Esprinet S.p.A.

Good morning everyone and thank you for joining the Esperenet's fiscal year 2023 results conference call. Please note that this webinar is mere recorded and after the call the podcast will be posted on the Esperenet website in the investor section together with the presentation. For the duration of the call, your lines will be on listen-only mode. However, you will have an opportunity to ask questions at the end of the call. Please note again that this presentation contains a forward-looking statement, I would like to draw your attention to the regulation note on page 2 regarding the information contained with this document. I am Giulia Perfetti, Investor Relations and Sustainability Manager of Espernet and with me is Alessandro Cattani, CEO of Espernet. I will now turn the call over to Alessandro to present and comment with you the fiscal year 2023 results. Alessandro, the floor is yours.

Thank you. and welcome everybody to the presentation. Let's jump into the presentation. It's been a year of transition, I would say. a year where we faced a number of challenges, but where we have achieved also a number of successes overcoming these challenges. But let's dig into what happened. Well, first of all, what did we face in 2023? It's been, as we said, a challenging year, especially for the screens market, so PCs and smartphones. and in general for everything linked to consumer demand. We came from 2022 with record profitability, but a year where we piled up an excessive inventory. So during 2023, we gave priority to the balance sheet improvement over profitability. And last but not least, we had an old tax dispute that we eventually closed, effectively eliminating a really high risk, a potential risk for the company. Which goals did we have during this year? Well, the first goal that we set was to grow in the higher margin product and customer segments. because we have and we still have in mind a clear goal to grow our gross profit margin and in time, therefore, also our EBITDA margin. Second, we wanted to exit the structurally low return on capital employed product customer combinations. During our growth in the last years, we faced certain businesses which we thought we could bring to a reasonable return on capital employed either by improving the profitability or improving working capital. Some of them proved exceedingly challenging and we decided to exit those businesses. And last but not least, we had the goal to bring the working capital back to sort of physiological levels. And so what we did, Probably I would say we reduced the inventory levels while improving gross profit margins. We'll see them later on. but we definitely had a major, major reduction in our levels of stock if we compare what happened in 2022 against this year. In December 2022, we closed the year with more than 670 million euros of inventory, and we went down to 514, a sharp reduction of 23, plus 23%. So pretty pleased with this result. We improved our high margin segments also by means of acquisitions that we did last year, CIFAR and LIDERA. And we began cutting costs and rationalizing our processes to address the new environment. We are deep into experiments with AI and with other processes that are being automated. And last but not least, we reorganized the group, especially in Italy. So to have legal entities focused on their respective reference markets. So Esprinette focused, the Esprinette brand focused on screens and devices. So generally speaking, clients, everything that is out of a data center. V-Valley in the different countries focused on solution and services. And now Ziliatech focused on the nascent and growing business of green solutions, solar business and energy efficiency solutions, especially for the data center. What happened during this year is that we demonstrated a couple of assumptions that we have always put in front of our investor community. The first one is that we were able to reduce by 20%, as I said before, the inventory levels without major devaluations. As a matter of fact, with gross profit margins that were up against previous year, proving that the stock protection mechanism in place work, effectively work. Secondly, we have sadly reduced the revenues by close to 700 million euros. And we have reduced EBITDA by 27 million, but If you think of the magnitude of the reduction in revenues and compared to the reduction of the EBITDA, we have proved that the business model of distributors and Esperanto specifically has a strong resilience in terms of profitability that is guaranteed by a low fixed cost structure. So a low operating leverage. And one thing is to say, one thing is to prove it in such a challenging year. What do we have to do moving forward? Well, first and foremost, recover volumes on those market segments with lower margins, but which can still guarantee adequate return on capital employed by means of good working capital management. It was really challenging to do so last year because we had such a high level of inventory. Now that the inventory is not at the place where we'd really like it to be, but it's definitely way down. We think that we can go back to the drawing board and design programs, sales programs and interactions with volume vendors in order to grab part of the market share that we lost on these segments that indeed provide lower margins than, for instance, solutions and services, but with the help of a better management of working capital can still provide good and sometimes excellent return on capital employed. So we'll focus not