Data#3 Stock

Thank you for standing by, and welcome to the Data#3 Limited FY '26 Results Webinar and Investor Presentation. [Operator Instructions]

I would now like to hand the conference over to Mr. Brad Colledge, CEO and MD. Please go ahead.

Thank you, and good morning, and thank you for joining us for this briefing of Data#3's FY '26 Full Year Financial Results. I am joined by Cherie O'Riordan, our CFO, who will take you through our financial performance in detail a little later in the presentation.

For those of you not familiar with us, Data#3 is an ASX 200 listed IT services and solutions provider in Australia and the Pacific Islands. Our vision is to harness the power of people and technology for a better future. We have over 48 years of experience evolving our solutions and services to enable our customer success, combined with world-leading vendor technologies. We deliver the digital future for our customers through our technology solutions and life cycle services.

In terms of the agenda, we will start with the FY '26 highlights, followed by key operational updates, and Cherie will provide a detailed overview of our financial performance. I will cover IT sector trends and round out with our strategy and outlook before closing with Q&A.

Let's start with our FY '26 highlights. We delivered gross sales of $3.4 billion for FY '26, which represents growth of 12.7%, well ahead of Gartner's Australian IT industry growth forecast of 8.9% and a strong achievement for a company of our scale. Recurring gross sales increased to 70% of the total, up from 69% in FY '25, underpinned by multiyear customer contracts in our managed services, maintenance services and software solutions businesses and the ongoing shift by our customers to multiyear subscription and as-a-service offerings.

Net profit before tax of $78.8 million was up 14% on FY '25, boosted by the solid gross sales growth and improved operating leverage achieved this financial year, and our customer satisfaction rating increased to 4.36 out of 5. FY '26 was a record year for Infrastructure Solutions. It was a record year for Software Solutions, which included the successful management of the Microsoft channel incentive changes, plus securing the 5-year renewal of the whole of Federal Government Microsoft products and services agreement with the Digital Transformation Agency.

It was also a record year for Business Aspect consulting and for managed services. We advanced our solutions development across Managed Azure, Managed Security, Device as a Service and Managed Networks and progressed our operational excellence agenda through our MyD3 customer portal for purchasing management and support, plus we enhanced our internal modern data platform, security and AI functions.

This next slide shows the consistency of Data#3's performance over the past 5 years. The FY '26 was a strong result in its own right. The more important message is that it's not a one-off. Across the FY '21 to FY '26 period, gross sales have grown at an 11.6% compound annual growth rate, gross profit at 9.4%, basic earnings per share at 16.3% and dividends per share at 16%. That consistency reflects the strength of our market position, the strength of our vendor and customer relationships and the recurring nature of our growing share of our business. So when we talk about consistent earnings growth, this is the evidence behind it. Strong FY '26 execution, a 5-year track record of compounding growth and increasing recurring sales base that supports the resilience and visibility.

Moving on now to our key operational updates for FY '26. Looking at growth by solution area for the year. Device as a Service grew over 100%; End User Compute, 18%; Data Centre, 19%; Public Cloud Azure, 29%; Security, 21%; and AI over 100%. This is broad-based growth. Every one of our major solution areas contributed and the fastest growing AI and Device as a Service are the areas in which we've been deliberately investing.

Microsoft recently reported its FY '26 full year results materially ahead of expectations, led by Azure, AI and Microsoft 365. That momentum reads through directly to Data#3. Microsoft grew Azure and cloud materially during the year, which aligns with our own software solutions growth areas for FY '26 and looking forward to FY '27. Microsoft's increase in Copilot and AI reflects directly on Data#3's strong AI growth in Copilot, Azure Foundry and associated services. Security remains central to enterprise cloud and Copilot adoption for Microsoft. Our security business grew 21% with security software, E5 and managed security a key growth pillar for Data#3.

In short, Microsoft's AI and Azure momentum reinforces demand across Data#3's fastest-growing lines, Azure consumption, Copilot deployment, security and AI services. And all of this culminated in Data#3 listing software solutions gross sales 14% to $2.3 billion and being named Microsoft's Country Partner of the Year for Australia during FY '26. Our customer satisfaction improved across 3 key metrics during FY '26, overall satisfaction, ease of working with Data#3 and the quality of account representation. This is reflected in our customers' experience.

Let's look at an example of Mitsubishi Motors Australia Limited. Mitsubishi faced growing IT complexity and limited internal capacity. It operates a complex national IT environment supporting its head office and dealer network of around 4,000 users across Australia. After an 8-year relationship with Data#3, the customer went back to market as part of the governance process and chose to continue with Data#3 while expanding the scope of services. This is a strong example of how Data#3 creates long-term value for customers and shareholders. The expanded engagement covers service desk, application support, software licensing management and cloud optimization.

The outcomes for the customers and reduce -- the customer are reduced operational risk, better cost control and improved governance. This managed service case study shows the quality of Data#3 services business and the benefit these engagements have to our overall relationships with customers. These are sticky, trusted recurring relationships where our people are deeply embedded in the customer environment. It shows our ability to move customers from just support services into broader life cycle services across cloud support applications and managed operations. We have a large customer base, and there is a broad opportunity to replicate these types of engagements with many more customers.

Our ability to continue to deliver high-quality solutions for customers is a testament to our incredible people and culture. Data#3 has again been recognized by multiple third-party organizations during FY '26 as having a leading workplace environment. This is reflected in our employee satisfaction score of 4.38 out of 5. Our vendor partners are investing heavily in advanced technology solutions and our expertise in implementing and managing those solutions is central to both our customers' success and our own. We work with over 500 vendors and growth is increasingly broad-based across our portfolio, reflecting the breadth and resilience of our partner ecosystem.

FY '26 brought local, regional and global recognition across multiple partners. Highlights include the 2025 Microsoft Country Partner of the Year, the Cisco ANZ Partner of the Year and a series of global and Asia Pacific Cisco awards. These awards reaffirm our capability and that vendors and customers alike see us as a partner they can trust and a partner of choice.

AI is now a core operating capability across Data#3 embedded in finance, HR, IT, cybersecurity, sales and customer experience. We run Microsoft Copilot Studio, Azure Foundry, Azure Cognitive Search and LinkedIn Sales Navigator internally, alongside our own AI embedded solutions. We use our own business as the proving ground. What we deploy internally, we take to our customers with the credibility of how run it at scale ourselves. Results are measurable. This is AI-driven operating leverage story and practice, cost avoidance and capacity enhancement that scale with growth, and we're just getting started.

I'll now hand over to Cherie for a closer look at our FY '26 financial performance.

Thank you, Brad, and good morning, everyone. It's my pleasure to take you through our financial results for the 2026 financial year. Data#3 delivered record gross sales of $3.4 billion for FY '26, up 12.7% on FY '25, with growth across Infrastructure Solutions, Software Solutions and Services.

Gross profit grew 5.3% to $305.2 million. This is a strong outcome given the Microsoft incentive program changes that took effect on 1 January 2025 and had the greatest impact on the FY '26 first half. The mitigation strategies we put in place proved successful and software gross profit finished the year ahead of our expectations with a strong second half. Earnings before interest and tax increased 16.6% to $69.8 million, and net profit before tax increased 14% to $78.8 million, growth well ahead of gross profit growth and clear evidence of the operating leverage we've been building.

Basic earnings per share increased 13% to $0.3516, and the Board has declared a final fully franked dividend of $0.1825 per share, up 13% for the full year, representing a payout ratio of 90.3%. We finished the year with a strong balance sheet and no borrowings, which continues to give us the flexibility to invest in growth while delivering attractive returns to shareholders.

Moving now to the results by line of business or operating segment. Infrastructure Solutions delivered a record year. Gross sales grew over 14% to $651 million, boosted by end user compute sales, which were underpinned by Windows 11 upgrades and device refresh cycles. Data centre storage and server sales grew over 19% as customers moved to hybrid cloud and prepared for AI adoption. The business expertly managed any variability in the supply chain related to global memory shortages and significant hardware price increases by leveraging its warehousing capabilities and vendor relationships to get the best outcomes for customers.

Infrastructure gross profit grew 18.6% to $84.5 million, with gross margin improving to 13% from 12.5%. This was driven by improved deal margins, accelerated rebates earned off the strong sales performance and a shift in rebates from maintenance services following changes made to the Cisco incentive programs earlier this year. Management profit grew over 78% to $31.2 million in FY '26 with the step change coming from higher rebates in addition to significant cost efficiencies driven by automation and the restructuring completed during FY '25, now having a positive annualized impact.

Software Solutions also delivered a record year with gross sales of $2.3 billion, up over 14% on FY '25's $2 billion. Growth was driven by ongoing demand for security products, cloud subscriptions, Adobe and Microsoft Azure. Gross profit grew 7.6% to $78.1 million as the impact of the Microsoft incentive program changes were successfully mitigated. Gross margin of 3.4% compares with 3.6% in FY '25 and FY '26 management profit grew 7.7% to $41 million. We achieved significant growth in cloud solution provider sales in the commercial mid-market sector and gained momentum with our licensing consulting and management offerings. Enterprise agreement renewals were strong, particularly in public sector.

As Brad mentioned earlier, in March 2026, Data#3 was appointed by the Digital Transformation Agency as the sole provider of Microsoft products and services to the Australian government for a 5-year term with a 1-year extension option, which will ensure continuity of gross sales for this segment as well as an opportunity for the provision of services into federal government. We also delivered strong growth with non-Microsoft vendors during FY '26, in line with our diversification strategy. In summary, all of the mitigation strategies we put in place in response to the Microsoft incentive program changes have proven successful.

Services gross sales of $412.3 million grew 3.6% on the prior year with different growth profiles across the services portfolio. Business Aspect Consulting had a record year with gross sales up over 22% to $37.1 million as it capitalized on the market opportunity across key accounts and practices, including transformation and governance and information and analytics. Maintenance services grew 11.5% to $192.3 million, with solid improvement in the second half as expected and a record year of Cisco Enterprise Agreement wins. Managed Services grew 9.4% to $60 million, supported by ongoing contract wins and renewals, particularly in the resources sector.

Onsite Managed Services was flat for the prior year -- sorry, was flat on the prior year with some downsizing in a key account, but the pipeline is solid for both Enterprise and Onsite Managed Services. Project Services maintained solid market activity and pipeline coverage during FY '26. However, booking conversions reflected reduced business confidence, customer timing and extended procurement processes. New South Wales and ACT performed well, while Queensland, VIC and WA recorded softer sales conversion and a slower market recovery as the year progressed. As a result, Project Services gross sales of $67.4 million were down 15.3% on the prior year. FY '26 marked the start of a multiyear transition for Project Services with leadership changes, the development of new solutions and capability and an overall enhanced services growth strategy for execution commencing in FY '27.

People Solutions gross sales of $55.5 million were down 8.7% in FY '26, reflecting an ongoing tight labor market and economic sentiment, which resulted in customer decisions to manage contractor numbers in some key Queensland accounts, together with some margin pressure from a more competitive market. Renewal performance and activity levels remain strong. However, conversions reflected customer decisions, cash rate pressures and a tight market for specialist candidates.

