Good day, and thank you for standing by. Welcome to the SoftwareONE Q1 trading update conference call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star zero. 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 two. 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-over-year in constant currency to CHF 213 million. Taking a look at our two business lines, Solutions and 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 and Cloud grew 1%, but it's important to view that number in the context of a strong comparative quarter to an exceptional vendor payment last year.
This related to the Microsoft strategic agreement and co-investment announced in March 2021. Underlying gross profit growth for software and cloud was actually higher than in H2 2021. Furthermore, I'm really pleased that we are able to grow higher than the overall Microsoft market in Q1 2022 based on gross 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 2022 compared to Q4 2021, 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. 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 CHF 600 billion, the software and 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 offered them and their families to relocate to a safe location, and I am very relieved that everyone is okay today considering the circumstances.
We suspended a significant part of our sales and business operations in Russia, and as an update, I can now confirm that we have 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 dive deeper into the performance of each of our business lines, starting with solution and services, which delivered 40% gross profit growth. This performance was a broad-based strong performance across service lines, customers, and geographies.
XSimples continued to be a key 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-2021, 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 more secure 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% twelve months ago. Now turning to software and cloud. The business line delivered gross profit growth of 1%, but as previously highlighted, this should be seen in the context of a high comparative base as Q1 2021 included an exceptional vendor payment. Without this, underlying gross profit growth was higher than in H2 2021, driven by a sustained recovery of our hyperscaler practices. Total Microsoft billings reached close to $3.7 billion in Q1, growing faster than the overall Microsoft market at a rate of around 30% 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 Pillar Cloud Gold Path adoption and the demand for digital supply chain. From a geographical perspective, there are two main aspects I want to share with you. Firstly, we are back to double-digit growth across all regions. 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 de-globalization on the rise, customer 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 updates, 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 and 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 and cloud deliver 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 and 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 a 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 two 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 two higher and two 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. Let me dig deeper on the cost side. Firstly, we continuously look at portfolio optimization, not only in solutions and services through further standardization of our packages, but also in software and 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 automation. We will have ample room to optimize processes in our operations in 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're 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 2022 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. Going 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 three 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. 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.
Thank you. We will now begin the question and answer session. As a reminder, if you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press the hash key. Once again, please press star one if you wish to ask a question. The first question comes from the line of Varun Rajwanshi from J.P. Morgan. Please go ahead.
Hi, good morning, Dieter and Rodolfo. Couple of questions. Firstly, just a clarification on the magnitude of payments, you know, from Microsoft as part of the co-investment program. This was roughly CHF 12-13 million in Q1. Any exceptionals that we should keep in mind for subsequent quarters? Second, can you confirm the organic growth in the solutions and services business for Q1? And then thirdly, on the new cost savings initiatives, what are the sort of, you know, cost savings that you're targeting with these new plans? Is there any scope for further margin upgrade as part of the new cost, you know, savings initiatives that you will be launching through the course of the year?
Thanks.
Yeah. Thanks for the question, Varun. Good to hear you. On the first one, on the Microsoft exceptional vendor payment, 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, 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, and it's just a matter of time whether they do it this year or whether they do it in 3-5 years. With that, with the selection of Microsoft to choose SoftwareONE as a strategic partner to capture that opportunity, we build 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 strategic cooperation. While 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 course of our business. 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 solution and services? Remember, the market is growing 30% on solution and 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's no doubt about it. The underlying factors are absolutely there. Our backlog and pipeline are showing this growth momentum. In terms of what is organic and non-organic, I do understand that you tightly differentiate this. For us, you know, 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. For us this is not something which we would separate out and put it as a transparent metrics on.
If we have a transformational acquisition and the size is a high complexity like we did with COMPAREX, like we did with InterGrupo, we will definitely ring-fence 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. Yeah. Happy to provide additional. I think you covered very well the first two questions. 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, what 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? I would say very important, very importantly, we're 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. 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. 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.
Thanks for your comments.
Thank you. Next question comes from the line of Ross Jobber from Citi. Please go ahead.
Morning, gentlemen, and ladies. 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? 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?
whether or not indeed their IT budgets as a whole are being under discussion for being reduced. 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, you know, very uncertain? Thanks.
Yeah. Thanks, Ross. You wanna take the first one, Rodolfo, and the wage?
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. Of course, we have had to make some adjustments in order to ensure retention of key talent or attraction of key talent.
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 the, let's say, wage projections are roughly in line with the plan for the year, and this is in the lower single digit range. 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.
