Good morning or good afternoon all and welcome to the Insight Enterprises Second Quarter 2022 Operating Results Call. My name is Adam and I'll be your operator today. [Operator Instructions] I will now hand over to Glynis Bryan to begin. Glynis, please go ahead when you are ready..

Welcome everyone and thank you for joining the Insight Enterprises earnings conference call. Today, we will be discussing the company's operating results for the quarter ended June 30th, 2022. I'm Glynis Bryan, Chief Financial Officer of Insight; and joining me is Joyce Mullen, President and Chief Executive Officer.

If you do not have a copy of the earnings release or the accompanying slide presentation that was posted this morning and filed with the Securities and Exchange Commission on Form 8-K, you will find it on our website at insight.com under the Investor Relations section.

Today's call, including the question-and-answer period, is being webcast live and can be accessed via the Investor Relations page of our website at insight.com. An archived copy of the conference call will be available approximately two hours after completion of the call and will remain on our website for a limited time.

This conference call and the associated webcast contain time-sensitive information that is accurate only as of today, August 4, 2022. This call is a property of Insight Enterprises. Any redistribution, retransmission or rebroadcast of this call in any form without the express written consent of impact enterprises is strictly prohibited.

In today's conference call, we will be referring to non-GAAP financial measures as we discuss the second quarter 2022 financial results. When discussing non-GAAP measures, we will refer to them as adjusted.

You will find a reconciliation of these adjusted measures to our actual GAAP results included in either the press release or the accompanying slide presentation issued earlier today. Also, please note that unless highlighted at constant currency, all amounts and growth rates discussed are in US dollar terms.

As a reminder, all forward-looking statements that are made during this conference call are subject to risks and uncertainties that could cause actual results to differ materially. These risks are discussed in today's press release and in greater detail in our most recently filed periodic reports and subsequent filings with the SEC.

All forward-looking statements are made as of the date of this call and except as required by law, we undertake no obligation to update any forward-looking statements made on the call, whether as a result of new information, future events or otherwise.

With that, I will now turn the call over to Joyce and if you following on with the presentation, we will begin on slide four.

Joyce?.

Thank you very much, Glynis. Good morning, everyone, and thank you for joining us today. I am thrilled to report that Q2 was an outstanding quarter for Insight with record results in revenue, gross profit, adjusted earnings from operations, and adjusted earnings per share.

I'm particularly pleased with the results in our services business, which grew 16% over last year, driven by outstanding growth in cloud and Insight core services. Our hardware business also performed well again in Q2, growing 28% year-over-year.

This growth was primarily driven by a continued easing of supply constraints for devices and the sequential decline in backlog, also primarily in devices. Not only did we deliver record topline growth, but we drove operating efficiencies resulting in adjusted earnings from operations margin of 5.2%, an improvement of over 70 basis points.

Adjusted EBITDA margin was 5.6%. With record results, it's a great time to attract talent and acquire skills and scale through M&A. And to lead this effort, I'm thrilled to welcome our new SVP of Business Development, Anima [indiscernible].

Anima will be leading our M&A strategy, which is focused on expanding our capabilities in cloud, data, and cyber and opportunistically adding scale. Additionally, given our focus on building more technical capacity around the world, we also welcomed our first ever VP of Global Talent Acquisition, Melissa Smith.

Given the economic uncertainty, now more than ever, it is critical that we support our clients and their goal and ambitions as we navigate these uncertain times together.

We are uniquely positioned with our expertise across hardware, software, and our portfolio of digital transformation services focused on cloud, data, and AI and all thing cyber to deliver cost-effective outcomes for our clients.

For example, one of our credit union clients was preparing to move their corporate headquarters and also wanted to design and build a new data center. Their primary goals of this redesign were to improve business operations, enhance security, and drive scalability and performance.

This transition needed to occur while maintaining 24/7 online access for all of their members. And of course, we needed to do all of this while lowering total cost of ownership. This project demonstrates the depth of our technical talent and the speed of our execution, which sets us apart.

