Good day and welcome to the Data#3 Limited FY 2024 interim results briefing. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, please press star one again. For operator assistance throughout the call, please press star zero. And finally, I would like to advise all participants that this call is being recorded. Thank you. I'd now like to welcome Laurence Baynham, CEO and MD, to begin the conference. Laurence, over to you. Okay. Thank you. Good morning, everyone. Thank you for joining us for this first-half briefing for FY 2024. Today I'm joined by Cherie O'Riordan, our CFO, and Brad Colledge, who takes the reins of CEO and MD in a couple of weeks starting on the 1st of March. This is therefore my last set of briefings, and I'm pleased the business continues to show sustainable profits and continued growth. The agenda is relatively simple. I'll start with the Data#3 overview and then lead onto our operational overview for the first half. Cherie will provide a more detailed financial overview before passing on to Brad to cover how the IT sector is looking and the impact of artificial intelligence, and he will round out with strategy and outlook. We'll then open for questions. Before I start the presentation, I'd like to put into perspective the performance for the first half of FY 2024. The PCP, the first half of FY 2023, was a record-breaking result with net profit before tax growth of 38% and came with post-pandemic pent-up demand and improved supply chain. I think this is important to remember when we compare first half of FY 2024 with the PCP. So let's move on to slide 3 in terms of the financial highlights. Comparing first half of FY 2023, net profit before tax is up 25% to AUD 30.8 million. This is in line with the estimated range we announced on January 16th and well ahead of the range we indicated at the AGM on 31st of October 2023. Net profit after tax is AUD 21.4 million, also up 25%. You will see that we have introduced new financial measures, which are gross sales and statutory revenue. This was as a result of an internal review of the applicability of revenue accounting standard to our operations following new guidance on the standard being released. Cherie will elaborate more in the financial overview section of this presentation. Gross sales were up 18% to AUD 1.3 billion. Gross profit was up 8.8% to AUD 131 million. As we saw with net profit before tax growth, we delivered earnings per share growth of 25%, and we're pleased to announce a healthy dividend of AUD 0.126 per share, which is an increase of 26% with a payout ratio of 91%. Move on to slide 5. Our growth in market share continues to build as evidenced by the increase in gross sales, which is over twice the market growth. This is because of the breadth of our offering, our track record for delivering large private sector and government customers, and the strength of our supplier relationships. We're also pleased to report that our recurring business in the first half has grown to 67%, boosted by growth in managed services and software solutions of 13% and 14%, respectively, in line with our strategy. Although it was up on prior year, our infrastructure solutions business was impacted by customers ordering in advance of requirements in prior periods because of supply chain constraints. This, in turn, slowed down ordering and decision-making in the current period. Our people numbers have remained steady in the first half with no material change, and we continue to strengthen our capabilities in managed services. We saw further improvement in our supply chain during the half, which lessened our stock levels and improved our cash position, which in turn boosted our interest income. Once again, we achieved huge success with national and international vendor and industry awards, notably Global Software Partner of the Year with Cisco and two Microsoft Global Awards. Also in the first half, we executed on our continual succession program. Mark Gray is now our chair after six years as a non-executive director, and I announced my retirement from the CEO/MD position. The transition to Brad is nearly complete. And as I said before, my last day is the 1st of March. We move on to the operational highlights now on slide 6. I'll summarise some of our operational highlights. The first half of FY 2024 had many high points. We continue to drive transformation for our customers and are seeing rapid product development incorporating multi-cloud solutions with plenty of upside around services as we provide our customers to do more work in the cloud. Security continues to be our fastest-growing area and a top priority for customers as they respond to the ever-evolving and increasing threat of cyber breaches seen by many as their number one business and risk management imperative. A robust, scalable, and secure cloud platform is a prerequisite for any artificial intelligence solution, and Brad will talk more to this later in the presentation. I've mentioned previously that we have a strong balance sheet and continue to be efficient in managing our working capital. Our vendor awards position us favorably with customers, which along with our continued investment in improving the overall customer experience with process systems and analytics are real competitive differentiators. In summary, it was a productive and successful first half of FY 2024. On that note, I'll hand over to Cherie to cover our financials in more detail. Thank you. Thank you, Laurence, and good morning, everyone. It's my pleasure to now share some insights around our interim FY 2024 financial results. I'll start with slide 8, which presents a graphical view of our earnings and dividend trends over time. Our goal remains to deliver sustainable earnings growth, and we're pleased to report that the growth in gross sales and gross profit, complemented by additional interest income, have continued our earnings growth trend this half despite the high inflationary economic environment. In terms of compound annual growth rates, or CAGR, we have achieved 27.9% CAGR in profit before tax and 28.3% CAGR in EPS since the first half of FY 2019. Each graph shows our consistent performance and successful growth strategy as we've achieved steady growth in all metrics spanning several years. As highlighted by Laurence earlier, basic earnings per share increased by 25.5%, and the interim dividend increased by 26%, representing a payout ratio of 91%. As the charts show, this is