Release Date: August 21, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Net profit before tax increased by over 16% to $62.1 million.
- Gross sales reached a record $2.8 billion, up by 7.6%.
- Recurring business grew to 67%, driven by managed services and software solutions.
- Data3 Ltd was recognized with multiple industry awards, including Global Software Partner of the Year with Cisco and Microsoft.
- The company maintained a strong balance sheet and efficient working capital management.
Negative Points
- Infrastructure solutions business saw a decline due to customers pre-ordering in prior periods.
- Consulting sales were down slightly due to a highly competitive market and reduced demand.
- Internal cost ratio increased slightly from 80.3% to 80.6% due to inflationary pressures and investments.
- Economic conditions and delayed customer decision-making impacted growth rates.
- The company faces ongoing challenges with delayed decision-making in infrastructure projects.
Q & A Highlights
Q: Can you provide an update on the challenging trading conditions and customer decision-making delays?
A: (Brad Colledge, CEO) We had a strong Q4, but customer decision-making delays persist due to economic uncertainties and new technology assessments. While some progress has been made, the prolonged decision-making continues to be a challenge.
Q: How should we think about the internal cost ratio (ICR) for FY25, especially with the onboarding of large managed services contracts?
A: (Cherie O'Riordan, CFO) The ICR challenges in FY24 were more related to the infrastructure business's softness. We've improved our contracting to better manage transition costs, so we don't expect significant ICR impacts from new managed services contracts. Improvements will come from achieving desired scale and operational efficiencies.
Q: Is the upcoming Queensland election affecting decision-making, and could it impact the first half of FY25?
A: (Brad Colledge, CEO) Yes, elections can delay purchasing decisions and new contracts. We might see some business shift from the first half to the second half, but we have time to meet government requirements post-election.
Q: Have you seen any impact from the Queensland Government's cost-saving initiatives, particularly regarding the use of external consultants?
A: (Brad Colledge, CEO) Not significantly. Our consulting work is outcome-based and project-focused, which should continue despite cost-saving measures.
Q: Can you provide details on the order growth for infrastructure hardware and any backlog impacts?
A: (Brad Colledge, CEO) Our order pipeline is healthy, and while we saw good orders in Q4 and the start of FY25, the backlog is back to normal levels post-pandemic. We expect continued growth in infrastructure hardware.
Q: What drove the addition of 1,000 new customers in FY24, and are you targeting different customer segments?
A: (Brad Colledge, CEO) Success with new customers is partly due to alignment with customer groups. We see opportunities, particularly with Microsoft in the medium business segment, and have had success with the cloud solution provider program.
Q: What are your expectations for services growth, particularly in consulting and project services?
A: (Brad Colledge, CEO) We expect continued growth in services, especially in professional and managed services. Consulting around AI, security, and governance offers significant opportunities, and we aim to develop packaged managed services targeting specific customer needs.
Q: Can you explain the dynamics behind the product gross margins and how they should be viewed going forward?
A: (Brad Colledge, CEO) Product gross margins have stabilized, with a blend of infrastructure and software solutions contributing to the overall margin. We expect continued stability and healthy margins in the product segment.
Q: What are your plans for headcount growth in FY25, and what wage inflation are you seeing?
A: (Cherie O'Riordan, CFO) Headcount growth will depend on new business wins, with a focus on managing back-office headcount efficiently. We saw about 5.5% wage inflation in FY24 and hope it will stabilize or reduce in FY25.
Q: How is the pipeline shifting, and what impact does it have on margins and follow-on business?
A: (Brad Colledge, CEO) The pipeline remains diverse, with large infrastructure projects and strong mid-market commercial and government sector business. We don't see significant shifts, and our diverse customer base helps maintain stability.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