only in Our second goal, which is to grow in high margin lines of solutions and services, but in the recovery of shares of those businesses with lower margins. Again, only provided that the working capital can bring us, although the low margins, a good return on capital employed. Needless to say, the further goal is to keep optimizing working capital. Interest rates are still high. Our return on capital employed plummeted, mostly because of the inefficiencies that we had in 2022 and 2023 in working capital management. And we are on a good path of reduction of our working capital days, of our cash cycle days, but there's a lot of work still to do. And then we'll continue to look for growth opportunities also through acquisitions. Again, in line with what we did in the recent years in the regions where we're already present, bolt-on acquisitions of small to medium-sized companies with excellent profitability. And we'll keep on looking at opportunities in Western Europe to expand our footprint in other regions. But let's dig into the evolution of our sales. Well, as I said, it's been a challenging year for the market. As you can see, the market of distribution in Italy, Spain, and Portugal was down, respectively, minus 4, minus 2, minus 5. But what's particularly interesting is to see what happened at customer type. Minus 12% on retailers and retailers. 2% growth on resellers. If you look at the product segment, the product categories, screens, PCs, and smartphones were down 7% in the market, and devices, which are significantly represented by consumer products, were down 11%, where solutions and services were still up 7%. So as you can see, yes, we lost share in a little bit of share in solution and services. We were more or less in line with the market in devices. We really lost the share in screens and we really lost the share big time in retailers and retailers. So this is coherent with our target of reducing our working capital and working out working away from those exceedingly taxing businesses in terms of return on capital employed and probably we overdid here and I go back to the previous comment that's probably space for gaining a little bit of share that we lost while being so focused on the return on capital employed. Now, if you look at the profitability, the gross profit margin was up to 554% on sales compared to 522 or 2022. And it was up consistently quarter by quarter. Also in Q4, 521 grew up to 538. Of course, given the sharp reduction in the top line, we had a reduction in absolute terms of our gross profit, a bit adjusted was down accordingly and although a little bit less in Q4 against the average of the full year. Cash conversion cycle was was down two days compared against the q3 2023 and up two days compared to q4 2022 but if we look and later we'll do single quarter and not the average which is dragging the numbers down the path of improvement is truly significant the net financial position was back again positive we have been Cash positive for the last probably 14, 15 years. Just last year, we had this spike in working capital so big that it drew us into negative. And this year, we closed positive by 15.4 million against negative by 83 million last year. Even more so if you consider that we have reduced sharply the level of factoring. And return on capital employed is down, essentially, because of the average net invested capital, which is going down moving forward. Now, if we look at the pillars, if we group together the devices, screens, and our own brands, which will now sell under the Esprit brand, and solution and services, which we sell under the Vivelli brand. you can see that we had 43 basis point of EBITDA margin reduction in the Esplanade sub-segment, full year, and 47 in the Vivali sub-segment. Given the different mix for the first time ever, the EBIT adjusted provided by Vivaldi outgrew the absolute value of the aspirant area. But the interesting point is that this reduction of 43 and 47 basis points is compared to an increase of 65 basis points, which we'll see in a second, of our overall SG&A, mostly because of the lower absorption of fixed costs due to the reduction of revenues by 700 million. That means that on an average, we had an improvement of our gross profit margins by line of business which is even more remarkable if we consider that we had close to 30 percent more Sorry, 0.3% higher factoring costs recorded in gross profit. We were able to bring down to customers this increase in factoring costs, therefore in interest rates. And even so, thanks to a better mix, and a better management of the relationship with customers, we were able to improve our gross profit margins as we have seen before. This bodes well in case of improvement of our top line moving forward, also in light of the fact that we are hard at work in the reduction of our cost structure, which has grown not so much during the full year and for the first time in Q4 was even down compared to the previous year. You'll probably have seen that we have posted among the adjustments an adjustment of roughly a million euro for the layoff of a group of top managers, mostly in Spain, one in Italy. We have had, but we post them as recurring revenues already quite significant adjustment of the headcount in Spain with tens of layoffs. So we are quickly adjusting our cost structure to deal with a change scenario. So that's That's the key highlights on the on the five pillars. One comment on the solution business. First and foremost, you have seen in the previous slide that we closed the year