus Kruber of UBS. Please go ahead. Your line is open. Magnus here with UBS. I guess, first, congratulation. It's in order another very solid print. Maybe jumping on the GS margins first. Obviously, the volumes and savings helped you a lot in the quarter, but you also call out the mix there, could you help us a bit to quantify the mix contribution on margins year over year there, if that's Possible and to what extent that's sustainable? It's hard to say, but I would say, we probably have a mix contribution of 1%. Got it. I guess that's Geosystems. That's sort of the majority of that intra business area mix is not so Important thing. No, it's actually across the board. So Geosystems had fantastic margin development, but so did FI and AMP. Got it. And that means it could be a little bit more sustainable than just sort of the mix between the 3 potentially? Yes, absolutely. Perfect. And then I guess same topic, but then switching to IES. I mean is this Purely due to Mi outgoing PP and M again in this quarter, is there anything else that we should sort of call out within the mix? First of all, Mi improved its mix significantly and improved its margins. But to the fact that we have the same margin as last year is the fact that Mi outgrew PP and M. Perfect. And yes, maybe as a follow-up on that, do you have any comments on how fast the software business in Mi grew in the quarter then? Around 10%. Perfect. Thanks a lot. I'll get back to the line. Yes. Organic. Our next question comes from the line of Daniel Gielbe to Handelsbanken, please go ahead. Your line is open. Thank you very much, operator, and congratulations to a really strong quarter and Fantastic cash flow. I was wondering if you could give me some view on the China, you had strong growth here also in this quarter despite tougher comps. And your view on second half and also perhaps on the geopolitical situation, if you do need to take any actions in any form back to the geopolitical situation right now? China has a very strong momentum for us, and it's actually spread among from 5, 6 industry segments, so it's not just one segment performing very well. When it comes to the second half, one should remember that 2019 was not a great year for China. So we're still in a recovery mode coming back to a long term trend with strong single digit, weak double digit growth in China, and we think that is set to continue. When it comes to political situations, we never comment on that, but we obviously have mitigation plans for all possible outcomes. Perfect. May I ask you also on the great cash conversion, obviously, 113% and 3.9%, I think working capital to sales have to drop in both in Q1 and Q2, should we expect it to come back to the line, so to, say, in second half or in 2022, where we see a drop in the line and a more flat line perhaps ahead? I think that maybe 4% where we are in our mix development and strategic development in a company, it might be a stretch to keep it at this level for the short term, I think longer term, this might be a realistic target for us the way the mix evolves. Perfect. Thank you. I have more questions, but I'll get back in queue to let the other one. Yes. Thanks. Thank you. Our next question comes from the line of Alexander Virgo of Bank of America. Please go ahead. Your line is open. Good morning, Ola. I trust you're well. Thanks for taking the question. I guess it was a sort of a broad question on a new normal, I mean, I appreciate that Q2 is the strongest quarter ever as I think we're sort of seeing across the board. But given where margins are and given where cash flow is, I'm just wondering if you can comment and I appreciate that you probably will answer this in a bit more the CMD, but I wonder if you can help us a little bit just in terms of modeling, because I want to try and understand where you see the new normal profitability, gross margins above 64% is fantastic, margins in GES above 28% is Fantastic. I'm just trying to get a feel for how we need to think about the rest of this year in modeling terms, but actually just more broadly. I think that, first of all, you need to dissect the margin, and it stands from a new cost level in the group, where travel is obviously at all time lows and that contributes to the margin. And then you have the volume component, which probably is more accentuated in this quarter than normally, and then you have the never ending mix improvement story, and I would put a percent on each of those three components in the quarter, so cost 1%, volume and mix. And cost is not it's not so that we have savings over 2020, but it's more a philosophical discussion where we probably travel less as an organization going forward, and that is going to be more of a long term saving for us. Okay, great. Thanks. And then I wanted just to follow-up, I wondered if you could talk a little bit to the product contribution or new product contribution to the top line and how that sort of plays through in the second half is typically a stronger contribution to the business in the second half. So just wondering how that sort of new product launches have developed and contributed. That's absolutely true. We do expect to greater contributions in the second half of this year, what happens when you have this kind of recovery that we're seeing right now is