We quickly deployed a team of more than 30 experts across multiple disciplines, holding over 120 different certifications. And the results have been impressive. We use SnapStart, an Insight-developed tool to map the client's IT landscape, including on- and off-premise data centers.

We segmented the data center workloads to enhance security and resiliency and we saved the client nearly $3 million. Most importantly, we remain deeply engaged with this client and are evaluating the business continuity and disaster recovery program.

It is client success stories like this that demonstrate the opportunity in front of us and the rationale for our continued investment in our solutions capabilities. Speaking of investments, we acquired Hanu Software last month.

Hanu is an award-winning Microsoft partner for more than 15 years and brings deep cloud expertise and a proven track record of attracting and developing offshore technical talent.

Hanu was recognized on the Gartner Magic Quadrant for Azure migration and will enhance our ability to deliver cutting-edge cloud solutions by adding over 500 teammates to our team in India.

Including Hanu teammates, Insight added over 700 technical experts in the first half of the year, providing the right technical talent and depth to support our clients. Another great example of this type of support in demonstrating our cloud capabilities is an engagement that we recently completed with a leading vocational school in Australia.

With 500,000 students spread over 140 different campuses, our client needed to enhance the experience of students and teachers, while improving data analytics.

Our solutions team leveraged Windows Virtual Desktop to transition courses to online learning, designed an application to survey the students, reducing planning efforts from three months to six weeks.

Developed analytics to measure student, teacher, and course engagement leading to higher student and teacher satisfaction and deployed integrated metrics to assess profitability and effectiveness of course offerings.

This project required us to migrate all of the clients' disparate data sources to the cloud, which eliminated silos between organizations and created a single source of truth.

Our client estimates this project will deliver over $10 million of benefits over two years and because of the success of this project, we remain highly engaged with a client and have recently been retained to implement advanced analytics and AI to deliver even more benefits.

It takes a world-class team to deliver these solutions to our clients, and those teammates need an environment which allows them to do their best work. I'm thrilled that we recently welcomed our teammates to our stunning new headquarters in Chandler, Arizona.

The building was based on design principles that drive collaboration, problem solving, and creativity. We believe the space will inspire our teammates to design and deliver the best solutions for our clients.

We are particularly proud of the new innovation center, which provides an interactive experience to help clients visualize exactly how our solutions can address their most ambitious challenges as they work through their digital transformation journeys.

And consistent with Insight's focus on sustainability, our headquarters will be gold lead certified, including key elements such as window sensors that automatically open and close based on UV intensity; solar panels, which provide 80% of the facilities energy consumption during peak periods; and over 800 indoor trees and plants to improve air quality.

In addition to moving into our new headquarters, we also celebrated some key recognitions in the quarter. We received over 13 partner awards from Microsoft that spans cloud, security, modern workplace, and the manufacturing vertical industry recognition.

We are particularly proud of our Global VP of Security and CISO, Jason Rader, who was recently honored with Microsoft Security Excellence Award as the Security Change Maker of the Year. Jason was instrumental in developing Insight's end-to-end security consulting portfolio.

And under his leadership, our cybersecurity team has become a trusted adviser to help our clients navigate complexity and security and compliance. We were also named Intel 2022 U.S. Partner of the Year for Innovation and were awarded Cradle Point's IoT Partner of the Year.

Lastly, we were recognized by Fast Company for their World-Changing Ideas Award, which honors companies that support positive social innovation. These recognitions cannot be achieved without the dedication of our Insight teammate.

So, before I hand the call back over to Glynis, I'd like to thank our Insight teammates, clients, and partners around the world and reiterate how pleased I am with our first half results. I recognize that we are moving into uncertain times economically and that the environment is rapidly evolving.

But as my grandmother used to say, when the going gets tough, the tough get going, and we are going. We are confident in the value of our solutions to our clients and resolute about our long-term fundamentals of our business.