with 900 million euros of solution and services. Here you see that we report a billion and 91. That's the invoices that we made to customers, Due to the application of the accounting principle IFRS 15, part of the software as well as the cybersecurity and cloud sales were booked as margin only with the agent concept. And so the as reported number is roughly 190 million less. If we compare it to the figures of the market that we have seen in the previous slides where everybody books the revenues, let's say gross of the IFRS 15 adjustment, we have now more than a billion in sales. The market for us, sorry, service storage and networking has been a bit challenging. We are far bigger than what we were in 2021. But in 2022, we won a couple of big tenders which we were not able to win again this year. Most of the difference is driven by these big deals, but we compensated with organic run rate sales. Software had the same issue. Last year, we had a significant deal of around 30 million, which we had not this year. Again, a tender in Italy. With the other lines of businesses, especially cybersecurity and cloud, we posted the really interesting growth rates, especially in cloud. So we're pleased of the progression that we are having. Very often they think of us as a purely PC company, PC distributor. We are not, or at least we are no longer. What's interesting, I would say, is that more and more we are diversified distributor covering all areas of the market. And we'll come in a second to a number of opportunities stemming from the growth of AI, artificial intelligence. Okay, if we move to the P&L, Here most of the things have already been discussed. What I would highlight is the enormous growth in the financial charges. We have faced almost a triple rate in our average funding costs because of the Euribor growth. I remember everybody beginning, well, end of 2022, we had a negative, still negative Euribor. We are now north of 3%. And although we have a portion of our funding which is at fixed rate, we're still incurring higher costs. The tax rate on ordinary businesses is stable around a bit less than 25%. And then we had the impact that we have discussed at length, the impact of our non-recurring items. The vast majority of these 33.3 million euros out of the settlement of the dispute with the tax authorities, which we disclosed in Q2 of 2023. So nothing new here. The non-recurring cost with the tax authorities has been charged as non-tax deductible, and therefore it directly hits on the net profit. uh the one million is uh related to the reorganization of the management team of the group mostly in spain as i said before was that we we book as ordinary charges the normal uh layoffs that we have with employees and then we had uh 2.6 million related to an extraordinary booking on a single customer in Italy, which undergo a procedure. For our methodologies, whenever a customer open up a procedure, we typically accrue 100% of the position. If the customer will be admitted to the procedure, probably part of it, normally a significant portion of it, could be recovered. We are waiting to see the evolution of this situation. But we have booked it, yeah. And therefore, before these adjustments, we would have closed with a net income of 24.2 because of this and especially the non-deductible charge with the government. We are for the first time ever in our history with roughly 12 million euros of negative income. I've been doing this business as a CEO since 2020. And I was here for a few years before when the company already was not yet existent, but there were independent companies that later on were merged into Esprunet. This is the first time ever we incur in a loss and it's due to this 33 million of net charge with the government. Just to give a brief reminder, we were making in 2018 14.2 million of net profit and in 2019 23.6. So we are north of 2019. In terms of a bid 2020, we posted 69 and we posted 64.1. And in 2020, with the zero interest rates, basically, we had 31.8 net profit this year, 24.2. We come from two record years. And so we are back two years, more or less. Let's see if in the coming years we will be able to start growing again. That's the mission, but we'll talk about it in a second. Okay, if we go into our balance sheet, well, the key point around the net cash position is all around our operating working capital. If you compare it to December 2022, you see that there's no big changes in trade receivables and payables. The big improvement is out of inventory improvement, which is the task that we gave ourselves during the year. And in such a difficult year, It was our key priority and I'm happy to see that we delivered this, at least in such a complex year. The key priority has been met. The second one was to keep on growing our gross profit margin because it's easy to reduce inventory by devaluating your inventory. It's harder to slash by 25% your inventory while you decrease your revenues by 15%, 700 million euros, and therefore purchasing much less with your gross profit margin that is growing. That was a big challenge and we achieved it. I would draw your attention also to the fact that we achieved this improvement in our operating net working capital while reducing by more than 150 million euros our factoring utilization, close to 150 million euros. That is particularly significant because, of course, If we had the same level of factoring, we would have had 140 million euros of lower reported networking capital and reported cash position. So, particularly good number here. And