Services gross profit of $142.3 million and gross margin of 34.5% reflects the mix in services growth by business unit, in addition to the shift in Cisco rebates from maintenance services into the Infrastructure Solutions segment following the Cisco 360 program changes, a reallocation within the group rather than a loss of value. Total rebates generated across all vendors in all segments in FY '26 increased over 20% on the prior year. This next slide presents a summarized view of our FY '26 statement of comprehensive income.

Statutory revenue and other income grew over 6% to $907 million. Statutory revenue includes adjustments to present our software licensing and vendor delivered maintenance support sales on a net revenue basis. However, internally, we continue to measure performance in terms of gross sales. Gross profit grew 5.3% to $305.2 million, an increase of $15.5 million. First half gross profit was most impacted by the Microsoft incentive program changes, while the second half saw a return to growth. Operating expenses, including staff costs of $228.8 million increased just 2.4% in FY '26. Staff costs increased just over 2% on the prior year, supported by our disciplined focus on cost management, ongoing alignment of our cost base to market demand and improved operating leverage.

Lower billable services headcount aligned to customer demand was offset by targeted investment in specialist sales roles across all 3 segments to support future growth. Wage inflation was modest during FY '26. Operating costs benefited from a first half lease accounting adjustment of $0.9 million, offset by increased IT projects, software licensing and other costs. The result is EBITDA of $76.4 million, up 15.1% or $10 million, with the EBITDA margin improving 0.6 percentage points to 8.4%. Gross profit growth of 5.3% converting to EBITDA growth of 15.1% clearly demonstrates the operating leverage we've built.

Depreciation and amortization was steady at $6.6 million and interest income of $10.1 million was in line with FY '25, earned off a strong average cash position and a sustained high cash rate. Net profit before tax for the period grew 14% to $78.8 million, reflecting significant growth in infrastructure and software solutions management profit and tight cost control that substantially offsets the impact of the Microsoft incentive program changes on FY '26.

Turning now to the balance sheet as at 30 June '26. Cash of $326 million compares with $356.7 million at 30 June '25. As is usual for us, the May and June sales peak drives a strong closing cash position off the back of high-value invoicing and collections activity. Other current assets of $720.7 million are up on $547.2 million with trade debtors higher in June with the end of financial year sales peak. Importantly, average day sales outstanding was maintained at 25 days.

Trade creditors are correspondingly higher with current liabilities of $975.9 million. One balance worth highlighting is inventory, which closed at $73.4 million, up from $18.4 million at 30 June '25. This reflects some larger hardware orders procured and held in advance of customers' requirements, deliberately positioned to get ahead of expected hardware price increases and potential supply constraints associated with global memory shortages in addition to higher goods in transit from partially delivered vendor shipments. All inventory is committed to customer orders and holding costs are charged where inventory is retained beyond standard holding periods. The increase in noncurrent assets predominantly reflects newly recognized right-of-use assets and property, plant and equipment related to our new Melbourne, Canberra and Sydney office leases. Net assets grew to $95.2 million from $84.2 million. The current ratio maintained at 1.1, and the company continues to operate with no borrowings.

On to the cash flow. FY '26 cash flows from operating activities were $23.3 million compared with $126.3 million in FY '25. This movement reflects the timing of receipt of customer payments net of supplier invoices during the peak months of June rather than any change in collection performance. Investing activities of $5 million relate predominantly to new office fit-outs, internal computer equipment and software assets. Financing activities of $48 million include dividends paid of $44.2 million compared with $40.3 million in FY '25 at a payout ratio of approximately 90%. Our average daily cash balance for the year was $276 million, up from $267 million in FY '25. Pulling the working capital pitch together, we had closing cash of $326 million, average daily cash of $276 million, which is up over 3%, interest income of $10.1 million and an average day sales outstanding held at 25 days.

This final slide in the financial overview covers our internal cost ratio, internal expenses divided by gross profit, which is our key internal measure of operating leverage and which has improved steadily over time. FY '26 ICR improved to 77.5% from 79.7% in FY '25, supported by the restructuring of the Infrastructure Solutions business in the first half of FY '25, company-wide automation initiatives, system improvements and effective cost management. Staff costs increased just over 2% on the prior year, as outlined earlier, and the increase in operating expenses was also modest. This 2.2 percentage point improvement in ICR is what elevates our 5.3% gross profit growth to 14% net profit growth.

Thank you for your time this morning. I'll now pass back to Brad.

Thank you, Cherie. And let's now take a few minutes to review IT sector trends and then our strategy and outlook.

In calendar year 2026, Gartner expects Australian technology industry spending to increase 8.9% to exceed $172 billion, growth well ahead of the broader economy and driven in large part by spending related to generative AI adoption. Software is the largest IT spending category in Australia in 2026, having overtaken IT services. Devices continue to grow, supported by AI-capable PCs. Investment in AI-related infrastructure continues to accelerate and is driving strong data centre growth. While much of that investment sits with the hyperscalers, we are also seeing sustained customer interest in hybrid cloud as organizations determine the optimum environment for both their AI and their non-AI workloads. Overall, this is a growing market, and Data#3 has been exceeding industry growth.

It's worth stepping back to see where it sits in the longer arc. The industry has moved through the enterprise era, the cloud era, the digital experience era and now firmly in the AI era. Data#3 has navigated each of these transitions successfully and each one has expanded the value we deliver to our customers. The AI era is the largest of them, and we enter it with capability already built and running.

Let's explore a summary of our strategy before reviewing the outlook. Four strategic priorities drive our strategy; solutions, developing solutions and services that deliver customer success; customer experience, differentiating Data#3 through the experiences we deliver to our customers; operational excellence, connecting and simplifying Data#3 to deliver an agile and efficient business; and people and community, connecting Data#3 with the people and the communities in which we operate.

Our solution technologies are delivered across the full life cycle, advise, procure, deploy, adopt and operate. It's our ability to integrate these solutions and manage them throughout that life cycle that is one of our competitive advantages. Our Data#3 business units map to that life cycle. Business Aspect advisers, infrastructure and software solutions help customers to procure the right technology solution, project services deploys and customer success teams drive adoption and managed services operate the technology. Each stage is a genuine capability and together they create recurring revenue and multiyear customer relationships.

We deliver those solutions with deep industry relevance across energy, water and utilities, mining and resources, construction and venues, defense and national security, education and the public sector. The customers showed improvement in activity levels this year, supported by the progression of digital strategies, cybersecurity requirements and modernization programs. AI touches every part of our solutions portfolio. In our AI solutions practice, we deliver AI-specific solutions such as Copilot and Azure Foundry.

In cybersecurity, we provide defense against AI-based attacks using AI-based tools. In applications and automation, we increase the efficiency of applications and utilize AI tools for automation and integration. In collaboration, we have AI-enabled software and hardware with Microsoft Teams, Cisco Webex and in-room equipment. In end user computing, AI PCs enable faster local processing and reduced latency. In hybrid cloud, we are seeing increases in server, storage and public cloud AI solutions. And in networking, enterprise networks are being embedded with AI for better manageability and insights.

AI is a significant opportunity for Data#3 across software, infrastructure and services alike. We supplement our life cycle services with our enterprise AI life cycle services to drive real business outcomes. The Data#3 AI factory is how we turn that opportunity into repeatable delivery, moving customers from envision through transform to operate. It gives customers a defined path from proof of concept to production and gives us a scalable, outcome-led AI go-to-market.

Our key initiatives for the year ahead are the artificial intelligence solutions practice, a 24/7 Sovereign Security Operations Centre, expanded Microsoft services and public sector, managed Azure acceleration, enhanced development of our unified endpoint management offering and an upgraded ServiceNow environment within our managed services, which will provide AI capability to help us to be more efficient and scale more readily.

Two of those initiatives warrant more attention. The first is a deliberate high-priority investment in establishing a dedicated artificial intelligence solution practice in FY '27, positioning the business at the forefront of next-generation value creation. Alongside it, we are building customer-facing AI delivery pods, enabling a more consistent, scalable and outcome-led AI go-to-market. The second is a strategic investment in the 24/7 Sovereign Security Operations Centre in FY '27, supplementing our existing hybrid stock in Brisbane and strengthening our leadership in trusted locally governed cybersecurity services.

Cybersecurity remains one of our highest priorities for our customers, particularly in government, regulated industries and critical infrastructure. This capability is designed to meet customer requirements for data residency, locally operated services and to provide regulatory alignment and it strengthens our broader managed security and life cycle services offerings. We are taking deliberate action to accelerate the growth of our profit -- and profitability of our services business. The services plan includes enhanced capability, solutions and strategy on which to commence executing in FY '27. The services plan embeds advisory capability into key accounts, grows our annuity contract base, strengthens our managed services platforms, improves services sales disciplines and aligns project services capability to high-growth solution areas. This supports a more services-led organization over time.

On leadership, we thank Michael Bowser for his contribution to Data#3 and acknowledge his retirement after more than 38 years with the company. We are pleased to welcome David Gold to the services leadership role, where he will drive the next phase of our services strategy.

Turning to the outlook. We see growth opportunity across all 3 segments. Infrastructure Solutions growth is expected to be supported by AI-ready infrastructure, end user computing, hybrid cloud, networking, cybersecurity and life cycle services. We will continue to focus on priority solution areas that address customer needs for productivity, resilience, compliance and secure modernization.

In software, having successfully navigated Microsoft channel changes, we expect to return to normal growth with a strategic focus on winning with complementary vendors, services and packaged offerings. Microsoft's AI products and programs provide further opportunity in FY '27 and will continue to drive large Azure commitments, software advisory and Microsoft services opportunities in the public sector. The strategy will also focus on growth in the mid-market, supported by continued investment in our MyD3 customer portal that enables efficiency and scale.

In services, we expect growth from expanded managed and project services offerings across AI, security, devices and cloud. Managed services is expected to continue performing well, supported by a solid pipeline. Maintenance services carries momentum in enterprise agreement wins and consulting is gaining momentum through opportunities in cybersecurity and analytics. Project Services and People Solutions are expected to build from the current market conditions in the near term as customers manage project timing and contractor numbers. The pipeline is solid, providing momentum into the second half and supporting growth for the full year as we execute on our services growth strategy. Consistent with previous practice, we're not providing specific FY '27 guidance at this stage. In line with previous years, we continue to expect a sales peak in the months of May and June and earnings skewed to the second half.

While the year ahead will be shaped by global supply conditions, broader economic confidence and customer procurement cycles, we have started the year strongly. We have a growing market, excellent support from our vendor partners, momentum generated by AI and a clear strategy to continuing delivering consistent earnings growth for our shareholders in line with our long-term strategy. As a leader in the Australian IT industry, there's no better place to be.

Thank you. And we'll now open for Q&A.

[Operator Instructions] The first question comes from the line of Nick Harris with Morgans.