Yeah. Thanks, Rodolfo. On your second question, Ross, on the conversation with the customer, you know, technology is actually not that complicated if you look at the customer landscape, right? There's always three buckets which you're talking about. The first bucket is, you know, just keeping the lights on. The second bucket is making the lights brighter, and the third bucket, you know, innovate new lights. I highly oversimplify it now, but to make it crystal clear, right? Your question, the conversation is completely different in those three buckets, right? McKinsey would call it the horizon one to three. On keeping the lights on, you know exactly what you said.
It's the robustness, the resilience which counts, which they continue to invest, and the cybersecurity, the perimeter security, which they're pulling in. There we see on top of the maintenance, we see that improvement and robustness. The second pillar, making the lights brighter is really capturing the opportunities to move to the cloud and what scalable effect and optimization it can bring. Over there it has become now a combination that it's 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.
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. Particularly when you look at the trend of, you know, the anti-globalization and de-globalization and the impact of the supply chain, that's where they're focusing and, of course, completely dependent on what industry they are. Many are affected by obviously supply chain situations, and that's where they drive innovation into it. 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.
Thank you. 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?
Yeah, 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 mathematical, you can look at it. On software and cloud, you always sorry for using all the three buckets, but you have, again, three buckets, right? You have the infrastructure bucket, you have the horizontal software, you know, which is in, you know, like a ServiceNow or SaaS applications and or Office 365. Then you have the vertical solutions, which is like, you know, because I'm in construction, I have X, Y, Z vertical solution.
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 and cloud. On solution and 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. Everything what we do on solution and services is in the direction of the second bucket or the third bucket, which means keeping, making the lights brighter or innovating new lights.
Thank you.
Thank you. Next question comes from the line of Knut Woller from Baader Bank. Please go ahead.
Yeah. Thank you. 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? 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 here any further costs? Will your new efficiency measures result in any comparable extraordinary cost? Thirdly, on the inflation side, we already touched wage inflation. On the other hand, are you able to do price increases in your service part? Do you have any CPI clauses factored into the cloud contracts that help you to offset wage inflation?
Thank you.
Hi, Knut. Thanks for the questions. On the comparison, if you adjust it, we have been growing higher than H2 2021. On the second, I hand over later to Rodolfo, but let me take the third one, which you mentioned on the CPI or the price increase. That's relevant to, again, solutions and services where you have a differentiation between professional services and managed services. On professional services, usually those are time-boxed projects, right? Where you have between one month and nine months projects. Over there, it's our, you know, our base is the daily rate, the cost base, and then we move this into a fixed rate.
We are always able to adjust. On the managed services, we have the standard of our contract clause has cost adjustments and COLA adjustments in there. That's basically what you do in a 3- or 5-year managed service contract. Yes.
Coming back to Transformance. Yes, this is correct. With the additional provision, the program we communicated in March is completed. This is associated with around 600 separations, and the expectation is that this would generate the separations itself. The cost is around CHF 30 million-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 positions from our organization and really bring the savings to the bottom line as such. It was more around improving performance in the organization. Making sure that the lower performers were moved out. Of course, the expectation is that if you move, let's say two low performers, you probably don't need to replace with the same number of resources.
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. 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 savings.
Maybe you want to say something on the ROI of the provision versus what we are actually reducing on operating expenses.
Yeah. The ROI is extremely high, right? Of course, if we take the overall provision, which is the CHF 9 million + CHF 6 million, and then we generate that, we associate that with the savings that have been created, it's very high.
Thank you.
Thank you. Next question comes in the line of Jad Younes from UBS. Please go ahead.
Yeah. Hi, everyone. Thank you for taking my questions. A couple from my side. 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 into Q2 and Q3 and Q4? Lastly, on the buybacks, are there any plans to undertake further buybacks and further sale of the Crayon stake? Maybe you can comment as well on if we'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 Mic-
Okay.
That Microsoft is giving?
Yeah. Let me just take this on. Thank you. Let me just take the last one first, and then I hand over to Rodolfo for the headcount Transformance-
Sure.
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. Fortunately, actually yesterday, there has been already a blog published from Microsoft on that with the partner community. So what's my sense of it, there are no negative impact on the incentives. It rotates around the various buckets, Chad Jones, but overall.
Mm-hmm.
It's not going down. I see a slight increase in it. But this really depends on your portfolio. Every partner of Microsoft has, you know, has a different focus and a different portfolio. For us, I see it rather positive.
Okay.
Rodolfo.