that's for the balance sheet summary. We can see better the numbers with our working capital metrics. As you can see, this is the cash cycle with the usual average of the last trading four quarters. The path is clearly set. We have been running around 80 days, 75 to 80 days of payables. since, let's say, second half of 2022, inventory is going down. The lower level of factoring is impacting our as reported DSOs. But if we look at the quarter by quarter figures, you see that after a disastrous Q4 2022, with 12 days of cash cycle, We're not yet back to a negative cash cycle in Q4 as we did in the four previous years, but we're down to three days. The big impact being the higher level of DSOs, again, driven by a lower utilization of factoring. So we're pretty pleased here. and uh and we see a good momentum moving forward in this in this direction so That's for the numbers. Of course, the return on capital employed, given the level, this is calculated on the average of five quarters for working capital is down and it probably will take a couple of quarters to start going up again because we have to work out the oldest quarters and bringing the new ones that are much better in terms of working capital before seeing the improvements. Now, a couple of words about our sustainability achievements. As you know, regulations are changing and sustainability is also in light of the changed attitude of consumers and companies alike is taking more and more importance into the decisions of our customers. We keep on working on three major areas. Our footprint on the environment, and I'm pleased to say that we have achieved all our targets. We have brought to zero scope one and scope two emissions, reduced by more than 10% scope three. We have launched our first green tech distributor Zelia Tech which we hope in time will capture the opportunities stemming from the growth of demand in the green economy for green data centers as well as solar powered houses and offices and buildings, generally speaking. So we are there trying to grab this opportunity because sustainability is not only a fade, a fade is truly an opportunity of doing business. We have improved our performance in our human capital. We have got, once again, the Great Place to Work and top employer certifications in all the countries in which we operate. We got the EDGE certification on gender equality. So we have done a number of activities and we have excellent rates from our employees. It's a good place where we're working. And we keep on working with our local communities to grow the perception of the importance of our group within the economy and the society as a whole. Now, going to what's happening and what we plan for the future. Market trends. Well, if we look at our, well, our tech forecast that we see, but this is also what our key vendors and customers, as well as the market analysts that we deal with, see for the future. We all know that the macroeconomic headwinds are still relevant, but we are more and more how could I say, confident that there's good opportunities of seeing inflation going down and therefore open the path to interest rate reductions. As a matter of fact, we are factoring that in the second half of this year, we should have in our numbers a small but still significant reduction of interest rates. Sector analysis. believe that the ICT market is ready to go back to growth and that the distribution will be well positioned to grab this growth. Most probably this growth should be present during the second half of the year, probably at low single digit rates, but still back uh to a growth path exceeding the expected gdp growth as it has been more or less always in the last probably 10 15 years if we look at the breakdown by rather segment the infrastructure hardware so server storage networking should should still grow but there's a sentiment around a lower growth rate compared to the past. Software, on the other side, should still be pretty much in demand. We have this multi-year government investment under the Recovery and Resilience Plans, the Next Gen EU, which is an important driver There's been a stop and go in Italy because of bureaucracy in Spain and because of the change in the government. We trust that this year the situation should be more favorable and so that these investments could help sustain the growth of this area. What is particularly interesting for us is product innovation, especially into artificial intelligence. We really thought that the real winners of the GenAI movement would have been the large hyperscalers, large data centers, and the software providers. Of course, they will have a big opportunity, but what's interesting is And of course, all the manufacturers of the components, think of NVIDIA that are fueling the growth, the computing power in big data centers. But what's interesting is that more and more, vendors are telling us that this computing power, enormous amount of computing power needed to run effectively these GenAI opportunities will be pushed into clients. So into devices that sit on companies' desks or sit in houses or in the pockets of consumers. So PCs, smartphones, appliances in general. This is a tremendous opportunities for us because we are not only playing in the data center space. It's as you see now, 25% of our revenues and close to 50% of our profitability, but we are still a very strong player in the client business. And for us, this could turn into an interesting opportunity because these devices will be sold in big quantities and most probably with better margin