Congrats on a good result and some nice operating leverage. I've got more, but I'll just ask one and then I'll jump back in the queue. So my main question is just trying to understand the materiality of your cost growth plans, your investment into services, particularly in FY '27. Obviously, in FY '26, your staff costs grew about 2% and your ICR trended lower. So is that kind of the way we should think about your investment in the business going forward, particularly in the context of that Data#3 AI Practice and the 24/7 SOC? Is that sort of BAU? Or might you be lifting your investment, your expenses a bit more in FY '27? Any direction would be great.

Thanks for the question, Nick. So I guess there's a few pieces to that. And as Brad outlined, there are a number of different key initiatives, investments that we are planning for FY '27. The majority of them are investments in people and billable headcount. There's also a little bit of sort of tooling and physical presence that we need to take out for the SOC, for example. However, for the most part, it's billable headcount. Most of those investments should have an almost immediate return once employed and once we start selling up those various investments. The 2 that will likely take a little bit more time to ramp up are the Sovereign SOC and the AI Practice, where we might need to bring in some headcount ahead of generating gross profit of that investment.

So overall, we expect, depending on timing of bringing those resources into business and ramping up those investments, we expect staff costs to increase by up to 10% next year. As I said, most of those investments should be fully recoverable in the same financial period. However, with the SOC and the AI Practice, we could have up to about a $2 million impact on net profitability next year. So that all being said, I would expect the operating leverage to sort of maintain for next year while we ramp up those investments and get to generating full return in FY '28.

Next question comes from the line of Apoorv Sehgal, Jarden.

So a few from me. I'll just like to follow up on the previous questions before, just to make sure I got that right. Did you say, Cherie, for FY '27, the employee costs up about 10% year-on-year. And did you say from those other specific initiatives around the SOC and the AI, were you saying like in the other OpEx line, a $2 million higher incremental in '27 than the other OpEx for that?

No. So your first point is correct. So staff costs up to 10% depending on timing. But my comment would be around the net impact on the bottom line of all of those investments that would be in that 10% number already would be around $2 million, again, depending on timing.

Okay. Can I ask a question about the infrastructure gross profit. There's a slide in there that says that some Cisco rebates were shifted to the Infrastructure segment. And that, if I'm reading it right, contributed to the gross profit dollars for infrastructure. Brad, can you maybe just elaborate on that point and potentially quantify what that GP dollar number is that on the benefit of shifting those Cisco rebates into infrastructure?

Yes. Absolutely, of course. And yes, thanks for the question. So at the beginning of the year, we -- in our February results, we discussed the changes in the Cisco program. And part of that was Cisco really reducing incentives on the maintenance business and the renewals and literally moving them over to new products and premium products. And so we've seen about $4 million in shift, if you like, in rebates from maintenance over to INS product sales, if that makes sense.

Understood. Just so I guess. I mean if you wanted to sort of compare like a like-for-like performance for infrastructure and services equally as well. In theory, we should probably -- like we could take off a $4 million benefit there for infrastructure GP sort of and add it on to services to make it like like-for-like.

Yes. Yes, that would be fair. But just noting when we're looking forward to FY '27 that, that will -- that trend will likely continue.

Like a first half benefit as well to '27.

So just the transition of rebates between services and infrastructure, the trend will likely remain for next year just in terms of FY '27 growth numbers. So this year is obviously the transition year and then next year will return to more normal levels of growth.

Yes. Okay. I'll finish my Q&A, just actually that one question on infrastructure again. When we think about the outlook then for infrastructure into '27, if I just look at like Cisco's results, right, they've had a really strong last 6 months, their product segment did an acceleration in growth. And if you look at consensus estimates for Cisco, analysts have like a further acceleration in the next quarter. Should we be thinking of Data#3 in a similar light? Like you've had a good year with infrastructure. But should we potentially see some sort of acceleration in the next 6 months given that Cisco is a key vendor. You can see what's happening with them. We've got AI coming through arguably still early stage. Yes, just keen to see your thoughts on infrastructure GP growth into FY '27.

Yes, we expect further continued growth in our Cisco business being Cisco's #1 partner in Australia, we're perfectly placed to leverage further growth there, both within the existing customers as Cisco bring new products on board as well as continued market share. So we -- in exactly the same way that we aligned some of the Microsoft results, and I think Cisco just released last week, we do expect some good growth there, I thought.

So that infrastructure segment, right, it grew 19% in...

Apoorv, sorry for interrupting. Please rejoin the queue for more questions. We have more questions lined up. The next question comes from the line of Olivier Coulon with E&P Financial Group.

Just on -- obviously, this year, you generated quite a lot of operating leverage. You're calling out pretty significant staff acceleration, albeit saying most of that is going to be billable. If we put aside the $2 million investment in those 2 key initiatives, do you expect to generate operating leverage again in '27?

Look, I think at the moment, best guess is that the ICR will maintain on FY '26 levels. That being said, it is our intention to continue building operating leverage through automation and the adoption of AI. So that won't stand still, but it will depend how much of that is offset by those -- by the more material investments that we're planning on moving forward within FY '27. So I think the best guess would be to maintain for next year, which is a pretty good result given the level of investments that we are planning on. The operating leverage we've achieved has enabled us to invest a little bit more next year without impacting too significantly on net profitability. So that would be a really good outcome.

Okay. So effectively, you're kind of loosely guiding to low double-digit gross profit dollar growth.

Well, as you know, we don't provide guidance, but...

If you think the ICR is going to be broadly flat, basically.

Yes. Look, we would like to -- given that we don't have the headwinds of the Microsoft incentive program changes next year and provided we can ensure that the majority of the investments generate a return in that first year, then we should return gross profit growth to more historical average levels.

Next question comes from the line of James Wilson with Macquarie.

Just firstly for me on the Software Solutions line. Are we right to be thinking of that business now going forward with the Microsoft incentive changes largely washed through sort of maybe a low single-digit gross profit growth business, GDP plus perhaps?

Was that low single digit or...

Yes, that's right, low single-digit gross profit growth.

So we delivered almost 8% growth this year with those changes impacting on the numbers. So we would expect gross profit growth to improve on this year.

So that's low double digit then.

Yes. Look, we won't give specifics, but it should return to, again, more historical average growth levels.

Okay. Great. And then just one more for me. Just on sort of the behavior you're seeing from some of your enterprise agreement partners. Have you seen any material change in the discussions you've had this year relative to last year on some of those incentives, perhaps from the like of Microsoft?

The changes in the programs, James?

Yes. In your preliminary discussions at least, yes.

They've been similar since Jan 2025, those major changes that they made. So they're often still tweaking a little pieces here and there across all their programs, but nothing material like they did 18 months -- 12, 18 months ago.

Right. And you're not expecting any material changes in the outlook from what you can see at the moment on those either?

No. Well, we're not expecting it. You never know what Microsoft does. So we'll -- but no, we're not expecting that, James.

Next question comes from the line of Chenny Wang with Morgan Stanley.

Just the first one in terms of the shifting rebates. I just wondering, are there any further rebate shifts that we should be aware of for Cisco maybe outside of Cisco? Just maybe coming back to the Microsoft program. They've had a few kind of changes to their incentive program for this year or next year. So yes, just kind of wondering whether there's any other shifts between a GP basis that we should be aware of? And then I've got a follow-up after.

Chenny, not really. The -- as I said before, there's always going to be some small changes. We haven't seen anything significant from Microsoft in that regard. We've got a number of great initiatives with them, but we also have just around other software vendors as well, which is where your question was going. We do see the vendors tweak their programs from time to time, but nothing material, sometimes it's in our favor. And other times, we need to make some changes around focus, which we're pretty good at doing. So nothing that we're terribly concerned about from a program change perspective across all our software vendors at this point in time.

Got it. And then just maybe on managed services. What drove that downsizing in key accounts? And I guess, you mentioned a strong pipeline. Is this downsizing a onetime reset, if I can put it that way? And do we kind of get back to that double-digit growth in FY '27?

The downsizing just specifically related to our onsite managed services, and it was really just in one Queensland customer. So that's just reducing the amount of augmented staff resources that they have in their own premise. So that was sort of an outlier. We don't expect that to continue, and we've got really good pipeline for both enterprise and onsite managed services into next year. As you know, with managed services, it takes quite a bit of effort to make that step change in sales growth. There's a really long sales pipeline and your annual revenue, you've obviously got the carryforward annuity revenue from the previous year.

You have a little bit of attrition particularly where customers are consolidating or occasionally, they'll make a decision to in-source their managed services. So you have to grow the business by far more than any natural attrition that occurs. So the 9% was obviously a good result, and that represents a lot of sales activity. But for us to now make that step change, we need to make some investments next year in really driving our sales strategy for all the initiatives that Brad outlined earlier.

Next question comes from the line of Apoorv Sehgal with Jarden.

So two questions. Firstly, on services, how should we think of gross profit growth into FY '27? Obviously, you've called out kind of some customer delays and, I guess, macro sort of impacts in '26. So it's been a flattish kind of gross profit year. Should we be expecting another kind of slowish transition year in '27? Or do you think with the AI kind of work coming through, you might see more of a material step change?

Yes. Thanks, Apoorv. Look, we're expecting to have a much better year next year in terms of services gross profit growth. As Brad called out, Professional Services and People Solutions may be a little bit challenged in the first half still, but we've got really good visibility over the pipeline and they will both return to growth by the end of FY '27. And then we expect growth across all the services business units. So services GP should return to -- I don't know what historical averages are, but a lot better than, say, FY '25, for example.

And if I just expand on that a little. We continue to see growth, particularly with managed services and Business Aspect Consulting. And then on the project services side, the GP should increase as we're investing in additional people around additional capability, but that will have some staff costs associated with it as well. So at the GP line, it should continue to improve across the board.

Yes. And if I just follow up to that previous question I had asked earlier about infrastructure. It sounds like, Brad, from your earlier response, infrastructure had a strong year in '26, but growth should probably pare back a little bit in '27 was my interpretation.

Look, it's difficult because we had such a standout year last year, and we're still expecting growth this year. It's a really strong, healthy business with a growing strong market. So it's difficult to compare exactly against last year when our number -- our base number is a lot higher this year than it was at the start of last year. So percentage-wise, that starts to put a bit of pressure on the percentages. But certainly, from a growth perspective, we've started the year very strongly with Infrastructure Solutions, and we continue -- expect continued very strong growth this year.

Next question comes from the line of Nick Harris with Morgans.

I was just curious if you could give us a little bit of directional commentary on the SMC side of things. How has that been going? Are you seeing some good progress there? And what's the leverage looking like given a lot of it is automated, hopefully?

Thanks, Nick, on the small and medium commercial area.

Yes. I mean, obviously, you've moved -- pivoted a bit of the business into that in the last sort of 12, 18 months. And just curious to see, is that going as expected or better than expected? And just any details you could provide, please?

Yes. No, thanks. So look, we had some pretty lofty expectations. So I guess we're traveling to expectations. It's actually going really well. And what's going really well is the ability to service that market without having to put on a lot of cost into the business as well. So we have invested in our MyD3 customer portal that helps customers to procure and manage their environment with our support, and that's helping us to scale and scale efficiently within that mid-market. Mid-market is such a big market in its own right. We expect continued growth in that area, not just for our services business. I mean, our software business, which has been the main focus to offset some of the Enterprise Agreement pressure from Microsoft, but also across the board.