that all products are actually performing well, whether it's old or new. So I can't really highlight the new products as a great contributor to growth in this quarter. Okay, great. Thank you. Thanks. Thank you. To Our next question comes from the line of Kavinko Dukuiper of JPMorgan. Please go ahead. Your line is open. Hi, thank you for taking my question and congratulations on the strong quarter. You mentioned that you expect to be in to get back to growth in H2, are you already starting to see some recovery in oil and gas? And could we expect PPM back to growth already in Q3? That's what we hope. One shouldn't promise anything, but we do see signs of recovery, and that's why we are fairly certain that PP and M will return to growth maybe already in the Q3. Okay. Thank you. Can you comment on Eastern Asia that remain weak, could you comment on the dynamics you saw there? Yes. It was mostly 3 shipyards in Korea and a somewhat muted manufacturing sector in Japan? Right. Very clear. And then finally, on M and A, of course, you just announced the acquisition of in for AM, can you comment on your pipeline? And are there any areas you're particularly interested in? Now we don't comment on our pipeline, but it's healthy. Okay. That was it. Thank you. Thanks. Thank you. And our next Question comes from the line of Jochem Gunnell of DNB Markets. Please go ahead. Your line is open. Thank you. Good morning. So with most questions already taken, perhaps to Ulla, if you could talk us to a little bit about the new products here that Accelerated growth in Geosystems and exactly what that pertains to? Geosystems grew in several sub segments. We have a product line called RealityCapture with laser scanning and that grew significantly in the quarter, but also our more traditional sensors like total stations and GNSS rovers for surveyors grew rapidly. Automation of construction machines, what we call machine control, grew as well. So can't single out one area. All areas actually grew strong in the quarter. Understood. And also, you had previously, in some quarters, commented a bit on the book to bill in Mi, can you give us any flavor on where that was now given the stellar organic growth report? It was at record levels. So very strong book to bill ratio in the quarter. Understood. Thank you. Thank you. And our next question comes from the line of Sven Mert at to Barclays, please go ahead. Your line is open. Great. Good morning and thanks for taking my questions. I have a couple. First, I was wondering if you could help me to reconcile the difference in growth between AAC and Geosystems. If I interpret the release correctly, AEC was growing slow in the end to your system. So could you comment why you don't see a strong acceleration For AEC. And then my second question is around, if you see any signs that a strong recovery in construction infrastructure is now peaking as increased construction costs, lower demand? And then finally, If we have seen any cost inflation, either in your own cost base or if you have increased prices during the quarter? First of all, I don't recognize what you're saying about AEC. AEC grew roughly at the same pace as Geosystems, so that is not correct. And no, I don't think we've seen the peaks for the construction and infrastructure markets just yet. And cost inflation not in the Q2, it might come later in the year as everyone is squeezed for resources. Okay, great. That's helpful. Thank you. Thank you. Our next question comes from the line of Erik Golrang of SEB. Please go ahead. Your line is open. Thank you. I have three questions. The first one on working capital. I mean, we can see the metrics in the balance sheet and so on. But you help us out just a bit there on the operational factors behind that improvement, especially now since I guess you're growing the hardware business faster, have you changed payment terms or anything? And then on the second question relates to the PIM222A there for ADAS applications. You said it wasn't done in partnership with an OEM. Do you have a firm order? What kind of volumes are we talking about? And when does this product come into play, are we talking level 3 type applications? Or do we need to go higher in automation levels? And then the third question, if you could say something about the size of the business on the Hexagon content program? Thank you. Thanks. So okay, let me see if I got it right. Working capital, there are actually several factors contributing to the reduction in working capital. But 2 major ones are on the liability side, and that is we have an increased share of software where you prepay, which builds up the liabilities and then a bit funny is that we're starting to pay bonuses to our employees again and we build up a short term liability when we book those bonuses as the company starts to improve and that has a negative impact on working capital. But apart from that, we had strict control of accounts receivables and inventories in the hardware business, which also contributed to the release. Thank you. And then if we move on to ADAS, the OEM I referred to it's an OEM that helps us manufacturing the board. So that was a bit, I guess, Dim on my side, on the customer side, we already have relationships with all, I wouldn't say all, but most of the major OEMs in automotive. And