clearly a standout result. The fully franked interim dividend of AUD 0.126 per share will be paid on the 28th of March 2024 with a 14 March record date. During the first half, we undertook a detailed review of our software licensing agreements to reassess whether we are acting as principal or agent under these arrangements. The review took into consideration an IFRS interpretations committee agenda decision finalised in May 2022 that provides specific guidance to software resellers. It was determined that we are acting as an agent rather than a principal in respect of these sales, which resulted in a change to our revenue accounting policy, and comparatives have been restated. The statutory revenue presented in our interim financial statements includes the reclassification of software licensing revenues on a net basis in accordance with our change in revenue accounting policy. This means that instead of presenting gross sales and revenue and the cost of product, net of incentives in cost of goods sold, revenue is now presented net of cost of sales and incentives in statutory revenue. As a result, our gross margin on statutory revenue is 29.4% for the current period compared to 9.9% on a gross sales basis. I'd like to emphasize that this is a statutory presentation change only and has no impact on the bottom line. The company will continue to measure operational performance and report externally outside of its statutory accounts on a gross sales basis. We have clearly delivered sustained growth in gross sales, as you can see on slide 10, with a compound growth rate of 15.5% over the past six years, reflecting our strategic focus on growth in software and services. We continue to see growth this half in the education, health, and resource sectors and strong growth across most states, reflecting increased market share. As mentioned by Laurence earlier, approximately 67% of our total gross sales is recurring, up on the prior period and derived from software and services contracts with government and large corporate customers. This increase is in line with our strategy of growing recurring sales. Slide 3 comprises a wide portfolio of IT businesses, and the chart on slide 11 breaks the total revenue into three broad functional areas: infrastructure, software, and services. The chart clearly shows the change in sales mix over time with the strongest growth in software, which is also where most of our multi-cloud sales revenue is recognized. I'll provide more details on these areas in the next slide. It's important to remember there are significant interdependencies between these different business areas, and our solutions typically comprise a combination of infrastructure, software, and services. Our main product-related businesses achieved better-than-expected gross sales growth of over 13% and more than doubled the broader market growth rate. Infrastructure sales increased by almost 11% to AUD 269 million. Software licensing gross sales increased by 14% to AUD 876 million. Our combined services gross sales increased by 11% to AUD 172 million, reflecting a mixture of growth rates across the portfolio of businesses. Consulting revenues were relatively flat off a stronger prior period, which saw growth of 23%. However, profitability improved this half. We saw solid increases in sales across project, maintenance, and managed services, and people solutions recruitment sales decreased by just under 13% to around AUD 32 million following a particularly strong prior period that benefited from post-pandemic increased labor market activity. Although we've seen some delays in customer decision-making around larger networking and infrastructure projects in the first half of FY 2024, we are seeing increased tender activity, which should support our growing pipeline. While growth in gross sales is obviously important, we place greater emphasis on gross profit, which grew 8.8% half on half to AUD 130.6 million. The table on slide 12 shows total gross profit and margin on gross sales in addition to the breakdown by products and services. Total margin on gross sales saw a slight improvement on FY 2023 and ended the first half at 9.9% or 29.4% on a statutory basis. Pleasingly, the services-based gross profit increased by 13.6% on first half FY 2023 with an increased margin on gross sales of 38.2%, reflecting the growth in the higher margin project services and managed services. We onboarded several new managed services customers in the second half of FY 2023 and expect to realize the benefits of this investment as contracts continue to mature during FY 2024 and following their initial transition phase, with profitability generally increasing from year two onwards. The product-based gross profit increased by over 4% to nearly AUD 65 million, with margin on gross sales consistent with FY 2023 at 5.7% due to the relative mix of higher volume, lower margin products, and gradual shift in vendor rebates for services. Infrastructure solutions have been impacted by abnormal customer order cycles in recent years caused by the pandemic and related supply chain issues. This led to some customers ordering goods in advance of requirements, which they are now consuming, thereby resulting in some delays in new orders. To reiterate, the company's gross sales have seen very strong growth in relatively low growth margin areas in recent years, especially software and multi-cloud, and this has impacted the blended product growth margin. This is purely a result of the change in revenue mix. The gross margins have remained relatively stable within each individual business unit. We're seeing results from our strategy to accelerate the growth of services, and the pleasing growth in the higher margin areas of professional services and managed services has helped stabilize the overall blended growth margin. Our continued objective is to achieve sustained growth in the absolute value of gross profit, which we've been successful in doing over several years, and that is a more important measure of success than the blended growth margin percentage. We expect to continue to deliver strong growth in services, which will boost the overall gross profit and should, in turn, increase the blended margin on gross sales over time. You can see our growth in total gross profit on the left-hand chart of slide 13 and the total margin on gross sales trend. As previously mentioned, we achieved growth in gross profit of 8.8% in the first half, which