opportunities because they are more complex and with higher sticker price. So here there's an opportunity. And last but not least, there's a bunch of emerging areas that still have a strong rate of innovation and that will keep on offering opportunities. We keep on talking about cybersecurity, and with the Gen-AI cyber threat that will be even more sophisticated. So there will be even more requests of more sophisticated cybersecurity solutions and products. Everything as a service. So the renting of technology will keep on being interesting, especially if and when interest rates will go down. And then sustainability. Sustainability will drive investments because companies will need to comply to the new ESG regulations, but also because sustainability is bringing to the market a number of new technologies. And these new technologies is the last point of this slide. The fact that the ICT sector is going into adjacencies. We think of energy efficiency and renewable energy, electric mobility. Those are clear examples of how the traditional IT sector is entering formally analog businesses such as energy or cars, just to give an example. So long-term, we see a bunch of opportunities. And to wrap up here, what are our group's strategic priorities? Well, of course, creating sustainable value over time. As I said, back in 2018, our group was making 45 million euros of EBITDA and 14 million euros of net. We grew in time to a record result in 2022, doubling the EBITDA and more than tripling, close to multiplying by four, the net profit. Last year was challenging, but we were roughly 50% more than 2018 in terms of profitability of EBITDA and more than 50% in terms of net profit. we are on a growth path which has been stopped by a tough year. And the first priority is to keep on having a strong geographical and product diversification. Last year has been particularly challenging for consumer spending and for clients, PCs and smartphones specifically, Analysts think that the drive to GenAI could turn this year and the future ones into excellent years for PCs, and we are a player there. Whereas the data center business could slow down in the near future, and we are looking into the opportunities of diversification. both from a geographical standpoint as from a product standpoint. The opening up of Xiliatec as our company in charge of grabbing the nascent market of solar energy as well as sustainable and energy efficient data center is an example of looking after new opportunities in light of the need of keeping always a strong product diversification. Second, we'll keep on investing in the excellence of operations. We need to provide our vendor community, our customers, services aligned with their expectations. And therefore, we are more and more focused on investing in our processes also with the help of Gen EI. The key priority will keep on being our relentless focus on return on capital employed. We want to work hard, not only in profitability improvement, but in capital employed optimizations as well. Because for us, an excellent ROCE means the possibility of getting back to a generous dividend policy, having the money to fund organic growth and to fund M&A projects. Let me say a word on the dividend policy. As you have seen, we have declared the zero dividend. We have proposed to the board up to the AGM to give zero dividend for this year. We have discussed at length in our board, the dividend policy of the group is unchanged. So 50, at least, 50% of the net profit consolidated of the group every year. This year the net profit adjusted was positive, but given the fact that for the first time ever we had a negative result at as reported level, we decided to be cautious and to suspend the dividend for one year in accordance with the policy. But the policy is unchanged and we really want to go back to giving generous dividends in the future. We don't expect another charge such as the one that we had this year, so we should reasonably go back to giving a dividend the next year. Fourth priority, keep on having solid capital structure. The fact of not giving dividend goes in the direction of keeping a good cushion of equity on top of our funding, traditional funding structure. We want to be always able to manage external shocks. And last but not least, our attention to ESG issues. We will give to the financial community our profitability guidance during Q1 result presentations in May. Actually, we'll have the board on May 13. So in that date, we'll give the usual guidance for the year. One last word around solid capital structure. We have already received a question by mail around the news of the breach of a covenant. I'm ready to answer questions over there. Just to give an indication, which you can find as every year in our financial presentation, in our financial report, which is due to be published in a few days by the end of the month. But just to give a couple of numbers, as of December 22, 23, we had more than 1.4 billion euros of credit lines from financial institutions, of which 480 million roughly short-term bank lines, 111 long-term loans, 180 million of a short-term revolving credit facility, and then close to 700 million euros of factoring lines for customers. The level of utilization at the end of the year, what was mostly linked to the factoring utilization was around 17%, 20% the previous year. So we have a solid capital structure that we wanted to keep on for the future. for the future. In case there's a question on the covenant, I'm ready to answer, of course. And that's it. Thank you.