this is for level 3 and up. And then But no firm orders as of today? No, no, we have firm orders, but it's still in project related applications where you develop products. So it's not but this is the prerequisite to go to manufacturing and scale up volumes. Okay. Thanks. And your third question, you have to remind me. Yes, the Hexagon Content Program, how big is that business today? It is roughly EUR 80,000,000, EUR 90,000,000 on an annualized basis. Thank you. Thank you. Our next question comes from the line of Neso Ngo of Brandenburg. Please go ahead. Your line is open. Hi, Alain. Good morning. Firstly, thank you for taking the call. And secondly, congratulations on the great quarter. I've got 2 questions, one relating or one focusing on the end markets and second on the margins. If I start with the end markets, so if we excluding Power and Energy, our top 3 end markets, we've seen great growth. To the demands and activities are performing very well, just wanted to get a sense from you how do you see this continuing the recovery in H2 to and then your expectation post 2021, could you share some insights on that? You can almost plot this recovery to the recovery we saw in 2009, 2010 after the financial crisis, so what we see right now is pent up demand in combination with a changed behavior in the market due to corona, automation has become a bigger issue, for example, in most customers' organizations, so I think we should see a good development and good demand throughout to 2021, in 2022, it's sort of business as normal, and we should expect a more normalized market, more normalized demand and then obviously it's back to normal where you have to deliver great innovation, great products, great benefits for your customers in order to increase your sales. Perfect. That's really helpful. Thank you. The second part to your second question on the margins, you might have answered it already, so apologies, if you already have. The obviously, we've got 28% op margin this quarter, probably one of the highest quarter in terms of profitability. Your quarterly volume, product mix and cost savings, presumably these are the items that we will continue to see going forward, I. We should see uptick in margins going forward. Is that the right way to think about it? And secondly, relating to this, if on a pro form a basis, if we were to include EMA, which is a more profitable business, with the target the operating margin target of 28%, will that get closer to 30% or maybe even more? Well, you put me on the spot here. I need to think this one through. I guess that yes, I mean, it will definitely contribute to our margins, but how much? I think we'd said around a percent. But luckily, you know what, come to our Capital Markets Day and we sort it out because it's much better to have these lengthy discussions at the Capital Markets Day. But you're absolutely right. It's cost, it's volume and mix improving the margin in the Q2 and longer term, the way to look at this continuous improvement is that cost might not be a factor going forward. It's a sort of one off in 2021, but volume and mix, where mix typically is why we drive margin expansion long term. So I would bet more on mix than volume actually going forward. Perfect. That's helpful. Thank you very much. And understood on the EMA pro form a numbers, then I will wait for the Capital Markets Day. Thank you very much. Thank you. Thank you. And currently, we have one further question in the queue. To question, please dial 1 now. And that's a follow-up from Daniel Zuebbe of Handelsbanken. Please go ahead. Your line is open. Thank you very much for taking my follow-up question. I was thinking about cybersecurity actually. I know that you're working very much on digitalization. You have the Hexagon Connect, OnCall, a number of different software as a service offerings, of course. And I was thinking that we do see more and more cyber espionage around the world. So my thinking is how you work with this and also what you see among customers if they are more reluctant to centralize thanks to more concentrated management systems, etcetera. I think the general trend is that companies like Microsoft and Amazon can provide much better security than mid sized industrial or construction companies can do with their own budgets. So we still believe that moving to a software as a service is safer then staying on prem. Then we have Pass, which is a company that we acquired late last here and Path is providing what's called OT, operational technology as opposed to IT, and that is a cybersecurity solution where we basically bolster and safe well, make operational assets more safe for our customers. So PaaS is a really good example for our response to cybersecurity. Perfect. So now I may hurt you there. And my last question, if I may, this might have been asked already, but I think you mentioned 3 weeks back when you did the Innophobean acquisition that that we should look for some $25,000,000 in PP and A amortization. And if this is correct to 20 years amortization, what would you suggest being reasonable for these calculations? I think 2.5%, you're in a bank. So that's just wishful thinking. No, I think it's lower than 2.5%. Our borrowing cost right now is typically 1%, dollars 25,000,000 might be a good ballpark number, but