Next question comes from the line of Apoorv Sehgal with Jarden.

One quick question for Cherie. Have you, Cherie, just got any interest income indications you can give us for FY '27 on your current modeling?

Yes. So current modeling, we've estimated about $11.1 million interest income for FY '27, Apoorv, but your guess is as good as mine what happens with cash rate. We've forecast that it will largely hold for the majority of the financial year with a cut or 2 in the back end of the FY.

Thank you. [Operator Instructions] There are no further phone questions at this time. I'll now hand back to Mr. Colledge for closing remarks.

Look, thank you very much. I think we can leave it there for today. It's been great to have the opportunity to present some very good results to you with a strong outlook and market. So thank you all for attending, and thank you all for your questions.

Thank you.

Thank you. That does conclude our conference for today. Thank you for participating. You may now disconnect.

Thank you for standing by, and welcome to the Data#3 Limited H1 FY '26 results webinar and investor presentation. [Operator Instructions]

I would now like to hand the conference over to Mr. Brad Colledge, CEO and MD. Please go ahead.

Thank you. Good morning, and thank you for joining us for this briefing of Data#3's interim FY '26 financial results. I'm joined by Cherie O'Riordan, our CFO, who will cover our financial highlights a little later in the presentation.

For those of you not familiar with us, Data#3 is an ASX 200 listed IT services and solutions provider in Australia and the Pacific Islands. Our vision is to harness the power of people and technology for a better future and we have 48 years of experience in evolving our solutions to enable customer success and we partner with world-leading technology vendors.

We are delivering the digital future for our customers through our solutions, which you'll hear more about throughout the presentation.

In terms of the agenda, we will first review the first half FY '26 highlights and key operational updates. Then Cherie will provide a more detailed overview of our financial performance. I will cover IT sector trends and round out with our strategy and outlook before closing with Q&A.

Let's begin with the financial highlights. Gross sales was a record $1.5 billion for the first half of FY '26, up over 9% on first half FY '25, driven by top line growth across most business units, particularly Managed Services, Infrastructure Solutions and Software Solutions.

Gross profit was consistent with the previous corresponding period at $144 million, with software gross profit impacted by Microsoft channel incentive program changes this half as expected, but pleasingly offset by solid performance in our Infrastructure Solutions business, which achieved almost 17% gross profit growth.

The average gross margin of 9.3% for the first half was down against PCP of 10.2%, predominantly impacted by the Microsoft incentives. Given the Microsoft incentives took effect on 1st of January 2025, the impact is largely behind us and should be immaterial in the second half of this financial year.

First half profit before tax of $33.5 million was up 4.5% and reflects our improved operating leverage of the relatively flat gross profit. Earnings before interest and tax was up over 6%. We delivered earnings per share growth of 3.6% and we are pleased to announce a healthy fully franked interim dividend of $0.135 per share, which is an increase of 3.1% on PCP and represents a total payout ratio of 90.3%.

Our solid first half highlights -- performance highlights our ability to adapt quickly to rapidly evolving technology, changes in incentive programs and the changing needs of our customers.

I'll now touch on a few of our operational highlights for the first half of FY '26, as shown on Slide 6. The growth in sales of over 9% outperformed calendar year 2025 Australian IT market growth rate of 8.7% and supports a 5-year compound annual growth rate of 11.5%, a solid achievement for a $3 billion turnover company.

Our recurring business is steady at 70%, underpinned by growth in Managed Services, Maintenance Services and Software Solutions and the ongoing shift by our customers to multiyear subscription and as-a-service offerings. Our customer satisfaction rating also remains high as we continue to enable customer success.

We're pleased to report that sales of our end user computing -- end-user computing were up over 30% this half with overall growth across device vendors such as HP, Dell, Microsoft and Lenovo. This strong performance was driven by Windows 11 upgrades and device refresh cycles, including AI PCs. Data center sales were also up 30% as customers optimize their service and storage through a hybrid cloud approach.

AI is now a core operating capability throughout our business, embedded across our digital platforms through both our vendors and our own internal developed solutions. We are seeing clear measurable impacts.

For example, we've achieved a significant reduction in our human hours across product pricing management, ordering and invoice-related processes, supporting scalable, cost-efficient growth and improving customer service.

At the same time, AI is accelerating how quickly we can build and deliver solutions. Proof of concepts can now be delivered in days instead of weeks or months, while AI agents are streamlining solution design and testing, significantly reducing delivery time frames. Our customers are benefiting from AI on a PC, network and in the data center.

Software solutions such as Microsoft Copilot and Azure AI are redefining how customers engage with their data and business processes. AI continues to be a significant opportunity for Data#3 across software, infrastructure and services. Our world-leading vendor partners are investing heavily in new advanced technology solutions.

Our expertise in implementing and managing these solutions is key to enabling our customers and Data#3 success. Growth is increasingly broad across the vendor portfolio, reflecting the breadth and resilience of our partner ecosystem.

Cisco has recently updated its 360 Partner program, which redeploys incentives to partners with preferred partner status across its networking, security, services, collaboration, cloud and AI solutions.

Data#3 has preferred status in each of these areas, and the program aligns with Data#3's ongoing focus of driving greater value across the customer life cycle. Our vendors are important to Data#3 and Data#3 is important to our vendors as recognized by our top-tier status with our various chosen partners.

In the first half, Data#3 was rewarded with local, regional and global awards, including Microsoft Country Partner of the Year, HP Australia Services Partner of the Year and 6 awards with Cisco, including the ANZ Partner of the Year and Global Awards for services, software and collaboration.

There are thousands of partners in Australia and tens of thousands of partners globally eligible for these awards. They are significant and demonstrate the deep expertise Data#3 has in providing world-leading solutions to our customers. Data#3 is recognized by vendors and customers as a partner they can trust.

I'll now pass to Cherie to provide you with more detail on our first half FY '26 financial performance.

Thanks, Brad, and good morning, everyone. It's my pleasure to now take you through our financial results for the first half of FY '26.

This first slide shows the consistent trend in growth of gross sales, gross profit and net earnings over the last several years as we continue to strengthen our competitive position through ongoing capability investment and our ability to adapt to new technologies and vendor programs.

As Brad already noted in the highlights, we saw record gross sales of $1.5 billion this half with demand for infrastructure and software remaining strong, while parts of the group services business have been impacted by ongoing challenging market conditions.

Our PBT of $33.5 million was up 4.5% on the prior year and we achieved EPS growth of 3.6%, with net earnings supported by improved operating leverage, which I'll provide further detail on later in the presentation.

The Board declared an interim fully franked dividend of $0.135 per share, resulting in a payout ratio of 90.3% for the first half.

Moving on now to the results by line of business or operating segment. Slide 13 provides an overview of the first half FY '26 gross sales generated by each of our services business units as well as the services gross profit, gross margin and management profit.

Services gross sales of $205 million was up 0.9% on the PCP, driven by mixed performance across the business units. Managed Services achieved solid growth of almost 16%, boosted by new contract wins and a high renewal success rate.

Business Aspect consulting was up over 9% to $16 million with improved pipeline across key accounts and practices such as information analytics, security and transformation. Project Services sales of almost $37 million were down around 13% on the prior half.

This reflected prolonged lead times and project delays as customers delay larger projects and closely manage IT budgets, even as the underlying pipeline remains healthy.

People Solutions gross sales were down 4.8% on PCP to $30.7 million, impacted by a reduction in contractor numbers across some key accounts as customers reprioritize their IT budgets. And lastly, managed -- Maintenance Services gross sales of $90.6 million represents modest growth of almost 4% off the back of a solid FY '25 and supported by a strong rebound by the infrastructure business.

A strong second half pipeline of Cisco enterprise agreements should see this improve in the second half. Services gross profit was down 4.2% to $69.5 million, largely driven by the sales performance being in line with prior year and lower rebates generated by maintenance services.

Management profit of $12 million was down almost 14% due to lower gross profit, but offset in part by disciplined management of staff and operating expenses.

Taking a look now at our Infrastructure Solutions first half FY '26 financial results. We're delighted to report infrastructure gross sales growth of almost 18% to $275 million, underpinned by strong sales of end-user computing, which were up over 30% on PCP. This was driven by Windows 11 related upgrades and device refresh cycles and should continue to deliver some tailwinds for the remainder of this financial year.

Pleasingly, growth in sales of data center storage and servers was also up 30% as customers move to hybrid cloud and accelerate their adoption of AI. Infrastructure gross profit of $36.8 million represents growth of almost 17% and gross margin is consistent with the prior comparative period at 13.4%.

Both were supported by a continued focus on maximizing individual deal margins in addition to the achievement of some accelerated rebates given the strong sales performance.

Management profit of almost $11 million was up over 105% on PCP, demonstrating improved operating leverage and benefiting from the automation and restructuring initiatives implemented during FY '25.

The next slide provides an overview of our Software Solutions results for the first half. Gross sales of $1.1 billion were up almost 9% on the prior comparative period, driven by demand for security products, enterprise agreement to cloud solution provider conversions, Azure and growth with non-Microsoft vendors such as Adobe and VMware.

We've seen significant growth in sales of CSP agreements and are gaining momentum with licensing consulting and management offerings. Gross profit of $37.5 million was down over 4%, reflecting the changes to the Microsoft incentive program, which impacted margins, most notably in the December 2025 half as expected.

The financial impact of these changes is largely behind us given they came into effect on 1 January 2025. Gross margin was down to 3.5% from 4% this half and management profit of $19.7 million was down over 9% on PCP, both impacted by the Microsoft incentive changes, while staff and operating costs were consistent with the prior year as costs are managed closely through this transition period.

We have successfully implemented a number of initiatives to mitigate the impact of the Microsoft incentive program changes on the Software Solutions business and we expect the software business to return to gross profit growth in the second half of FY '26, resulting in a full year contribution to gross profit for software consistent with FY '25.

Slide 16 presents a summarized view of our interim FY '26 statement of comprehensive income, noting that statutory revenue, which is up over 8% on PCP to $423 million, includes adjustments to present our software licensing and vendor-delivered maintenance support sales on a net revenue basis.

Operating expenses, including internal staff costs were down 1% on the prior year, driven by tight cost control and some vacant roles that were not backfilled this half.

The prior comparative period was also impacted by higher restructuring costs. In addition, operating expenses benefited from a nonrecurring lease adjustment this half relating to an upcoming office relocation.

The first half earnings include $6.3 million of interest revenue compared with $6.5 million in the prior half year, reflecting the company's sound working capital management and sustained high cash rate.

We are currently forecasting interest income of about $9.6 million for FY '26, assuming seasonality in our cash position is similar to FY '25 and no further changes to the cash rate in the second half.

This next slide shows our summarized consolidated balance sheet as at 31 December 2025. Key callouts include the usual inflated cash, trade receivables and trade payable balances at 30 June each year, resulting from the May, June sales peak, which subsequently reduced in Q1 of the next financial year as debtors are receded and vendors are paid for the products sold.