We can start with the Q&A session. Let me remind that to ask questions, you should kindly book your speech and then unmute your microphone.

Okay, Gabriele Berti.

Hi, good morning all. Thank you for your presentation and taking my question. First one, considering that you mentioned Zelia Tech several times over the presentation, I wanted to ask which are your overall expectations for this business in the coming years and also in particular if Zelia Tech's activities could benefit from an increase in demand coming from the incentive under the new transition 5.0 plan. and second question if now that the level of the working capital is back to a more normalized level you can consider about being less cautious in taking certain businesses and for more room to push sales or this is not an option and maintaining the focus on networking capital remain the key priority

Okay, thank you, Mr. Berti. On Zelia Tech, well, on the second question, will it benefit? Probably so. We have not been able to read in detail the new law, but generally speaking, it looks like the new law goes in the direction of more efficiency in buildings. And that's the general trend that lies behind the creation of Zeliatek. We have seen an opportunity in the energy efficiency of data centers as well as in energy creation and efficiency in buildings, buildings of all kind, of course. And that's why we have opened up Zeliatek, which is the receiving end of some businesses that we already had. Some of them, both years ago, if we take the energy efficiency for the buildup of a data center, the physical building in which the servers and storage are typically hosted, these are really energy, how can I say, energy-hungry buildings. situations where you need to power the machines and to cool them off. So there's a lot of energy included. Years ago, we bought a company in Italy, EDSLAN, which was selling to special kind of electrical contractors that build physically this kind of data centers. And we sell to them cabling. We sell to them cooling devices, uninterruptible power supplies, UPS. And in time, we want to grow this. As you have probably seen, there's a lot of demand in data center build up. Not only the machines inside, but the physical building. So we think that there's an opportunity. We are leveraging what we already had. Then there's the new opportunity. driven by the solar business. So companies and families alike that are installing solar panels. We are not really in solar panels as a matter of fact so far. We are more in batteries, inverters and we If you probably remember years ago, we signed already contracts for the distribution of car charging devices and not only car charging devices, bicycle charging devices and so on. And so we are putting all together. Yes, we think there's a good opportunity. We have not yet released any long-term target. We think that this could potentially become something material. But first we wanted to grow it because we really need different people. We are hiring people from other industries, different kind of vendors and competitors as well. Customers are not traditional system integrators. IT resellers are more electrical contractors. So we first want to strengthen our presence there, and then we will give voice to some expectations. But yes, the opportunity potentially is material. As for your second question around working capital, yes, we are not where we want to be. As you have seen, working capital is still higher than expected, but we are way better than the really unacceptable for us numbers of 2022 and definitely first part of 2023. As I mentioned before, yes, this could help us address some sales that we lost because we were so focused on reducing inventory. that we were simply turning our back to our historical vendors, say, hey guys, first we need to sell what we have in stock. Then we can think of going after new opportunities. Now that not everything, but a lot has been done, selectively we will go back to vendors and I think and hope, well, I don't know if hope and think or think and hope, that some of them will be pleased to have Esprunet back on the scene, providing our logistical and financial and commercial capability to help drive their growth. And we'll be there. We will be, however, very careful of not bringing back problems into our working capital. That's for sure. But still, we will be back on the market. How big this opportunity will be? Don't yet know, but we are more positive than last year, definitely. Thank you.

And other questions from Mr. Belluati? Mr. Belluati, I'll give you the floor.

Good morning and thank you for taking my questions. My first question is regarding Q4 revenues from the solution and services business. I see a slight underperformance of this quarter compared to fourth quarter of 2022. So was it mainly because of the tenders you were mentioning or because also market component And the second one is on DNA. I see that the DNA in Q4 is slightly above the DNA of Q3. So is it because of the parameter effect of the acquisitions or because of other things? Thank you.