we have to wait for the final consolidation because we don't know either the exact number right now. Perfect. Thanks and good luck in Q3. Thank you. Have a great summer. Thank you. You too. Thank you. And we have one further question in the queue. That's a follow-up from Alex Langevergo of Bank of America. Please go ahead. Your line is Thanks very much. Thanks very much for squeezing me in. All I wanted to come back, if I could, just on the sequential momentum. And looking at the 2 year stack, I suppose, versus 2019, it looks like China is accelerating. It looks like EMEA is accelerating. It looks like Americas isn't. And I'm a little, I guess, surprised that the relative growth in North America versus what we've seen in Europe, now for sure comps were a lot easier in Europe year on last year. But just wondering if you could comment a little bit on the trend you're seeing there, whether we should expect to see that sequential momentum accelerating in North America as we move into the second half, we do see an acceleration similar to Europe and Asia in America in Manufacturing and Construction, the two areas that are not accelerating are SI and PPNM, and PPNM's share of business in North America is slightly larger from the group average, so it has a negative impact on the region. But if we do see a recovery now in the second half, that to point at PP and M contributing to the growth in North America. When it comes to FI, we had a very good growth in North America this time last year, and we do not expect them to significantly contribute to growth going forward, even though they're also one of our smallest divisions. So I think that we have to wait and see, but we expect a good year in the Americas in 2021 as well. To February. Thanks very much. Have a good summer. You too. Thank you. Thank you. And we've had one further question join the queue. That's from Andre Kooten of Credit Suisse. Please go ahead. Your line is open. Good morning. Thank you very much for taking my question. I was just thinking about the comment you made on mix being the more sustainable a driver of your margin going forward with high software mix and software as a service, I'm trying to think about in the light of the shift towards product as a service across the kind of industrial environment, is that something that you're exploring with your current new product launches already? Or is that something that's planned for the future to shift more towards product as a service or solutions as a service? No, absolutely. We're exploring several avenues. We have product as a service, we have service as a service and we have software as a service. And we're exploring all three avenues. And it is true that right now, many of our hardware products have similar gross margins as a pure software product, so there isn't a great difference in terms of profitability. But in terms of stability, if you can move a product to as a service, you obviously have a much more stable cash flow, and that's what we're aiming at. Thank you. And if I may, just one more question. On the new product launch of AbsoluteScan AS1, Is this evolutionary? Or is this a game changer in this industry? It's sort of a game changer, an evolutionary game changer. Okay. I guess we'll learn more at Capital Markets Day. You will. Thank you for your time. Thank you. Thank you. We've had one other question during the queue. That's from the line to Vasi Ricci of Redburn. Please go ahead. Your line is open. Hi, yes. Thanks for squeezing me in at the end. Just one on your very strong margins and we've not had to spend a lot of time listening about cost headwinds or shortages of components. Is that because you're not really seeing any? Or is that strong margin performance despite some strong increases that you've absorbed and more than overcome? Or do we need to think about inflation coming further down the line for you? And then on the shortages, I know you're not a big manufacturer yourself, but what are you hearing about inventories and then lead times for your suppliers? Well, I think the only area where we are a bit concerned is silicon wafers for our A and P division where we've seen shortages. Up till now, it hasn't cost us more than a couple of $1,000,000 in sales. But it could get worse. So it's actually a daily activity trying to second guess what's going to happen to silicon wafers. But apart from that, we haven't seen material shortages having an impact on our business. And on cost inflation, you're seeing it, but just being able to to cost inflation yes, I think cost inflation for us is mostly salary inflation. And we've seen a tendency where salaries have increased in 2021 significantly in India, where we have a large software development facility. And I think that is just to be expected in the situation in this recovery situation where we're at and the fact that we've had almost 18 months of completely dead labor to Gitan and people are now changing jobs, but we also expect this to stabilize early next year. To queue. And as there are no further questions at this time, I'll hand back to our speakers for the closing comments. And I think we have exhausted to the subject, so I have no closing comments, I thank you all for listening in, and I wish everyone a great summer with lots of sunshine. Thank you. Bye.