We are uniquely positioned in a very large market with significant expertise across hardware, software, and services and we'll continue to invest in our solutions business to realize this opportunity. I will now turn the call over to Glynis..

Thank you, Joyce. As Joyce mentioned, we are very pleased with our record results for the second quarter. We had strong performance in both products and services and our North America business had an outstanding quarter. As we had expected, hardware and particularly devices were very strong and we saw acceleration in services growth.

All of our operating results can be found in our earnings presentation, and I'll start on slide eight. For our consolidated results, net sales in the second quarter were $2.7 billion, up 26% in constant currency and up 23% in U.S. dollars compared to the second quarter of 2021.

Product net sales in the second quarter grew 24% year-over-year primarily driven by hardware net debt. Services net sales in the second quarter grew 16% year-over-year, with Insight delivered or core services growth of 15% and partner and cloud services growth of 17%. Gross profit of $438 million increased 21% in constant currency and 19% in U.S.

dollars over prior year. Gross margin was 16%, a decrease of 40 basis points compared to prior year. Product gross profit increased 23% year-over-year, driven by growth in sales of devices. Services gross profit increased 16% year-over-year, driven by growth in Insight core services and partner and cloud services.

Our cloud gross profit for the trailing 12 months ended June 30th with 19% of consolidated gross profit, up 50 basis points from prior year. And our services gross profit was 48% of total gross profit also on a trailing 12-month basis. SG&A expenses for the second quarter were up 12% year-over-year in constant currency and up 10% in U.S. dollars.

As a percentage of net sales, both adjusted SG&A and SG&A in GAAP basis were 11% and versus 12% in the prior year quarter. Adjusted earnings from operations for the second quarter were $142 million, up 49% year-over-year in constant currency and up 45% in U.S. dollars. On a GAAP basis, earnings from operations increased 46% to $130 million.

For the second quarter, adjusted diluted earnings per share was $2.78, up 5% in constant currency and 46% in U.S. dollars year-over-year. On a GAAP basis, diluted earnings per share was $2.42, an increase of 53%.

Before I discuss the performance of our operating segments, I'd like to provide a little more color on backlog in Q2 as well as our expectations for the rest of 2022.

While total hardware backlog remained at elevated levels going into Q3, with the continued improvements in the device supply chain, our device backlog started to decline in Q2.We expect our current device backlog will flush in the second half of 2022. On the infrastructure side, backlog continues to build in Q2.

However, the infrastructure supply chain is also starting to improve and we expect to see backlog start to decline in Q3 and estimate that it will be sometime in 2023 before all that backlog clears. Moving on now to the results of our operating segments and starting with North America.

North America had an outstanding second quarter with record net sales of $2.2 billion, up 28% year-over-year. Product net sales grew 29% year-over-year, primarily driven by a 33% increase in hardware net sales. While we expected double-digit growth in hardware and primarily related to devices, this was higher than expected.

As we have discussed over the year, we believe device growth will slow in the second half of 2022. However, we expect infrastructure growth and accompanying services will accelerate as that product becomes more available. Services net sales grew 20% year-over-year, primarily driven by Insight core services and higher sales of software assurance.

Gross profit in North America in the second quarter increased 26% year-over-year and gross margin at 15.6% was down 20 basis points, primarily driven by changes in product and services mix. Product gross profit increased 28% year-over-year.

Services gross profit increased 23% year-over-year, primarily driven by Insight core services and cloud solutions. Selling and administrative expenses increased 14% year-over-year, driven by higher personnel and variable compensation costs, primarily from higher gross profit and our investment in solutions and services teammates.

Adjusted earnings from operations grew 60% year-over-year to $116 million. GAAP earnings from operations grew 63% year-over-year to $104 million. Moving on to EMEA. Net sales in the second quarter grew 14% in constant currency, driven by product net sales, specifically software.