was a pleasing result in a competitive market and inflationary economic environment. We also manage our internal staff costs and operating expenses very closely, and the chart on the right of the slide shows the trends for these costs and how they compare to the total gross profit. Our internal cost ratio, which is staff and operating expenses as a percentage of gross profit, is one of our key measures of operating leverage. This ratio has improved from 88% in FY 2016 to 81.4% this half, however, is up from 80.3% in FY 2023. This is due to the investments in people and systems, predominantly in managed services, which were made in the second half of FY 2023 and will have an annualized impact on FY 2024 ahead of the contracts which were onboarded in FY 2023 being at full profitability. We also saw higher wage inflation than in the prior period. Longer term, we expect to improve operating leverage across our business. The next slide, number 14, shows the P&L statement, and I've summarised the key points on the slide. Statutory revenue grew over 11%, and our pre-tax earnings benefited from interest income of AUD 6.5 million compared to AUD 1.6 million in the prior period. Our higher cash position, a result of the company's growth in gross sales and diligent working capital management, benefited from the increased cash rate. Based on the current cash projections and assuming no change to the cash rate or our typical cash flow seasonality, interest income is forecast to be approximately AUD 2.5 million for the six months to June 2024. Looking at the expenses section of the P&L, the first four lines represent cost of sales. Deducting those items from the revenue from contracts with customers gives a total gross profit, which increased by nearly 9% to AUD 130.6 million. The next line, labelled other employee and contractor costs, comprises our internal staff costs, which increased by approximately 10% to just over AUD 93 million. This reflects steady growth in headcount compared to first half FY 2023, predominantly in services, as well as general remuneration increases in line with the market, but higher than those experienced in the prior year in light of the inflationary economic environment in which we operate. The sum of the remaining expenses line gives the other operating expenses, and that total increased by about 5% from AUD 12.3 million to AUD 13 million with increases in travel, insurance, and software, predominantly related to managed services systems. The balance sheet is shown on slide 15, and I'll now run through the key points. Our balance sheet remains strong and debt-free. The traditional fourth quarter revenue spike inflates the current trade receivables and trade payable balances at 30 June and typically generates large temporary cash surpluses at year-end. A key trade receivables measure is average day sales outstanding, and that was 27 days at the end of the first half, down from 33 days in the PCP, which was impacted by collection delays caused by the supply chain issues and associated partial shipment of orders. Inventory holdings have reduced to a pre-pandemic normal and are comprised of allocated stock, that is, product held in our warehousing and configuration centres pending delivery to customers. The fourth quarter sales spike skews the working capital at year-end, so I've included a working capital analysis on slide 16 to help illustrate this seasonal impact. The chart shows the changes in the working capital components reported at 30 June and 31 December over the last five years. The key point to note is that the underlying working capital position shown by the black line remains stable despite the significant seasonal fluctuations between the reported period ends. We have a very effective working capital model, and the working capital cycle is typically very short or even negative, so our business is effectively self-funding. This is due to our relatively low inventory levels, our short collection cycle, and the favorable trade terms offered by our suppliers. Lastly, slide 17 shows the cash flow statement and summarizes the key points. The sales seasonality has a significant impact on the operating cash flows due to the high volume of sales in May and June each year and the timing differences in the collections from customers and payments to suppliers around 30 June each year. This causes the typical operating cash outflow in the first half of the next financial year. The net cash outflow from operating activities this half was AUD 266.8 million versus AUD 88.8 million in the prior period. This is primarily the result of a higher number of customers electing to pay early and pre-30 June 2023, combined with the growth in sales in Q4 of FY 2023 resulting in higher trade payables in Q1 of FY 2024. One point of comparison is the average daily cash balance, which was around AUD 300 million this half compared to AUD 147 million in the PCP due to the much higher 30 June 2023 surplus cash position carried into FY 2024, as previously explained. These cash balances typically include sizable temporary surpluses due to the working capital cycle, and the average cash position tends to be lower in the second half. The other points to note are the relatively low levels of capital expenditure and the high dividend payout ratio of around 91%. I hope this information has helped give you a better understanding of the key drivers of our financial results. Many thanks for joining the briefing on our handover to Brad to take you through industry trends and the company's strategy and outlook. Thank you, Cherie. Let's take a few minutes to talk about the technology industry trends in AI, plus our strategy and outlook. In 2023, overall IT spending grew only 3.3% year- over- year to $4.68 trillion worldwide. This year, Gartner expects annual spend to increase 6.8% to approximately $5 trillion in 2024, more than doubling 2023 growth rates. Revenue growth generated from software is expected to grow at 13%, exceeding $1 trillion globally for the first time. Software has increased at the highest rate over the past few years compared to all other categories. Our experience has seen this growth with software as a service offerings such as Microsoft M365. Devices are expected to grow by 5% this year compared to a decrease of 9% in 2023. Data#3 bucked the trend on this last year and had positive growth, so a positive industry trend is positive for Data#3. IT services growth is at 9% and