Yes. On the headcount, of course, with these quarterly trading updates, we are limiting the amount of information we disclose. We want to still provide meaningful information, but not every detail. I would not give you the precise number, but what I can indicate is that as mentioned during my notes, 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. You know, the clear implication is headcount was pretty much flat compared to the exit headcount.
Yeah
...that we had in 2021. Related to your question on Transformance, we will not have more provisions related to Transformance. The program itself is closed.
Mm-hmm.
Of course, we will not make it a recurring now Transformance program. It will say otherwise. 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. This will be a separate provision, nothing to do with Transformance. It is associated with a broader efficiency initiative that we are driving as an executive board here in SoftwareONE.
Okay. It's this.
Sorry, go ahead.
Sorry. 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
No.
The headcount was flat, but you've got some stops and hires.
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.
Okay.
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. Here you have the leavers, but you have the joiners as well, right?
Okay
The net result for quarter one is what I said before. Look, going back to Crayon, I think here the story is straightforward. Initially, when we built the position of owning roughly 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. Like, I mean, all of you in the call would also immediately agree, when you have a very concentrated 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.
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. As such, we regularly assess. We weigh against our strategy, which include bolt-ons, and some M&A. At this stage, the only thing I can say is this is something we are regularly reassessing, and whenever there's a change, we will communicate it back to the market.
On attrition, is there anything you can give us there as an up down?
Yeah. Maybe I jump on this, Rodolfo. Yeah, so we see actually very heterogeneous picture on that chart. We had in Q1 the highest attrition in North America. In other markets, there were a little bit of a spike, but not as visible as it was in North America. It's really different per geography. Also, of course, related to the portfolio as well. It's our normal attrition ratio otherwise, but in US, we had in Q1 seen up to 20%.
Okay. That's all. Thank you.
Okay.
Thank you. Next question comes from the line of Ben Castillo from BNP Paribas. Please go ahead.
Good morning. Thanks very much for taking my question. Really focused on the additional cost savings program that you sort of talked to on slide 12. I guess, how should we think about the roughly CHF 170 million of OpEx, the run rate you've seen in Q1 and what was seen in Q4 end of last year? How should we think about that OpEx run rate through the rest of the year? Any color would be helpful there. Secondly, on the software and 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 a sort of further out narrative? Thank you.
Yeah. Hi, Ben. I take the second one, Rodolfo, you take the first one on the OpEx on this.
Yes. 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. Again, while 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. This is the logic behind our guidance on the margin, where we say clearly above the 25%. As you remember, we closed with 25.7% last year. 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? 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. On the second one, whether we are now out of the woods on software and cloud and in a recovery phase, we strongly believe so, right? As you rightfully said, we have been growing above H2 2021 and on the back of multiple things, right? The demand, of course, has increased in the market coming out post-COVID. Also, we leveraged our subscription portfolio in a different way. We have put a higher focus on specific ISVs with a different tiering.
We have seen now a steady incentive base, particularly with the top one like Microsoft for the time being, right? There's always, of course, 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 then, because, you know, the market is growing 14%, as you know. If we are in, 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.
That is a fundamental shift, which is positive. But we haven't baked in any disruptions to our platform yet. As we shared with you before, that's something where we test the waters in this year. If we are growing as per plan with a successful digitization of that space, then I would be more bullish on it and say, you know, this is exactly what the future would be in terms of a potential double-digit growth on an ongoing basis.
Very good. Thank you.
Thank you. The last question comes from the line of Alastair Nolan from Morgan Stanley. Please go ahead.
Great. Thank you. 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 gonna be any adjustment there? And is there any exceptional or one-off charges associated with the disposal? Thank you.
It's baked. Hi, Alistair first. It's good to be the last one, right? The Russia divestment, that's from the numbers you remember, we said it's not material. Russia, Ukraine, was like 1.5% of our total GP. It's already baked into our guidance. There will be no adjustment to 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 had in Russia. We will publish that. But from a so-called adjusted EBITA 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 have payables and receivables there. We're trying to net off the position. Of course, and there's some obligations from the buyer of our business. But I would say in a nutshell, we expect a minimum cash impact. We will have some write-offs, as you can imagine.
This would not affect neither the guidance nor adjusted EBITA, and we will publish that in due course with our financial numbers in H1.
Great. Thank you very much.
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. Thanks, everyone, for participating today. We have later on another call with our analysts, which is great. Looking forward to speak to you more in detail. Thanks for participating, and have a good day.
That does conclude our conference for today. Thank you for participating. You may all disconnect.