The cash balance at 31 December '25 was $125.4 million compared to $131 million at 31 December '24. Our net cash outflow from operating activities in the first half of FY '26 of $204.3 million compared to the prior year outflow of $123.8 million reflects the difference in timing of customer collections each financial year.

Investing activities in the current year included some IT project costs capitalized as software assets, including those relating to the cloud solution provider platform and our data and reporting modernization project.

The last call out on the cash flow and our working capital are that our average daily cash balance of $347 million is up almost 12% and we have maintained our average day sales outstanding at 25 days.

The final slide in this first half FY '26 financial overview supports our internal focus in recent years on steadily improving our internal cost ratio, a key internal measure of operating leverage.

ICR improved this half to 81.2% compared to 82.2% in the PCP, benefiting from the restructure of our infrastructure business in the first half of 2025 and various automation initiatives and system improvements in addition to effective cost management.

Thanks again for your time this morning. I'll now pass back to Brad.

Thank you, Cherie. Let's take a few minutes to review IT sector trends and strategy and outlook.

In calendar year 2026, Gartner expects Australian technology industry spending to increase 8.9% to approximately $172 billion. Software will be the largest IT spending category in Australia in 2026, overtaking IT services.

Gartner forecasts software spending in Australia to reach almost $60 billion in 2026, a 13.6% increase from 2025. Devices, which includes smartphones, tablets and PCs, is expected to grow by 6.6%, although memory chip price increases and availability may create risk of a slowdown in this sector.

According to our vendors, price increases and restricted availability could last for up to 18 months with now the best time to buy.

IT services growth is forecast to grow at 5.6% with IT communication services relatively steady at 3.6%. Within communication services, we anticipate stronger growth in networking, where demand and our competitive position remains solid. Investments in AI-related infrastructure continues to accelerate and is expected to drive data center growth of 22.5%.

While much of this investment is occurring with hyperscalers such as Microsoft, we are also seeing renewed interest from customers in hybrid cloud as they determine the optimal environment for both their AI and non-AI workloads.

Let's explore a summary of our FY '26 strategy before reviewing the outlook. Our strategic priorities drive our strategy. This includes our solutions, developing solutions and services that deliver customer success, customer experience, differentiating Data#3 through the experiences we deliver to our customers.

Operational excellence, connecting and simplifying Data#3 to deliver an agile and efficient business and people and community, connecting Data#3 with its people and the communities in which we operate.

Our customer experience combines customer segmentation with an enhanced digital platform, ensuring customers can access the right expertise and solutions at the right time.

This provides a secure unified gateway to Data#3's full solutions capability. Importantly, customers are seeking a combination of digital and in-person engagement. And in FY '26, we are delivering a model that integrates both.

MyD3 is our digital customer experience platform that combines multiple functions into one easy-to-access environment. It provides secure access to information such as real-time pricing and stock availability that is updated through live vendor connections.

Dashboards highlight the most relevant information in the procurement process, plus there is access to service delivery and support. The platform supports the operational needs of our largest customers and provide self-service functionality for all size customers.

This supports our customer segmentation model of matching the right solutions with the right customers. This has been a key tool in helping us to scale and service our Microsoft cloud solution provider customers with high levels of automation and efficiency, improving the customer experience.

Our solution sets and life cycle services capability are where we are focusing and investing in FY '26. It is our ability to integrate these solutions and manage them through the solutions life cycle that is one of our competitive advantages.

Let's look at a customer case study that integrates 2 of our largest partner solutions with Cisco and Microsoft. Griffith University set out to modernize its campus by implementing a Smart Campus concept that optimizes space utilization, improves energy efficiency and enhances security while supporting hybrid learning and collaboration.

Partnering with Data#3 and Cisco, Cisco -- Griffith University deployed an intelligent campus solution to achieve its business outcomes. The solution optimizes space utilization by providing better visibility of available resources while enhancing the student and staff experience and provided a more secure and manageable environment.

With Cisco Smart Spaces technology and Microsoft Outlook and Teams, Data#3 was able to facilitate a fully integrated solution.

The initiatives implemented in response to the Microsoft channel incentives changes on 1st of January 2025 and a focus on CSP, Copilot, security and Azure has significantly mitigated the financial impact on our first half FY '26 results.

The software business is expected to return to gross profit growth in second half FY '26, resulting in a full year contribution to gross profit for software consistent with FY '25. With software expected to recover to PCP for the full year, we anticipate continued momentum in infrastructure in the second half, particularly across devices, the network and multi-cloud solutions.

Rising memory chip prices and some supply uncertainty may provide some short-term uplift as customers bring forward purchases to get ahead of the price increases. However, it could also provide delays in order fulfillment in Q4, particularly supply constraints emerge.

Cisco launched its 360 Partner program in February 2026. However, we don't expect these program changes to have any material effect on the company's FY '26 performance.

We expect growth in Managed Services as we continue to expand our capabilities and offerings. While demand for contractors and some larger projects remain subdued with protracted sales lead times, the business remains agile in responding to areas of high customer demand such as security, data and AI.

Consistent with previous practice, we're not providing specific FY '26 earnings guidance. In line with previous years, we continue to expect a sales peak in the months of May and June and an earnings skew to the second half.

Our goal remains to continue to deliver sustainable earnings growth for our shareholders, consistent with our long-term strategy. An active market and strong solutions portfolio provide opportunity for further growth.

Thank you, and we'll now open for Q&A.

[Operator Instructions] Your first question comes from Apoorv Sehgal from Jarden.

First question for me, just could we unpack the gross profit performance and outlook a bit more? So first half gross profit was flattish year-on-year. But at the AGM, you were expecting sort of slightly up year-on-year, so a little bit soft there in the first half.

But then also into FY '26, at the AGM, you were talking to high single digit growth in overall gross profit for full year '26. I don't think you've reaffirmed that today. So if you could just talk about what your expectations are now for full year '26 gross profit growth, please?

Okay. Good to hear from you. So just in terms of -- I guess, the first part just say the gross profit, we did say that we were aiming towards a slight gross profit increase and we did because I think it was 0.3%.

So -- but we -- also remember, we said that software would be impacted in the first half because of the Microsoft channel incentives. That was the remainder of the full year of Microsoft channel incentive changes. So the fact that we got to where we said that we were going to get was absolutely a fantastic result from our perspective.

I think the second part of the question was more around the outlook. And the outlook is still really unchanged from what we said at the AGM as well. It's the fact that we see that our software business now that we've gone through the full 12 months of Microsoft channel incentive changes and we've managed through that fairly well that the -- it will return to growth in the second half.

And we also continue to see growth from our infrastructure and services businesses as well. So we are still expecting single digit growth in the second half.

Just to clarify the gross profit outlook for the full year. So if I go back to the AGM in October, it said high single digit gross profit growth for full year '26. Are you saying that's unchanged?

That's unchanged.

Okay. So that means sort of probably low double digit for the second half. If you're going to get high single full year, that's sort of what it implies is like second half will be pretty strong.

I'll let you do the math on that.

Okay. And just to clarify, sorry, just [indiscernible] on about this. But with high single digit, is it sort of 7%, 8% -- like are we talking sort of 7%, 8%? Is that high single digit? Or are the range of outcomes a bit wider than that?

Look, if we achieve 7% to 9% growth this year, considering what we've had to deal with in the first half with Microsoft channel incentive changes, that would be a great result. As you know, we don't give specific guidance because we do have significant months in the months of May and June.

And we -- while our underlying business can be very strong, we are also subject to market factors as well, which is why we call out some of the potential headwinds with regards to supply for memory.

So I think at this stage, the main takeaways is a strong underlying business. We are performing to expectations in every market in which we're operating from a line of business perspective. And we expect that growth to continue in an accelerated form over the first half into the second half for the full year.

Okay. Last question for me, please. Services business. Gross profit was down 4% year-on-year in the first half. I was just a bit surprised by that performance, just given there should be like an AI boom playing out at the moment. So I would have thought services would be pretty strong. So is AI potentially underperforming expectations on the services side?

AI is pervasive right across the board. And when I think about some of the larger projects that we have been involved in the first half where some of the -- and I've spoken about this before, the decision delays on some of these larger infrastructure projects continue to take effect.

In fact, we just closed a deal that we had been working on for 2 years last week. So that was nice. And that actually had nothing to do with AI.

So -- and there are other, I guess, project-related IT services projects that wax and wane depending on the nature of where customers are at with their purchasing decisions. So I guess our strategy has been to move more of our services to Managed Services in terms of supporting annuity revenue, which is more predictable.

And that's occurring. We've had another growth half in our Managed Services. Our Managed Services revenue continues to grow and we are providing AI services across both managed and professional.

So I think that from an AI perspective, even though we've been talking about it since the release of OpenAI and ChatGPT that there is -- we're still at the early stages and there's still so much more that we can help our customers with from an AI perspective. We've been helping the customers identify whether their data is secure, whether their data structures are relevant for AI and then helping them in their AI readiness.

And more recently, we've been helping them with their deployments of AI and change management. So we are deeply engaged in AI, but there's certainly more benefits to come in our professional services area, which I think is the question that you're asking on the back of AI.

Okay. And just to quickly clarify, on Slide 30 of the outlook, the outlook slide in your [ present ], where you say services growth in the outlook, do I interpret that as you're expecting services GP growth for full year '26 or just second half '26?

So that is a sales outlook statement. So we're expecting growth at the sales line. As you know, we're less focused on the GP for services rather than the net earnings because of the mix of contractors and where those sit in the services P&L.

But yes, we're expecting gross sales growth probably low to mid-single digits for the full year, given we've got some unders and overs across the business units.

Your next question comes from Olivier Coulon with E&P Financial Group.

Can you just clarify a little bit? So the Cisco changes sounds like I suppose they're leaning more towards the preferred suppliers, which sounds like you are, which is helpful. [Technical Difficulty]

Since we've lost the participant, we'll move to the next question that comes from Chenny Wang with Morgan Stanley.

I mean, maybe just firstly, in terms of some of the project delays on some of these larger projects, can you give us some more color on what that's actually driven by? I guess kind of interested in just getting a feel on maybe delays from economic sentiment versus potentially the impact from memory and some of these projects having to re-spec.

Yes. It's a good question, Chenny, and it's good to hear from you. So the -- there's a number of reasons. Budget and interest rates have certainly not done any favors and particularly with providing uncertainty in terms of which directions they're heading. And we've had a few customers that had to rebudget a few times. But also it's the complexity in the technologies.

And we -- Apoorv asked the question about AI in services earlier. There's certainly opportunity, but it also provides a little bit more complexity for customers. So that takes a little bit longer for the customers to work through what is the right solution for them right now.

And then there's also more people involved in the decision-making process, as we've spoken about in previous briefings, where there's the security manager and the sustainability manager and the procurement manager and a lot of people, I think it's up to -- I think Gartner reports that it's like 9 to 10 people involved in the decision-making process now where it used to be 3 to 4.