largely due to investments in organizational efficiency and optimization projects. Data center is expected to grow by a healthy 7.5% and supports our multi-cloud strategy. The communication services market is expected to grow a modest 2% compared to 2023. This market exploded in 2020 and 2021 during the COVID global pandemic, and businesses invested in remote work solutions. Growth began to lower in 2022 and 2023, and Gartner expects small growth in 2024. While these are global trends with 6.8% growth overall, Gartner expects the Australian market to grow by 7.8% during the 2024 calendar year. Slide 20 has a recent quote from Satya Nadella, the executive chairman and CEO of Microsoft on generative AI. This shows the fast pace of AI development over recent months. I had exposure to Microsoft's vision recently through a visit to Microsoft in the USA, where they spoke to the various versions of their generative AI software called Copilot. Copilot is available in many forms, assisting information workers, sales staff, help desk personnel, security specialists, and more. AI is complementary to our solutions. It will be infused across all our vendor offerings, providing opportunity right across our solutions. As Laurence mentioned earlier, we've recently won two global awards with Microsoft, and our relationship has never been stronger. Based on our participation in the Microsoft Early Access Program for Microsoft Copilot, Data#3 is first to market with a number of services to assist our customers to prepare for Copilot adoption. We offer consulting services focused on information governance and security, organizational change management, and, of course, services for the preparation of the technology platform. In November, at our Investor Day, we had little visibility to the opportunity as we awaited general product availability from Microsoft. Microsoft has since moved fast with Copilot releases, and since November, we have been engaged in 120 Copilot opportunities, and the number of opportunities is continuing to grow. Our FY 2024 strategy remains consistent and is adaptable to industry trends. Let's look at the summary of our strategy before commenting on the outlook. Our strategic framework is on slide 23. It is underpinned by a focus on customer success. The more successful our customers become, the more successful we become in financial results. The strategy also revolves around having the best people and the most secure, scalable, and innovative solutions in the market, plus operating our business efficiently. We've consistently been able to achieve this, enabling customer success and sustained financial performance growth. Slide 24 is one of our solution slides that we have shown before. In addition to our competitive advantages of the ability to integrate our solutions and supporting our customers through the full solutions lifecycle, these solutions are now being embedded with AI by many of our vendors, further enhancing the opportunity. Let's look at our lifecycle services just a little further. From learning and consulting, procurement with our infrastructure and software businesses, implementation and adoption with our project services, and the operate phase with our support services through maintenance solutions and managed services, the closed-loop approach with our customers means we are continually working with them to ensure their success. We'd like to highlight many new successful customer stories. All of these are on our website with a description of the project and the benefits that the customers have derived from the technology investments. Let's take a deeper dive into our customer story for Royal Flying Doctor Service. RFDS Queensland had disparate systems and needed the ability to combine aircraft data, patient data, and crew data to provide better visibility to available resources and to access that information anytime. We were able to provide a solution that enabled access to timely data even when on the aircraft. This accelerated the ability to respond to calls, provide reliable information at all locations, and enable staff to make better decisions under the pressure of time. Data#3 won this project, and the project was successful because Data#3 was able to provision and integrate all of the infrastructure, software, and services. This leads me to our competitive advantages that, when combined, make us a unique organization in the Australian IT market. We've discussed some of these through the presentation, but would highlight our agility to respond to changing market dynamics supported by our strong financial position. With the dawn of generative AI, we are also at the forefront of change that is sweeping the IT industry, and this will only continue to enhance our position in the market. On slide 29, we have our strategic focus areas of customer experience, security, accelerating services, and ESG. Our growing customer success team works with important data from customers' use of multi-cloud technologies, where we take a longer-term view of our relationship rather than just the transactional. This results in an improved overall customer experience. Our security business is going from strength to strength with over 30% growth and is still the number one priority for our customers. The continued investment in all our services business units and the associated solution sets is the centerpiece of our strategy. While focused on improving the solutions and the financial performance of the company, we also look to continue developing our ESG strategy with the support of our team. Across each of these focus areas, we aim to improve our gross margins, provide better value to customers, capture internal efficiencies, and increase our recurring revenue. Let's look at the outlook on slide 30. We expect technology and specifically digital transformation to play a leading role in Australia's economic future, underpinned by growing demand for multi-cloud solutions and security. The growth in our services business aligns with our global vendor incentive programs and is expected to be accelerated by interest in AI. We also expect to see increasing profitability from our new managed services contracts secured over the last 12 months as they mature. We see steady growth in our software and infrastructure businesses. As Gartner showed in the communication services section, we see a slowing in networking spend. However, end-user computing is expected to continue to improve. With