OK, so on the first question is mostly linked to a big tender that was not there this year. We wanted to the previous year. So on solutions, it's essentially this. The market, as I said, was anyhow, is anyhow no longer growing so strongly as it has been in the previous two, three years. So I think that having a very diversified product range will help us Because that area with some differences, cloud software and cybersecurity still going strong, could be areas where there will be less less, let's say happiness in the market. That's the point. On your second question, are you referring to depreciation and amortization? I guess. Is it the Is it the right question, sorry?

Yeah, basically, if I'm looking at the Q3, it was at more or less 800 euros less. So 800,000 less.

So that's... Yeah, we made a few investments. We are working... on a couple of projects in Italy for the automatization of the portions of our warehouse. And we have had some further investments linked to the acquisitions that we made of Lidera. So probably the big part of the effect is this one. We can look into the details and if you want to, we can send more more info on this, but it's mostly linked to this this effect.

Thank you perfect. Mr Margie, I give you the floor. Hello, good morning everyone.

Thanks for the presentation and for taking my questions. The first one is about the first months of the year. If you may provide a trading update for the first two months. So if you are starting seeing first positive signals about a recovery in the market demand or is still too too early to see a reversal of the trend and the second question is about 2024 so trying to to to translate the qualitative message you you said before so I think might we expect so a recovering sales growth but with a less restrictive focus on gross margin but the main focus remain the networking capital dynamics so the aim is to achieve again a return on capital on a satisfactory return on capital. And if my considerations are correct from your point of view. And the last question is about your latest acquisition, if you could provide an update on CIFAR. So if you, anyway, if you can provide us with an update on that acquisition. Thank you.

Okay, thanks to you. Well, the consumer market at the beginning of the year is still showing no signs of recovery at all. The reseller business is in better shape. The PC market is getting better, definitely better. It comes from such an horrible year. It's not so strange. So all in all, the data center business is cooling off. The overall pitch so far is in line with the... analyst expectation and our expectation. So recovery of clients, consumer spending is still cool, but hopefully improving, and the commercial business is still going relatively well. We have to see the numbers in the second part of the year. We come from 2023 with analysts that were keeping on projecting next quarter recovery and we kept on waiting for this recovery, which never came. And we were fooled and trapped into this and we kept on giving targets. We were fighting harder with our historical vendors because they were reading this forecast and pushing harder to put the products. We were trying to reduce the inventory. So it's been a challenging time. We don't want to make the same mistake. Things are getting better, but we are not yet with the clear signs of recovery, I would say. That's the what we are seeing so far. As per 2024, our focus will be return on capital employed and profitability in absolute terms. So wherever we have lost unnecessarily share, because we thought that the combination of product customers could have given us structurally interesting return on capital employed, but we were focused on temporarily cleaning our working capital, those areas will be chased and hopefully recovered. That doesn't mean that we will lower the gross profit margins per se, but it could mean that there will be a different kind of mix Also because in the market, if the evolution of the market will go as analysts expect, clients should be better. So PC and smartphone in the market should perform better than data center and solutions. So that's what they say and expect. So that is what might happen. Clearly, our focus is return on capital employed. Therefore, we will keep on having a strong focus on working capital management. That's the area where we will keep on looking for opportunity. Obviously, with a different starting point, we'll be in a position to sit in front of our vendor community and customers alike. probably take more bets on the market than before because we started from a cleaner slate. So that's the situation. As Persever is performing pretty well, we are really pleased with this deal, excellent margins. The market is a bit tougher than expected, but marginally so, but they are really performing very well we are now seeing if we can move their tremendous capabilities also in other regions and see if we can leverage these capabilities in a better way it's a bit early the integration so far it's a very light integration because they really do a completely different business with very different customers alike so we keep them separate but But things are moving pretty well, and it's a great team. We're really happy about what's happening.

There are no more questions.

So I think we can end the call. We, of course, remain at your disposal. So thank you for participating, and I'll see you next time.

Thanks, everybody, and have a great day.