So that continues to affect the more complex purchasing decisions, which is -- and services is where the more complex projects are in services.

If it's just buying 1,000 devices, for example, that's an easy decision, whereas there's more complexity, we're seeing that's where the delayed decision-making is.

Got it. And then -- sorry about that. And then you guys, I guess, called out the infrastructure momentum into the second half. How should we kind of think about maybe from -- sorry, from volume versus price? And you talked about the scope for some pull forward to get ahead of price increases. Are you seeing that come through already?

Yes, we are. February, we started to see price increases already coming through from our vendor partners. And we expect that to continue right through the calendar year into next calendar year.

So it is a bit of a challenge because customers will have a budget for -- particularly for this financial year in Australia. And as prices increase, they may spend the same revenue, but they may end up getting less for that revenue and having to rebudget into the next financial year. So it is -- it may provide a challenge for our customers' budgets moving forward.

Got it. And then just one last one. Just on software GP. I guess good to see that you guys reiterated the flat software GP for FY '26 given the incentive changes. But maybe how should we think about this into FY '27? And can we get back to a scenario where software GP grows, let's say, more in line with revenues?

So we certainly will see software grow into -- that's the plan into FY '27. We've set the team up and our strategies and results support that. Whether it's in line with revenue is a separate question, Chenny, because as you know, that some of the revenue growth even this year was 8.9% versus 3.5% or thereabouts for the GP growth.

So our revenue in the software area could quite easily grow faster than our profit growth, but our goal will be to continue to grow our profit at our previous levels that we have in previous years before the Microsoft channel incentive changes.

Your next question comes from Nick Harris with Morgans.

Just wanted -- I'll just stick with my 2 questions really. The first one was just for Cherie in the context of Software Solutions. You mentioned you're getting some positive momentum with licensing and consulting side of things.

So I'm just trying to understand, does that mean there's a meaningful number of enterprise customers who are paying Data#3 for licensing advice? And it sounds like if that's the case, that's a fair bit better than, I guess, we feared, I guess, 12 months ago. So that's my first question. Are you making some money out of the consulting side of licensing advice?

And the second one was actually just what Olivier, I think, started to ask, which was on the Cisco side, maybe for Brad, the license, the Cisco 360 changes to partner program, I think it was January of this year. I know you said it won't have any impact in this year. But could you just give us a little bit of color around what it would look like on a 12-month basis? Is it material or not meaningful?

I'll quickly answer the first question. So short answer is, yes, we are starting to see some meaningful numbers coming through in our software advisory team, which means that we are getting the customers to pay for services that were previously covered by the Microsoft incentives. So we're getting some really good momentum there with our fee-for-service model. And do you want to take the Cisco?

Yes. So yes, with the Cisco ONE, the -- I guess we're fortunate that we've been ahead of the game a little bit with this because of all the partner advisory councils that we sit on with Cisco and getting early visibility to their program changes and have been able to pivot already even before the launch of the program. So it's nice that Cisco were very consultative about what they were doing.

So while it will have an effect just for a -- through our transition period, it's not going to be material. And in terms of FY '27, we will be in a better position to comment on that at our next update, I'd say, rather than this one as we'll monitor the transition and the effects during this half and be able to talk a little bit more about that in a few months' time.

Your next question comes from Apoorv Sehgal with Jarden.

Maybe for Cherie, just on the operating costs, some good cost control in the half. I think your OpEx was down like 1% year-on-year. My understanding is you've made some kind of new hires at the back end of the half, which will kind of give a full kind of cost contribution in the second half. Is that right?

And could you just give us some indication for OpEx growth in the second half? I mean, I was kind of thinking closer to 10% OpEx growth in the second half, but happy to be steered by you.

Yes. So if I just break down staff and OpEx separately, you're right, we did have some roles that were vacant for the majority of the half and then we backfilled towards the end of the first half, which was not all vacant roles.

So we are still obviously managing costs very closely and we're looking at each new role individually to assess whether it's directly replaceable, whether that budget can be reallocated to other specialists or sales solution type roles. So managing that very tightly.

But for the full year, I would say the staff costs will likely be up around 2% on PCP, which is a really good result compared to previous years. And our OpEx is probably going to be about 5% up on the prior year, provided there are no sort of one-offs in those numbers.

Cherie, that OpEx up 5%, that's total OpEx, up 5%?

So that's ex staff costs.

Ex staff costs. Okay, right. So staff was up to --

Yes. General operating...

-- the other OpEx up kind of 5% and total OpEx in between those 2 numbers basically.

Yes.

Okay. Okay. That's I guess pretty well controlled costs then. Just one other thing as well. Just on Slide 16, there was -- you did mention on the call earlier, $900,000 of lease accounting adjustment benefit nonrecurring in the first half. Just what is that, please?

So it's basically the release of our lease liability and right-of-use asset relating to one of our interstate offices, which is -- we're going through a relocation process with that office.

And effectively, the way the lease accounting works is you make certain assumptions about the extension options that you're going to take up at the end of the lease term. So when you are certain and you're no longer going to take up those options, you release those balances to the P&L.

And it just relates really to the timing difference between the amortization of the lease liability, which is on a P&I basis versus the right-of-use asset, which is straight-line depreciation. So it means we've over-expensed in previous years and you get the benefit adjusted through once you -- once that lease is negated effectively.

Got it. But it's nonrecurring. There's nothing to factor in for the second half with that?

That's right. Yes. Yes. I mean, there will always be lease adjustments as we move around. We've got a number of office leases coming up for renewal in the next couple of years. So there might be some more one-offs, but certainly for this year, it's nonrecurring.

Okay, sure. And just one final one for Brad. Just beyond the infrastructure-related shortages you talked about how it provided a tailwind for potentially the next 18 months. Did that give you guys a benefit in the first half already? Or is it sort of only coming now?

It's really only evolved over the last couple of months. So the -- it didn't have any effect on our first half. And as I said, it could have a short-term tailwind in our second half, but it could also provide some slowdown in Q4, depending on how rapidly some of these price increases occur and the availability of the memory as the hyperscalers consume all the memory that's available for the market.

[Operator Instructions] Your next question comes from Adam Dellaverde with Taylor Collison.

Apologies, I missed most of this because we're kind of busy day. But if this hasn't been asked, can you maybe give us an update on licensing and rebates, mainly around your confidence on market structure and position in CSP as that becomes Microsoft's go-to-market or preferred go-to-market?

And then also just the competitive intensity when the stuff you have on EA is rolling off. We're hearing that it's sort of very, very aggressive out there on that stuff.

Nice to hear from you. So our CSP business, I'm pleased to say, has been growing very well. And it has -- I'm not sure how -- I guess what that means is that it takes the pressure off the lower-margin EAs as to plan. But you are right, in the CSP world, there are a lot more resellers that can sell CSP than there are -- they can sell EA.

So if customers move from EA to a CSP, in theory, there's more competition. However, that's why we've invested in our systems processes and maintained our 100-plus people in expertise in our software team to be able to compete with all players in CSP.

And I'm pleased to report that, that is working. And particularly with any Data#3 enterprise agreements that roll into CSP, we're also an Azure -- I'm going into too much detail here.

We're an Azure expert MSP, so a managed service provider. And what that means is as customers move over from the EA construct to the CSP construct, it's not just licensing, they're actually moving their instances as well, for example, their Azure and Office 365 instances.

And we have the -- we're one of the few Microsoft partners in Australia that has the certification and the expertise to migrate those customers' environments from EA to CSP. And so that's why we're continuing to win very effectively in the market.

Okay. And just in terms of AI, the -- just some of the -- I guess, some of the early winners in terms of revenue aren't the traditional software vendors you're dealing with. So I'm just kind of curious what you're seeing in pilots and what you're seeing with early adopters if you have like a bundle or any product sets that are getting traction?

Yes. So as you know, we still invest very, very heavily in Microsoft. And while the -- I guess, the public face of a lot of the Microsoft technologies is Copilot and there's a lot of different variations of Copilot, including Copilot Studio that provides the agents that you can build agents in -- build agents into business processes and help customers with their automation and business process engineering effectively.

There's also a large amount of AI capability within Azure and Azure AI. And that's where we're seeing our engineers being able to lean in a lot more with our customers and help them to apply Azure AI across the data that they have stored in Azure, for example.

So are you seeing -- so a lot of the pilots that you've talked about in the past, are there any comments in terms of commercialization of them? Or are we still in this trialing and learning?

Various levels of deployment. So a number of them have moved forward and implemented solutions. And it's still a very rapidly evolving area and we continue to see a lot of opportunity.

All right. Last one for me. On the services side, just as I think about the scaling of that, is the infrastructure, at least as it has in the past, is big infrastructure project wins the precursor to more services work as part of your bundle as part of your solution?

Or is there like a separate go-to-market now for services attached to software or something else that drives volume in that business?

In terms of our project services, Adam or...

Yes, even hardware Managed Services and Maintenance Services and all of it.

Yes. Such a broad -- it's a good question. It's a broad question to answer succinctly. The -- from a -- what would be a good way to answer this? So from an -- same devices, devices -- rolling out devices across the network and deploying software on those devices, that used to be like a 3-month project.

And with a lot of the automation from tools such as Microsoft Intune, for example, that 3-month project is now a 3-week project. So that's reducing the opportunity with project services.

However, if we look at more complex environments, particularly enterprise networking, data center storage and AI within the customers' business processes, that's where there can be -- continue to be larger, longer projects.

You're also familiar with, I guess, some of the larger -- it still fits within the enterprise networking area, but say a stadiums fit out. So if we're fitting out a new stadium, for example, there's actually just a lot of people installing thousands of wireless access points.

So those larger infrastructure projects, they're few and far between. But when we do secure them, they're typically larger prolonged higher revenue businesses -- projects rather.

Your next question comes from Nick Harris with Morgans.

Just wanted to follow up on the memory and laptop side of things in the second half. Brad, I think you said volumes are lifting now in the Q3 as businesses are scrambling to get laptops, but there is a possibility price rises could negatively impact volume in Q4. So what I heard was sort of broadly up Q3 and then maybe down in Q4.

So I'm just trying to get a feel for the most likely outcome for the second half of '26. If you had to kind of go one way or the other, would you be thinking that devices are kind of net neutral or a net positive outcome in the second half?

Yes, it's a good question, Nick. At the moment, we're backing on that still being a positive growth for us and that it's just something that we will have to manage with our customers. I guess from a customer's perspective, a device on the 30th of June 2026 is going to be cheaper than a device on the 30th of June 2027.

So my concern is just whether customers have budgeted sufficiently to be able to do what they need to do. So I guess the main reason for mentioning it is there's the price -- there's 2 issues.

There's the price increase, which affects the customer's budget. And we may see customers ordering in advance, for example. And the second issue, I guess, is as customers are ordering in advance and memory prices are increasing and then supply gets more and more restricted, if a customer orders, but we can't get hold of the stock in time during Q4 to deliver an invoice, then that could be potentially a headwind.