our market-leading position, strong supplier relationships, long-term customer base, and experienced team, we are confident in our outlook as we enter the second half of FY 2024. The industry is growing, and we are well-positioned to benefit. Consistent with previous practice, we are unable to provide specific guidance for FY 2024 at this stage. In line with previous years, we continue to expect a sales peak in the months of May and June, and our goal remains to continue to deliver sustained earnings growth. Overall, the business is in great shape, and based on the industry growth trends, we are well-placed to capitalize on the opportunity. Thank you, and we'll now open for Q&A. If you wish to ask a question, please press star followed by one on your telephone and wait for your name to be announced. That is star one if you wish to ask a question. And your first question comes from the line of Bob Chen from JP Morgan. Your line is open. Morning, guys. Just a few questions from me. Just firstly around Copilot. I think you mentioned earlier that you've already engaged in a fair few opportunities there. Can you talk a little bit about how we might see this come through financially or the economics of that for Data#3? Hi, Bob. It's Brad here. Yeah, absolutely. As we mentioned at our investor briefing back in November, we don't necessarily see much in the actual transaction itself, but we do expect opportunity within services. So those 120 opportunities that we referenced are really around our Copilot services. And so we'd expect to see improvement in our services revenue, initially in consulting and project services, and ideally leading towards additional managed services in the long run. Okay, perfect. And then in terms of the internal staff costs, I mean, it's obviously stepped up a bit on the back of that investment in the services segment. How should we think about that into sort of the next half and sort of the future periods as well? Do we sort of expect a similar level of reinvestment there? Yes. I'll answer that one. So just to clarify, the headcount growth that I referred to, Bob, was in relation to comparing to PCP. So we actually haven't seen a lot of growth in headcount in the first half itself, although we have seen wage inflation. So any further increases to headcount in services or other areas of the business would be to service additional contracts and growth in the business. So I think you will likely see a lower rate of growth in headcount in FY 2024 compared to FY 2023, obviously, unless we get a ton of new contracts, which would be a good thing. Yeah, I can add to that flavor. I guess the second half of FY 2023, we did put on a number of services personnel related to the managed services contract. So when we're looking at PCP, comparing first half of FY 2023, this is first half of FY 2024. So a lot of the growth was in second half in terms of numbers of people of FY 2023. Okay, perfect. And then just the final one. In terms of, obviously, really good working capital management through the period, you've also been building a sizable sort of cash balance as well. Any thoughts on what your sort of plans around that sort of cash balance there? No immediate plans, Bob. It's obviously for the board to decide in due course. As you know, and as I've talked through the presentation, we do have the seasonal cash inflow and higher balances in the first half versus the second half. So that average cash position will come down in the second half. But yeah, no plans for special cash. The dividend payout rate has been increasing slightly in recent years and is now over 91%. Yeah, that's all I can tell you at this stage. Your next question comes from line of Chris Gawler from Goldman Sachs. Your line is open. Good morning, guys. Can you hear me okay? Can you hear me okay? There's a bit of an echo, Chris. Okay. Hang on. Give me a second. Hi. Is that better? That's better. Yep. Go ahead. Excellent. Cool. Thanks for taking my questions. Firstly, just wanted to ask one on the commentary around some delays in customer decision-making, maybe the pipeline slowing a little bit in terms of it actually converting to deals. How much of that do you think is driven by a bit of digestion of a pull forward of networking demand versus economic uncertainty or other factors causing that decision-making delay? Yeah. Maybe if I kick that off, Chris. It's Laurence. It's probably too early to tell. What we're seeing is consistent with Cisco, who are our largest provider in this area in terms of networking. Cisco have gone through tremendous growth in terms of orders and processing, a good deal of growth over previous quarters, and are seeing customers digesting some of the technology that they've taken on board, which is actually translating into implementation and services opportunities. And we're very much a microcosm of that global trend with Cisco. What I would say is that, as Brad mentioned before, the networking component is purely one component of our overall business and is probably the only area that we would see anything which is not necessarily slowing, but certainly not growing at a faster rate. I think, Brad, you mentioned 2% growth. But what we're also seeing is higher growth rates in software, in services, and we're also seeing end-user computing growth rates as well. So as with a reasonably large portfolio, there's some ups and downs. And in terms of the overall economic conditions, I think it's too early in terms of the connections. So we're purely commenting just in terms of some of the slowing, not necessarily backing down of decisions, but the slowing of some decisions while customers digest their previous large purchases. Sure. That makes sense. Then just one on competition. You mentioned that you are still pursuing some of those larger deals in some states where perhaps you don't have the same presence as federal or in Queensland. Just interested on what you're seeing from a competitive perspective and any thoughts on how that might impact the product gross margin from here? Yeah. I can comment on that, Chris. It's Brad. In that network, if I just speak purely to that networking space that you were talking about, and then we can go wider if you need to, with a contracting market, you could expect that competition is more fierce for a smaller number. So that will drive competitive prices, particularly across some of those communication services. So we do expect that. We are