Gross profit grew 6% in constant currency, lower than net sales due to a decline in software agency fees and the decline in margin on impact core services. Adjusted earnings from operations were $19 million, up 4% in constant currency. GAAP earnings from operations declined 7% year-over-year to $18 million.

On to APAC, net sales of $70 million in the second quarter increased to 41% year-over-year in constant currency, driven by software, hardware, Insight core services, and cloud solution sales.

Gross profit of $18 million increased 35% year-over-year in constant currency, primarily due to higher gross -- higher profit sales in services and higher volume of cloud solutions. This led to adjusted earnings from operations of $7.4 million in the quarter, up 52% in constant currency.

GAAP earnings from operations grew 46% year-over-year to $7 million. Moving on to our tax rate. Our effective pace for the second quarter of 2022 was 25.6%, relatively flat compared to 25.4% in 2021. Turning to the details of our year-to-date 2022 cash flow performance.

In the first six months of 2022, our operations yielded $442 million of cash compared to $5 million of cash generated in the same period in 2021. As we have highlighted previously, our cash conversion cycle is inverted, meaning we pay our partners on terms shorter than we receive payments from our clients.

This allows us to drive more cash flow when hardware growth decelerates, while in periods of hardware growth, more cash is used in our operations.

In the first half of 2022, the decrease in cash flow from operations activities was primarily driven by growth in hardware net sales, changes in partner mix, including increased volume with distributors with early payment terms, and securing inventory for future client projects.

In the second quarter of 2022, our cash conversion cycle was 48 days, up 15 days from second quarter of 2021 as a result of increased volumes with distributors, resulting in lower DPO that I had just discussed, an increase in DIO as a result of increased inventory, including inventory for future client projects, partially offset by a decrease in DSO.

In 2022, we invested $47 million in capital expenditures related to facility and technology investments. As a reminder, we received $27 million in proceeds from the sale of real estate assets in the prior year. We also used $58 million net of cash and cash equivalents to purchase Hanu that Joyce discussed earlier.

We did not have any acquisitions in the prior year. We continue to have $75 million outstanding under recurring share repurchase authorization. We plan to repurchase approximately $25 million of outstanding shares in the second half of 2022 under this current authorization.

At the end of the second quarter, we had a cash balance of $138 million, of which $115 million was resident in our foreign subsidiaries. We had $1.1 billion of outstanding debt, including our senior convertible note at the end of the quarter compared to prior year quarter end cash balance of $108 million and total debt of $484 million.

In the second quarter, our convertible notes continue to exceed the market price trigger of $88.82 and remain convertible at the option of the holders and the principal amount will continue to be classified as current. Given the market value of the convertible notes, we do not anticipate that note holders would convert their notes in the near-term.

As we think about liquidity, we're exiting the quarter with a leverage position at less than 2.3 times debt to cash flows or EBITDA within our comfort level. Under our ABL agreement, our primary compliance covenant is a fixed charge coverage ratio, which includes trailing 12-month EBITDA coverage, lower capital expenditures, taxes and cash interest.

As of June 30th, we're at 3.8 times the minimum requirement of 1.0 times and we're confident we can support our capital requirements and liquidity needs. On July 22nd, we amended and extended our ABL facility and increased the capacity from $1.2 billion to $1.8 billion with comparable or better terms.

As of today, we have approximately $800 million of our $1.8 billion capacity available under our ABL facility, and we have ample capacity to fund future growth. As you think about our guidance for the first full year of 2022, we expect to deliver low double-digit net sales growth.

We expect adjusted diluted earnings per share for the full year of 2022 to be between $8.55 and $8.75. This outlook assumes interest expense between $30 million to $35 million, and effective tax rate of 25% to 26% for the full year 2022.

Capital expenditures of $65 million to $70 million, including completion of our new corporate headquarters and an average share count for the full year of 35.4 million shares after our planned repurchase of $25 million of shares.

This outlook excludes acquisition-related intangible expense of approximately $34 million, assumes no acquisition related or severance and restructuring and transformation expense and assumes no significant change in our debt instruments. I will now turn the call back to Joyce..