Got you. So it could theoretically end up a bit like Cisco did a few years ago where you got a bunch of preorders as people were trying to get their hands on equipment and it was a positive contributor initially and then you work through it all and it had a bit of a negative impact a few years later as things normalize. Is that essentially what you think about it?

Yes, potentially. We're trying to educate our customers to either move into more of a more manageable environment like the Device as a Service offerings that I've spoken about previously, which is more annuity revenue for us and annuity operating expenses for the customer, which is a little bit easier to manage.

And some customers don't replace all the devices at once either. They might replace 1/3 a year, so 1/3, 1/3, 1/3. So there it's just -- it's very difficult to tell exactly what customers will do moving forward, but we'll try and help to smooth that process out for the customers.

But this is probably going to go on as has been reported in the industry press for the next 12 to 18 months. So the question is what is going to happen when. And only time will tell, which is why we sort of just need to call it out that it may occur in Q4, but we don't really know.

Your next question comes from Chenny Wang with Morgan Stanley.

Just one follow-up. Just in terms of the missed rebates in Maintenance Services in the first half, can you just give us some more color on what happened there? And yes, how much do you guys actually miss out on?

So we don't give exact numbers, Chenny, but the lower rebates were really just off the back of the lower sales performance, as I called out in the commentary. So we achieved less than 4% growth.

A lot of those rebates are volume-based. Therefore, if you're not hitting the numbers, obviously, the rebates are softer.

As I said earlier, we do expect that to rebound in the second half. We do have a really healthy pipeline of enterprise agreements in the maintenance space. So hopefully, we can make that up in the second half.

Your next question comes from Apoorv Sehgal with Jarden.

Cherie, just a follow-up on the staff costs only being up at 2% for the full year. That's very kind of modest growth versus prior years. Just unpack what's actually driving that? Why is it so slow in cost growth, staff costs?

So if I break it down by department, we obviously called out that we implemented some restructuring initiatives in the infrastructure business in the prior year in addition to various automation and efficiency initiatives. So those 2 things combined have meant that we've been able to manage headcount in the product side of the business.

The software business, as we called out also, we are keeping headcount as flat as possible there as well while we manage through the transition and just work out what our future staffing requirements are.

So yes, it's just effectively managing vacant roles, restructuring teams and redeploying resources rather than bringing on incremental new headcount and leveraging those automation and efficiencies that we've implemented internally.

If I can just play devil's advocate for one moment. There's a lot of opportunity in AI that you talked about. I just thought in an environment like this as a business, you might be in like labor hiring mode to capitalize on the industry -- to capitalize on the opportunity you see in AI. But it seems like you're kind of in cost saving mode. Yes, just sort of your thoughts on that statement.

Yes. I guess it's not really -- when you talk about such staff cost across the business [indiscernible], we are hiring in our services businesses in -- across consulting, project services and Managed Services for AI. So I guess the -- some of the savings are coming from more of the cost centers where we've got operational efficiencies through automation and AI.

Your next question comes from Olivier Coulon with E&P Financial Group.

Apologies, I got cut off before. I did hear your answer on Cisco, but I did have a follow-up there. So you mentioned FY '27, you're going to wait until you see how it plays out in the second half.

What are the swing factors as to what the impact could be? Because it sounds like you're kind of weighing up the potential for market share gains versus GP hit? Or yes, what are those swing factors?

Yes. It's really just seeing how the program -- if the program actually rolls out and deploys as Cisco have modeled it really, Cisco have advised that there's no decrease in the channel incentives across the channel.

And we just need to make sure that the -- that we're continuing because we've been able to work with Cisco and their programs so well in the past being Cisco Gold and leveraging the programs that they have had in place.

It can take some time to make sure that we're maximizing the programs as they release and deploy them. We're fortunate that we've been involved in the development of the programs, but having just been released in late January, early February, we're just a little bit cautious until we see how that plays out that there's typically a bit of a transition in terms of what the vendor is paying for versus how the customers are adopting the technology.

But in terms of any partner in the Cisco community, we'd be one of the most advanced that there is aligned with this program.

Okay. So there's a possibility that there's a kind of short-term transition impact in FY '27, but it sounds like you feel in the medium to long term, it shouldn't be as meaningful impact on the potential appropriate returns out of that channel, that price?

Absolutely spot on.

[Operator Instructions] There are no further questions at this time. I'll now hand back to Mr. Colledge for closing remarks.

Well, thank you very much. There's been some great questions that went to all the topics that we expected. So thank you. And we'll just close it off there in the interest of time. I know you are all very busy. Appreciate your time. Thank you.

Thanks all.

That does conclude our conference for today. Thank you for participating. You may now disconnect.

[Presentation]

Good morning, ladies and gentlemen. My name is Mark Gray as the Chair of your Board. I'd like to extend a warm welcome to all shareholders and guests joining us today at Data#3's head office in Brisbane for the 2025 Annual General Meeting of Data#3 Limited. This is a hybrid meeting with in-person attendance and live streaming.

I'd like to start by introducing your Board of Directors who are with me today. Firstly, our Managing Director and CEO, Brett College. Next in line, Bronwyn Morris, Non-Executive Director since December 2024. And Laurence Baynham, Non-Executive Director, who rejoined the Board in July 25; Diana Island, Non-Executive Director, who joined the Board in July 2025. And Mark Esler, Non-Executive Director, who has been on the Board since 2019.

Also in attendance are members of our executive management team, Cherie O'Riordan, who's the Chief Financial Officer, Terence Bonner, Company Secretary and General Counsel; and Mike Bowser, there's Mike Bowser, Executive General Manager. We also have in attendance, Haley Harpin, Chief Counsel and moderator for the online questions today. I'd also like to welcome Ben Woodbridge and Rebecca Auto, representatives from our independent auditors, PricewaterhouseCoopers.

Now for the formalities of the meeting. I note there is a quorum present, and I declare the meeting open. The notice of the meeting was dated 22nd of September 2025, and the meeting has been properly convened. In the notice of meeting, we set out 5 resolutions to consider. The Board recommends resolutions 3, 4 and 5 for your approval and the Board supports but abstains from voting on resolutions 1 and 2 in the interest of good corporate governance.

Please note that only shareholders, proxy holders or shareholder company representatives may vote on the resolutions. I'll shortly start today's proceedings with a summary address and then invite Brad to address the meeting before we move to the formal business of the day. I'd like to begin my Chair's address with an overview of the Board changes and renewal process undertaken during FY '25. These changes were part of a deliberate and ongoing process of succession planning to ensure the Data#3 benefits from the mix of experience, fresh perspective and continuity in leadership.

Leanne Muller, who served as a Non-Executive Director since 2016 and is Chair of the Audit and Risk Committee, chose not to stand for reelection at the 2024 AGM and retired at that time. And just as an aside, I actually got a message from Leanne this morning, wishing us all the best for today's AGM. She's been traveling in Spain and Portugal for the last 2 months, so enjoying her retirement.

We're grateful for Leanne's enormous contribution to the Board and her guidance in financial oversight and risk management during her 8-year tenure. Following an independent search process, Bronwyn Morris, AM, was appointed as a Non-Executive Director and Chair of the Audit and Risk Committee in December '24. Bronwyn brings over 25 years of experience as a Director for ASX-listed and unlisted companies and large government-owned corporations.

For expertise in finance, audit, corporate governance and risk ensures consistency across this critical oversight factor. Bronwyn is standing for election at this meeting. In April 2025, Susan Forrester set down after 3 years of service, having made a valuable contribution to the Board and the company. In July 2025, we welcomed another 2 new independent nonexecutive directors -- sorry, nonexecutive directors, Diana let and Lawrence Baynham, again, following another independent search process. Both are standing for election at this meeting. Diana brings extensive experience in technology, strategy and customer and digital transformation. While Lawrence brings nearly 30 years of insight from his previous executive tenure with the company, including guiding Data#3 through a period of substantial growth during his time as Managing Director.

In line with our constitution and governance practice, as mentioned, the 3 directors, Bronwyn Morris, Diana [indiscernible] and Lawrence [indiscernible] will stand for election at today's AGM. The Board supports their election. -- confident that their combined experience, expertise and perspective will further strengthen the Board and benefit the company's shareholders. With these appointments, we will have a strong, engaged and highly experienced board with a wealth of industry expertise and diversity of thinking, which will position the company well for continued growth going forward.

On the basis of these elections being approved, the Board has considered adjustments to the Remuneration and Nominations Committee composition and has proposed that Diana be appointed to chair the Remuneration & Nominations Committee and for Lawrence to be appointed as a committee member to replace myself with effect from 1 November 2025. These proposed changes are conditional upon the outcome of today's resolutions before shareholders. As I enter my third year as Chair of the Data#3 Board, I remain privileged to serve in this role and to work with such a capable Board and management team.

Turning now to the financial highlights for FY '25. Data#3 delivered a strong performance achieving record gross sales of $3 billion, up 9% on the previous year. This growth was supported across all 3 operating segments. Profitability also improved during the year. Total gross profit increased 7.3% to $289.7 million, and the internal cost ratio improved from 80.6% to 79.7%, benefiting from operational efficiencies and a restructure in the Infrastructure Solutions business in the first half of FY '25.

EBITDA increased 11% to $66.4 million, and profit before tax rose 11.4% to $69.1 million. These results demonstrate the relevance and momentum of Data#3's integrated solutions as well as the company's ability to adapt to changing technologies and market conditions. In FY '25, our balance sheet remained very strong and debt-free with net assets of $84 million and a high cash conversion rate. Net cash generated from operating activities was over $126 million, reflecting the company's long-standing efficient working capital model.

From a strategic planning perspective, we are pleased to progress -- we were pleased with the progress made in FY '25 on our strategic priorities as part of our rolling 3-year plan, and Brad will touch on those shortly. In summary, the business continues to deliver on our strategy of consistent, reliable and sustainable growth. The success of Data#3 in FY '25 is underpinned by the expertise of its people and their dedication to our customers. I'd like to thank all employees for their commitment and contribution to delivering this strong result. I'd also like to thank our Board, both past members of the Board and the incoming members for their continued support and guidance.

And finally, I'd like to thank you, our shareholders, for your ongoing support and trust in Data#3. Your confidence enables us to continue investing in solutions, people and innovation, positioning the company for sustainable long-term growth. Before moving to the formal resolutions, I'd like to hand over to Brad Colledge, our MD and CEO, who will provide further detail on the operational performance for FY '25 and the outlook for the current financial year.

Good morning, ladies and gentlemen, and thank you, Mark. It's my pleasure to welcome you again to Data#3's AGM, and thank everyone for making the time to join us here in person today and also online. As Mark has already mentioned, FY '25 has been another record-breaking year. for the company with gross sales exceeding $3 billion. This represents a 9% increase on the prior year and continues our track record of sustained growth despite the broader economic headwinds of recent years.

Our recurring gross sales increased from 67% to 69% in FY '25, reflecting the ongoing shift from our customers to multiyear subscription and as a service purchasing models. Equally pleasing, our internal cost ratio improved from 80.6% in FY '24 to 79.7% in FY '25, demonstrating improved operational efficiency. Throughout FY '25, we delivered a commendable result despite having to navigate federal and state government elections, vendor program changes and some protracted customer decision-making. Despite these periodic challenges, Data#3's business model held strong, and we delivered earnings before tax of $69.1 million, up 11.4% on the prior year.