seeing some of that. However, it's just one part of the pie. On the flip side of that, we're still doing some great services for those organizations that are consuming. So there's certainly pros and cons. Yeah. Just one additional thing, Chris, and I mentioned Cisco previously, and it's sometimes easy to just think of Cisco as switching and routing and the hardware side. But they very much have now grown into a very large software business and services business. And if you look at their earnings call overnight, their revenues were down, but their earnings were up, and that was predominantly based on the growth in software and services. We're seeing the same. Your next question comes from the line of Apoorv Sehgal from UBS. Your line is open. Good morning, guys. Maybe a follow-up to the cost question earlier. I guess, broadly looking at it, historically, there's been a trend of operating leverage in this business with that ICR trending down, but we haven't seen that, obviously, in FY 2023 and first half 2024. I'm just curious, is that sort of basically driven by your expansion in services making it inherently more difficult to sort of get any operating leverage? Because you have to keep investing ahead of the curve, keep hiring, keep incentivizing staff as they hit their sales targets. And I guess in that context, as you are focused on growing that services business further, should we perhaps expect much more limited operating leverage going forward than perhaps what this business has delivered in the past? I think in answer to your first question, the assumptions you've made are pretty accurate in terms of growing the business, and the profitability is dependent on the relative maturity of the contracts we have on our books. As we've spoken to, at the end of FY 2023, we onboarded a number of significant contracts that are just working through the end of their transition phase currently and aren't at full profitability. That's definitely having an impact on the ICR. In addition, Brad referred to some margin pressure in certain areas of the infrastructure solutions business with the competitive market in which we operate. Yeah, I think as we scale up services, it will be a slower trajectory to improved ICR through the end of FY 2024 and into FY 2025. Does that answer your question? Also, it's important to break down the type of services as well because the project-related services is fairly linear in terms of the cost. But the managed services business is inherently a leverage business. So the quicker we grow the managed services business, the better leverage we'll get. But as many of you are aware, the managed services business is a relatively small component but growing fast in our portfolio. Yep. Okay. And then just with the product GP performance, would you be able to break that down even qualitatively by kind of customer sector and also between government and enterprise? What part of the sort of sector or customer type was particularly soft in the period? Good question. Our mix hasn't really changed that much, but I guess the question is around what was soft. We're seeing delays in again, if we just want to focus on that networking space, both across federal government, state government, and also the resources sector. So yeah, it's not one sector in particular, I guess, Apoorv. Question comes from line of Nick Harris from Morgans Financial. Your line is open. Thanks. Good morning. Thanks very much, Laurence. Obviously, you've made a massive contribution to the business over many, many years. Well done. Enjoy the golf. Thanks, Nick. Just really two questions. Maybe the first one for you, Laurence. Just the inventory unwind. Clearly, most stats around Cisco, though, they're sort of last in and last out in terms of the supply chain stuff. But could that inventory unwind continue going forward as more and more products are virtualized, or is it more a one-off around kind of the Cisco supply chain? And then my second question, just to give you guys a chance to think about if you want to answer it or not, was just on the Copilot side of things. Obviously, thank you, Brad. You talked to the additional services around the implementation and consulting side of that, which makes a heap of sense. But clearly, Microsoft's obviously charging the end customer additional for that Copilot. So I'm just interested in the impact for Data#3 in terms of recurring revenue and margin. Are you comfortable talking to the Office 365 seats that you manage or the revenue so that if we want to have a try at sort of attachment rates or something, we can have a crack at that on the numbers? And they're my two questions. Thank you. Go ahead. Okay. There were two questions. One was the inventory unwind and supply chain. Well, we've seen the inventory in terms of Data#3 inventory, as Cherie mentioned earlier, decrease back to normal levels. So that probably answers that question. With customer ordering, what we saw last year is they were ordering eight months in advance because they couldn't get product, and so they ordered a lot. Now, with the inventory levels coming down as a result of that because we haven't needed to hold product until that last widget arrived before we could send it on to a customer and whatnot, with the supply chain improving, the delivery times are a lot closer to the ordering times. So it's really back to business as usual there, Nick. Of course, as we spoke about Cisco before, as Cisco moves more towards software, that solves a bit of an inventory problem because software is a lot easier to deliver than boxes through the warehouse. We would continue to see an improvement in that area as vendors move towards software models. On the Copilot, as I mentioned earlier, there definitely is opportunity across the board in terms of licensing and services. And as you can see from the numbers, the licensing team continues to do very well. We've also done very well out of Microsoft security products and collaboration products and whatnot as well. But the margins, as you can see from the business in the numbers, are not substantial there associated with the licensing transaction. So we see the real opportunity is in that consulting professional services and managed services space, assisting customers to get value out of their Copilot implementations. Thanks very much, Brad. Your next question comes from the line of Edward Gate from Jarden. Your line is open. Hi, team. Can you hear me okay? Yes, we