Thanks Glynis. In closing, I'd like to thank our teammates for their commitment to our clients, partners, and each other. Our clients, for trusting insights to help them with their transformational journeys. Our partners, for their continued collaboration and support and delivering innovative solutions to our clients.

Insight is off to a great start in 2022 and we are optimistic about our ability to expand our solutions business and deliver even more value to our clients as they modernize and transform. This concludes my comments, and we will now open the line for your questions..

[Operator Instructions] The first question today comes from Joe Cardoso from JPMorgan. Joe please go ahead..

Hey good morning everyone and thanks for the question. My first question, if I take a look at the midpoint of your full year guide, it appears that you're baking in as the acceleration heading into the second half versus the first half from both an implied top line and profit perspective.

Can you maybe just dive into that a bit and discuss what are the primary drivers of the slowdown you're baking into the guide; particularly given the solid momentum you've seen in the first half?.

Thanks Joe. So, what we said at the start of the year was that we had envisioned that we were going to be stronger in the first half of the year versus the second half of the year, primarily based on our performance in the second half of 2021.

So, what we experienced in the first half of 2022 are growth levels that were kind of flowing through from 2021. And we have made an assumption with regard to how the year was going to play out, and we had lower growth in the second half of the year.

As we have gone through, the -- it has played out as we anticipated, meaning that the first quarter had strong hardware growth relative to a low compare in the first quarter of 2021. In 2020 -- in Q3 of 2021, growth was 36% in North America, just as an example.

That was not something that we envisioned as we go on a year-over-year basis that we would continue to grow at the same pace. So, our assumption is that relative to the compare that we have in the second half of 2021, we assume that our growth in 2022 second half is going to be more muted.

For the full year, we're still growing at over 400 or 500 basis points ahead of the market. So, I think it's -- I wouldn't say that it's necessarily a slowdown. It's just relative to our specific compares that we have to accommodate going into 2022.

I will say that as you go through there, what we had talked about also was that we would have higher gross margins in the second half of 2022. That's still the case. Primarily because devices will be a lower percentage of total hardware in the second half.

We anticipate that infrastructure that is the supply chain, not necessarily starting to ease, but the timelines are not as long as they used to be. We're going to get deliveries of infrastructure.

We're going to be able to do services projects associated with infrastructure and that's going to drive higher margins in the second half of the year relative to the first half of the year..

Got it. And then I guess just my second -- Yes. Totally. And then I guess on my just second question here. What are you seeing around demand for managing professional services. The reason I'm asking is everyone is privileged and seeing new stories around enterprises planning to slow down hiring.

So, just curious if that's kind of transitioning or translating into a tailwind for your customers as they look to increasingly leverage Insight due to that dynamic? Thanks..

Yes. Thank you, Joe. So yes, for sure, demand for digital transformation services, professional services, managed services is really, really strong. I think clients are looking to partners like Insight to augment their own skills and capacity because digital transformation is essential to their own performance.

So -- and this is a bit exacerbated by a constrained labor market, especially, around specific skills. And so there's a lot of increased interest in leveraging -- so those services from Insight. And I would also say there's also a lot more interest in automation to try to figure out how to design labor content other processes..

Thanks. Appreciate all the color guys..

The next question comes from Matt Sheerin of Stifel. Matt, please go ahead..

Yes. Thank you and good morning. Just following up on the last question regarding the revenue guide for the rest of the year. So, it looks like you'll be down sequentially.

Is that just -- is that primarily a function of that PC refresh and the backlog getting worked down? And if you look at the infrastructure products, the solutions products, if you will, do you expect that to be up in the second half versus the first half?.

Okay. Yes. So it is a sequential decline in hardware, albeit it is growth over prior year. This particular hardware quarter was very, very strong. Very, very strong also around devices as we --. Our assumption is that devices are not as strong in the second half, partly because the backlog has started to flush.

And while we're getting new bookings coming in, it's not at the same pace that we had in the first half of the year or the second half of last year. So, we anticipate that, yes, it is going to be a sequential decline specifically related to devices.

We do see an increase ultimately in infrastructure and projects associated with infrastructure in the second half of the year, which is higher margin -- which would be higher margins..

Got it. Yes.

And then just sort of backing into the gross margin after that very strong 16%, it looks like you'll be up certainly year-over-year, but sequentially, maybe not at those levels? And are there any drivers there? Were there some one-offs maybe on the services side that boosted that gross margin in June that may not repeat itself?.

So, the gross margin in our second quarter is primarily driven by Microsoft and the fact that June is Microsoft year-end. So, June is always -- sorry, the second quarter is typically our strongest quarter, and we saw tremendous cloud growth associated with that. Cloud as a percentage of total GP was 16%, up 50 basis points as we talked about.

So, I wouldn't anticipate that the rest of the year would be at the 16% level because that June -- second quarter is typically our highest quarter. However, I think that we will be recovering some of the gross margin that we gave up in the first half of the year when we had more devices in the mix.

And hence, our gross margin in the first two quarters were lower -- was lower than prior year. We're going to be higher gross margin going into the second half of the year. Net-net for the year, we will be up slightly as a gross margin line..

Got it. Okay, that's helpful. And then in terms of the regions, it looked like North America hardware sales were very strong again, but not so strong in EMEA, where you were down.

Could you just maybe give us some color on what you're seeing in terms of macro? Is the refresh cycle sort of played out there? Is there more cautiousness from customers?.

Yes, I would say that hardware growth in North America was really strong again. That's several quarters in a row, we've seen incredible hardware growth. And mix of our business is stronger in hardware in North America than it is in EMEA. EMEA's mix is much more software and services oriented.

We also have a fairly significant public sector business in EMEA. And in that business, the hardware was down. So, that is consistent with what you just recognized. But I would say overall, we're really pleased with our EMEA performance in constant currency, for sure. And as I said, it's primarily driven by software and services..

Okay. And just my last question regarding gross margin. On the pricing side, we're seeing ASP of the products that you sell go up, and that's typically a pass-through. And it looks like the price competition is less severe now given the strong demand and the constraints.

So, as things like [indiscernible] eases, are you seeing -- are you expecting a return to more tax competition in some margin pressure?.

Not particularly. I mean we have enjoyed -- we generally participate in the higher sort of ASP part of the market because most of our business is custom built. So, we've been very successful at passing along those cost increases to our clients without objection, and we would expect to continue to do that..

Okay. Thank you very much..

Thanks Matt..

The next question comes from Catherine Huntley from Raymond James. Catherine, please go ahead..

Hey, this is Catherine on for Adam today. Thank you so much for taking our question..

Thank you. Thanks for being here..

First, Joyce, could you touch on the demand environment for PCs? I know you talked a little bit about the supply environment and how that's alleviating, but what does PC demand look like across large enterprises and small businesses?.

Yes. We haven't seen significant -- I mean, so far, we haven't seen significant declines in demand. So as Glynis mentioned, we have very, very strong compares, especially on the device side for the back half of this year and the early part -- back half of 2022 and the early part of 2022 was also very, very strong.

And we are starting to see slower growth rates on those compares. But so far, we haven't seen significant declines. Now, we are looking at that very carefully. We are flushing a lot of inventory in devices, as Glynis noted. But still, we see reasonable demand.

Now, if you look at all the forecasts and the chip providers and the OEMs are all forecasting a unit decline. Again, that is -- so since we don't participate in the consumer space, that sort of started there. We are being cautious about it. So, we are anticipating that devices will slow and potentially decline near the end of the year.

But I would say, so far, we're basically holding pretty flat to last year..

Okay, perfect. Thank you so much for all the color.

And then could you just touch a little bit on the hiring environment? And do you expect to incrementally hire from here given that you just hired 700 technical experts in the first half?.