can. Thanks. So I think people are focusing on the EBIT growth. Obviously, PBIT was strong, but EBIT less so. So interest was obviously a strong driver of the PBIT. Can you just give us a bit more color? Because, I mean, in relation to your working capital, we only see the closing balances. And so it's hard to get a sense of how sustainable the cash balances are. So can you provide some commentaries on whether you benefited from anything like unusual delays in paying your suppliers? We haven't had any changes to our working capital cycle edge or our payment cycles. I think in terms of average cash position from memory for FY 2023, it was around AUD 170 million. I would expect average cash for FY 2024 based on the first half, daily average cash would be above AUD 200 million. So it just continues to grow with the growth in the business, but all other working capital factors remain consistent with prior periods. Yeah, right. Maybe I'm looking at the wrong numbers, but I think it's up 100% year-on-year. Yeah. So I spoke to the timing difference. At the close of FY 2023, we had an unusually large number of customers make prepayments in Q4 of FY 2023 that carried us into our opening cash position in July of this year. So that increased the average daily cash position compared to last year. However, through July and August, we then made the corresponding vendor payments relating to those prepayments. Yeah, hence the big outflow in Q1. Okay. That makes sense. And then so top line was still strong. If I understand correctly, you're saying that managed services margins will improve in the second half because you've just been annualizing the highs you made in the second half of FY 2023. Can you confirm that's what you're indicating? And then also in relation to some of the other line items that you called out being impacted by managed services, so like travel, did they decrease now that you've onboarded clients? Yeah. Your first point around increasing profitability as the year progresses relating to managed services is correct. The comments around increases in OpEx, like travel, that was unrelated to managed services. That was just the business as a whole. We're just seeing an increase in costs across the board in an inflationary environment. We're obviously back to full swing post-COVID with people moving around on a more normal basis. The comment I made around managed services was in relation to the software licensing costs, which have increased, I think, around 5% half on half. That relates to both internal and external system investments relating to managed services. We obviously need a bunch of platforms to service managed services contracts, which require licensing. As a reminder, if you wish to ask a question, please press star followed by 1 on your telephone. Your next question comes from line of Chenny Wang from MS. Your line is open. Morning, guys. Thanks for taking my questions. Just the first one in terms of infrastructure solutions. I guess you guys talked about the digestion amongst customers. But any thoughts at this stage on how long that digestion is expected to go on for? When do you think this dynamic finds a space? Thanks. That's the million-dollar question, Chenny. We do expect it to improve during the second half. However, it really is on a customer-by-customer basis. So it's a bit difficult to answer that one specifically. Got it. All good. That color's still useful. And then just in terms of that cost base, I just want to make sure that I'm thinking about it correctly. Basically, it sounds like you guys invested ahead over the past couple of years. I guess kind of looking forward now, is it now right size for what's in the pipeline? And if so, how much spare capacity is there to grow that cost base into? Are we talking about managed services there again? If we can just qualify that, or? Yeah. Managed services and also just more broadly as well, I guess. Yeah. I guess more broadly, we really, I guess, resource to the opportunity. It's a little bit more dynamic in terms of sales, operations, and even professional services. Managed services, as we've mentioned, we've made some investments in infrastructure and then also people who managed new managed services contracts. So that's where we'll get some further leverage over time as we build that business out. But I guess we'll continue to see an increase in staff costs even with, say, professional services as we grow that business because that's the product that we're selling is the people and to provide value around the product solutions that we're providing. I hope that answers the question. Yeah. No, it does. And then just sorry, just last one from me. You guys talked about increased tenant activity in the market and pipeline as well, but also, I guess, delays on customer decision-making. Maybe it's useful to just square the two. And then just on that increased tenant activity, which areas those are in? Yep. Actually, before Brad answers the question in terms of the areas, just to be very specific, the slowdown in decision-making was particularly related to one division and one part of that division, which is the infrastructure division and the networking business. So it is not related across to our business right across our portfolio, not related to our services business, not related to our software business, or end-user computing. So, Brad, do you want to? Yeah. What was the second part of the question? That was in the areas? You just repeated it? Pipeline. Yeah. It was in terms of the increased tenant activity. Which areas those were in? Yeah. Yeah. Yeah. I guess in terms of if we saw a delay in decision-making, but also general sales activity was down, then we'd be even more concerned. I guess what we were saying there is that, "Hey, we still see really good activity from a sales perspective and tender activity. We just need those to convert." And again, typically, as you know, a large percentage of our business is across local, state, and federal government. And then a number of large enterprise customers also go through that tendering activity. So it is across the board again. It's not specific to one sector in particular. Next question comes from line of Ross Barrows of Wilsons Advisory. Your line is open. Good morning. Thanks for taking the question. My question is just around getting customers ready for AI. I would assume that some customers are kind of sufficiently digitally fit to be able to capture that AI opportunity. So you kind of help them just with that. But I'm assuming there would also be others that need to get advice and support on their cloud strategy first before they can kind of pursue that AI opportunity. So maybe you could just talk a little bit about, I guess, AI being a or driving a pull forward in cloud also, or said differently, seeing AI being an accelerant for your underlying cloud services. Thanks. Yeah. Short answer, Ross, is yes, absolutely. So we have a lot of that word too, digitally fit. With the opportunity, I guess, that we see, particularly with our consulting practice through Business Aspect, is that there's certain organizations that need to update their business plan first and then their IT plan aligned to their business plan and then plan how they're going to implement the appropriate technologies to execute on their strategy. So we certainly see opportunity at that level with Business Aspect. And then at the next level down in terms of the technology, the IT environment, people might think that they're digitally fit at the highest level. And then you do the open-heart surgery, and there's all sorts of things going on in there. So we're finding that particularly around data governance and security is an area where organizations may think that they have some pretty good systems and policies in place. But once you start to look under the covers because you're about to put an AI solution across that data that's going to expose that data to people within the organization, they're finding that we really need to look at the controls that are in place. So there's quite a lot in all of that. And I guess what AI will do there is it will make organizations just more digitally fit because they'll do things that they probably needed to do previously, which will help them with their reporting systems in general because their data will be in a better shape that they're going to put the AI across. The second part of the question is that I know we spoke about Copilot and Microsoft, but we are seeing our other vendors such as Cisco and HP and Dell and others integrating AI into their solutions as well. So that's where we see that AI, not just from a pure-play Microsoft and services perspective, but right across the board, will increase the opportunity for us. Great. Thanks, May. Just a quick one on, I guess, Data#3's own use of Copilot. I think being part of the Early Access Program, you've been able to have a look at it and use it. Do you have any, I guess, internal observations you can make about it? We do. We're actually creating a use case library at the moment. That use case library is being valuable in terms of creating services for our customers around particular use cases. As I mentioned in my part of the presentation, Copilot, the initial version was more around the information worker with M365. We're seeing the use cases now being and the different versions of Copilot being released for security and others. Over time, we will actually release further case studies and use cases in our general marketing, if you like, go-to-market material that will share our experiences with Copilot. Your next question comes from the line of Bob Chen of JP Morgan. Your line is open. Hey, guys. Just a quick follow-up. Just in terms of the end-user computing segment, it's obviously been in a bit of a downturn, but it seems like it's starting to turn around. Could you talk a little bit about where are we in the cycle now and what you're seeing potentially into the second half in terms of improvement for that segment? Yeah, Bob. I think we just see ongoing opportunity. And we really need to focus on that opportunity that's in front of us. The two Microsoft awards that we won were based on a Microsoft Surface. And then one was based purely on Microsoft Surface, and then the other one was based on Microsoft Surface in the Microsoft ecosystem. And that's just Microsoft. And that's why we won the Worldwide Partner of the Year because of the amount of Microsoft Surface that we're able to help our customers to consume. But HP, Dell, Lenovo, certainly ongoing opportunity. And our opportunity is to ensure that geographically, all of our teams are focused on that opportunity. And I think we mentioned in previous calls that we have more opportunity in New South Wales, Victoria, and even WA in that area. We. One next question comes from line of apologies. I was just questioning whether we've completed the Q&A. We have one more person in queue. Okay. Next question comes from the line of Chris Gawler of Goldman Sachs. Your line is open. Hey, guys. Just another quick follow-up before the buzzer. Just in terms of the infrastructure segment, you've spoken a lot about how the slowdown that you're seeing in customer decision-making is more related to Cisco networking equipment. Just wanted to get a sense for how material that part of the business is to the infrastructure segment versus end-user compute versus other things. Thanks. It's a sizable component of the infrastructure business. However, as we described before, the Cisco business is we can break the Cisco business down into probably three logical segments. And that's the hardware component, which we categorize as slower decision-making, although growth, but slower decision-making. And then we've got software and services, which is higher growth and quicker decision-making. So if we break that down, the Cisco business as a whole is material to our infrastructure business as a whole. But if we break it down further, it obviously lessens. But one of the points I'd just like to reiterate is that we are still seeing growth. We saw growth in the first half in our infrastructure business, and we anticipate growth going forward. It is probably at a lower rate than we would anticipate compared to previous years. As Brad indicated, the shape of the global market is probably indicative of what we're seeing in our business. So higher growth in software, higher growth in services, which is the largest component of our business. There are no further questions at this time, so I'd like to hand back to our presenters. Okay. Thanks very much, everyone. Thanks very much for all the first of all, for your attendance. Thank you very much for Q&A. We look forward to seeing many of you over the coming few days. Thanks very much for your support of Data#3. That does conclude our conference for today. Thank you for participating. You may now all disconnect.