We are going to continue hiring, absolutely, especially in the areas of technical experts and specific skills around data, cloud, AI, security. So, we are focused on using this opportunity of potentially an uncertain market to acquire more talent, and we're actually looking at also continuing our M&A strategy..

Awesome. Thank you..

The next question comes from Anthony Lebiedzinski from Sidoti. Anthony, please go ahead..

Yes, good morning and thank you for taking the questions..

Good morning Anthony..

Hey good morning. So, first, I guess -- so I know typically in your 10-Q, you guys break out the client group revenues and so on. But -- so as we look at the enterprise versus public sector versus SMB, are you seeing any notable changes as far as demand levels? Just curious to get your take on that..

So, I would say, generally, it's a very -- it's a sort of large corporate and enterprise space. We are seeing a little more deliberate thought process and a slightly slower commitment cycle to large projects. But so far, demand is holding very strong. Certainly, our clients take a few extra a week or two to actually commit to a project.

In the mid-market space is really quite strong. Our commercial space is really quite strong. So, we haven't seen significant slowdown there at all. And I would say from a topline point of view and an outlook point of view, we expect corporate enterprise to stay strong.

Although against some pretty tough comparison lines noted in the back half of the year, especially around devices..

And so, Anthony, in Q2, all as -- performed well..

Got it. Okay. Understood. Okay.

And then if we were to take the midpoint of your EPS guidance now, how should we think about cash from operations? Any sort of ballpark estimate as to how that could shake out?.

[indiscernible] that we're going to be -- that hardware is going to decline sequentially and that there's going to be slower growth in hardware in the second half. I would say that we're going to start generating cash as the business kind of -- as that deceleration occurs.

So, we would envision that going -- as we go through the rest of the year that you would see cash flow from operations declining from the negative $442 million that it is today, getting towards positive territory.

I don't have enough visibility today given to the performance of hardware in Q4 to really be able to give you a firm number as to where we think it will end up. But you should see the cash flow from operations start to decline as we go through the rest of this year..

Got it. I just understand there's a lot of moving pieces there..

Sorry, increase. Sorry, I said decline, it's going to increase. The negative will get lower, and we get--.

Right. Right. I understand, yes. Got you. And -- all right.

And then lastly, as far as the Hanu Software acquisition, I know it was relatively small, but can you help us just understand how we should think about the on an annualized basis, revenue or EBITDA contribution from that acquisition?.

No impact..

We're excited about the incremental capacity at the additional teammate that's going to help us serve our customers better, but it's not a meaningful financial number..

Got it. Okay. right, well thanks. Best of luck..

Thank you..

Thank you..

The next question is from Vincent Colicchio from Barrington Research. Vincent, please go ahead..

Yes, a question on the acquisition side.

So, is your pipeline meaningful? Remind us of your current priorities? And is there any change in terms of valuations in the market, any easing of multiples out there?.

Yes. So, we do have a meaningful pipeline. We are focused on building our capacity and our skills in data -- data and AI, cloud and security. And we always are looking for opportunities to increase their scale because we do believe that scale matters.

So, far, I would say the expectations of the sellers have not moderated in terms of multiple devaluations, but we anticipate that they will over the next six months, and we think that's going to be an opportunity..

Thanks for that and one last one. I think I know the answer, but I'll ask anyway. Wage inflation has been roaring especially in the areas of highly skilled folks.

Any easing whatsoever or sort of status quo with last quarter?.

It kind of depends on the type of skills really. So, in some of those areas that I just mentioned, those skills are pretty constrained and in high demand. We have seen some moderation generally in terms of wage inflation, requirements, or requests. But in some of those hot areas like data and AI, we haven't seen that moderate yet..

Okay. thanks for answering my questions. Nice quarter..

Thank you..

We have no further questions at this time. So, this concludes today's Q&A session and thus conclude today's call. Thank you very much for your attendance. You may now disconnect your--.