This was underpinned by solid gross sales growth and improved operating leverage and was a result of our continued focus on delivering exceptional value for our customers. Our Software Solutions business achieved gross sales exceeding $2 billion for the first time, representing growth of almost 11% on the prior year. This performance was particularly pleasing given the changes to Microsoft's partner incentive programs that came into effect from the first of January 2025. Strength in the public sector and education verticals, along with early success in transitioning corporate customers from traditional enterprise agreements to cloud solution provider agreements supported this growth and helped to mitigate the impact of Microsoft incentive changes.

Our software advisory services revenue has also grown, helping customers to deploy, adopt and manage their software efficiently. Our Infrastructure Solutions business experienced a challenging first half due to delayed customer decision-making and election-related impacts. The second half saw a strong rebound driven by demand for devices supporting Windows 11 upgrades, network and security products and broader public sector demand.

Overall, gross infrastructure sales grew 4% for FY '25, while gross profit increased 10% and and management profit was up 27.4%, reflecting both operational efficiencies and a disciplined focus on improving infrastructure deal margin. Our services business delivered another solid performance, with gross sales up 6.7%, underpinned by strong growth in managed and maintenance services. This was slightly offset by subdued growth in People Solutions recruitment and Business Aspect Consulting, which were impacted by the state and federal elections during the financial year.

Strong demand for security solutions and our local security operations center further strengthened the services business unit. During FY '25, we continue to expand and refine our solution offerings, such as hybrid cloud, modern workplace, security, data and AI and connectivity. A AI continues to be embedded in our solutions, particularly through Microsoft co-pilot workshops and advisory services and in IT infrastructure upgrades required to power and secure AI tools. These solutions enable our customers to drive efficiencies and and create competitive advantages.

Our Managed Services team launched a new managed security solutions during the year, which pleasingly builds out our existing cybersecurity portfolio. These offerings, combined with our cloud securities capabilities, advisory services and Device as a Service solutions position Data#3 strongly to meet the evolving and diverse needs of our customers. Our people remain central to our success. Our culture and employee focus have remained strong as reflected in our HID Employer of Choice recognition for the tenth consecutive year, our great Place to Work certification, and an overall employee satisfaction rating of [indiscernible]. We also enhanced our hybrid workplace policies, learning and development platforms and parental leave entitlements this financial year, while increasing female employee representation to 34% and maintaining an average tenure of 5.6 years compared to the Australian average tenure of just 3.3 years.

In FY '25, Data#3 received multiple awards that highlight both our technical and cultural achievements, including Cisco Customer Experience Partner of the Year for Asia Pacific, Japan and China. HP Greater Asia Partner of the Year for the top enterprise reseller and Schneider Electric and Sustainability Champion of the year.

Additionally, we are recognized by the Australian Shareholders Association for most effective shareholder communications, affirming our commitment to transparency and engagement with the investor community. Let's now move to FY '26. In FY '26, our strategic priorities remain focused on solutions, customer experience, operational excellence and people and community.

As previously communicated, we expect the first half gross profit for software to be slightly below FY '25 due to the impact of Microsoft incentive changes. This will be offset by a stronger performance in our Infrastructure Solutions business, with group gross profit for first half FY '26 expected to be slightly ahead of first half FY '25. I'm pleased with the progress of our Microsoft channel incentive transitions and mitigating initiatives. We have implemented so far this year, and we have seen solid growth in CSP, which is the cloud solution provider, Azure security and software advisory services.

Our current first half projection is to deliver pretax profit in the range of $32 million to $34 million. There are, as always, many variables that can impact on this forecast, including the timing of customer decision-making product shipments and services project milestones. The software business is expected to return to growth in second half FY '26 and to deliver a similar full year gross profit contribution as the prior year. We expect a solid full year contribution from our infrastructure and services businesses to deliver overall gross profit growth in the high single digits for FY '26 with a slightly higher skew towards the second half compared to the prior year.

We anticipate further easing of interest rates in FY '26, which would see interest income down on FY '25. The first half results and interim dividend will be announced on the 23rd of February 2026 and it is our intention to maintain our usual dividend practice. As we look forward to the 2032 Brisbane Olympics and Para Olympics represent a unique opportunity for Data 3 to leverage our expertise in large-scale infrastructure projects. Our broad customer base, including customers in federal, state and local governments, education, health, the corporate and resources sector continues to benefit from our integrated solutions, transformation capability and adoption of AI.

In closing, I'd like to thank our Board, our shareholders and our customers and most importantly, our exceptional Data#3 team, who dedicated his dedication underpins everything we achieve. There is 1 team member for which we'd like to make special mention. Michael Bauer, our Executive General Manager for services, member of our executive management team, and one of our key management personnel is retiring in December after 38 years of creating shareholder value for Data#3. Michael started well before data 3 listed on the ASX and -- he's had many key roles in data 3, always executing with the passion, skills and values we have come to expect. We wish Michael the very best for the future and a huge thank you.

Our FY '26 plan has a strong foundation, clear strategy and we have exciting opportunities ahead, particularly in AI, cloud, security and infrastructure. I look forward to updating you on our progress and continuing to deliver growth and value in the year ahead.

Thank you. I'll now hand back to Mark.

Thanks, Brad. And can I just endorse those comments about about Michael fine innings and well done. Congratulations. Before we consider each item of business, I'd like to outline the procedural matters for this meeting. For those participating virtually at the bottom of the web page under the webcast and presentation, there are 3 boxes, which allow you to firstly get a voting card. Secondly, ask a question. And thirdly, download the AGM documents being the notice of meeting, the annual report and the virtual meeting online guide.

Shareholders will have the opportunity to comment on and ask questions in relation to the resolutions both in person and virtually. I'll hold comments and questions until the item of business has been introduced. Questions from those in person will be addressed first. For those shareholders using the online platform, you can ask your question during the meeting by clicking the Ask a Question button and following the prompts. For each item of business, we will address questions received from shareholders attending in person first, then from those shareholders participating virtually.

I'd now like to briefly summarize the voting procedures, which will apply to this meeting. Voting on each resolution be conducted by a poll. Shareholders who are attending the meeting in person will have been given a voting card on registration, and the completed voting cards will be collected at the end of the meeting. Shareholders who are participating virtually in this meeting can register to vote by clicking on the get a voting card box at the top of the web page or below the presentation slides and follow the instructions. Following discussion of all items, shareholders will be given a further 5 minutes after the meeting is closed to submit their votes via the online portal. After this time, the polls for each relevant item of business will close.

Your Board supports all resolutions put to the meeting for your consideration today. However, as set out in the AGM notice, it abstains from voting on resolutions 1 and 2. Where undirected proxies have been given in favor of the Chair the Chair will vote in favor of the resolution to the extent permitted. The number of proxy votes received on each resolution will be displayed on our slides as we move through the resolutions.

The results of each poll will be announced via the ASX as soon as possible after this meeting and will also be displayed on our website. If you experience any difficulties using the online platform, the help line number is displayed at the top of the page. You can also refer to the virtual meeting online guide which is accessible via the online platform.

We'll now move to the formal items of business for the meeting. First item of business for discussion today is to receive and consider the financial report, the director's report and the independent auditor's report for DAI and its controlled entities for the year ended 30th of June 2025. We Ben Woodbridge, the audit partner with Pricewaterhouse Coopers, please stand or wave your hand. He is available to answer questions relevant to the conduct of the external audit and the preparation and content of the independent auditor's report.

I'd now like to invite questions for this item of business. Are there any comments or questions from shareholders attending in person.

Paul [indiscernible] detailed shareholder and have been for a few years, but I commend the report from a few and Brad coverage college on DTL and particularly the outlook statements. A couple of questions. I'm interested to know, and this might go back to Cherry, the CFO, who I have not been officially met. In the past, it was very useful for the market about a month before the profit results released on half year and full year there was an indicative range given on unaudited NPAT and perhaps EBIT. Now that seems to have fallen away a dropped away for some reasons. And I'm not sure whether there's some sort of corporate requirement or whether it was deemed in the -- if the number is fluctuated from the unaudited numbers through to the actual reported numbers on the the profit release state, i.e., for half year and for full year.

Now I consider that the -- probably the -- probably it was a good boost for the share price. And it gave the market a bit more of a sense and we think both retail shareholders through the analysts and through to institutional shareholders.

Maybe answer that one first? Or is the next question related to that? Let's answer that question first. So look, what we've done over the last couple of years is, obviously, we've provided guidance today. Following half year -- in the lead up to half year full year results, we've provided a comment only where there is something new to add to what we've previously said. We felt that there hasn't been anything new to add, so we haven't bothered to say anything. Brad, did you want to add to that?

I would just add when you announce anything provisional. It's never provisional because all the analysis grab it and run with it anyway. So we would prefer to actually provide the full results with the full information at the right time, and that's working really well for us.

Well, change the procedure. We've been doing this process for a couple of years now. Paul, you mentioned haven't been here for a little while, but it's -- we've been following this process for a few years now.

The other one relates to Microsoft -- probably better for you -- the cash flow coming from Microsoft revenue would be significant to the business and that would be embedded in the in 1 or more of the business units. How much impact would you think that would have, at say, an EBIT line, both for the financial year closed out in the coming financial year. Impact that is because of the remodeling of the probably Software as a Service I'm guessing give us some color

Let me address where I think you're going with that. The changes in Microsoft channel incentives are changes to the incentives and not the revenue. So the revenue remains exactly the same. So as we reported it for the first year with the $2 billion worth of revenue, it's not expected to change our revenue from a programmatic perspective, unless we decide based on the channel incentives that we don't want to participate in different markets. However, at the moment, the strategy is the same. We're investing more in our medium business market, which is where there was additional sensors for Microsoft. But -- as far as the Microsoft revenue is concerned, it's business as usual.

[indiscernible] towards different sectors of the market.

Would you be talking about the gross sales versus revenue remodeling? Is that what you're talking about? Oh, okay. So that's that's purely a financial accounting or reporting requirements, which is why we're still reporting gross sales. So our shareholders and customers can understand how the business is traveling from gross sales perspective. So it doesn't -- the gross sales versus revenue reporting doesn't affect the gross sales number.

I thought I'd grab it quickly. Just if I can make a comment, I disagree with my neighbor here. I like the idea of giving us a little guidance as possible. We've all seen how volatile our share price is. We're priced for perfection at the moment. The slightest negative thing it could easily tumble. I know this morning, it's gone up a little bit. Gartner, in the full year presentation, the Gartner figure was mentioned that the IT industry would grow 8.7% in 2025, and then there was a mixture of 13% for software and various other things. Does Gartner review what actually happened rather than the forecast. I couldn't find it on the website. It was like waiting through [indiscernible] -- but if -- could you each year report what the actual growth was last year? Because that would give us an idea of market share.

I'll let Brad answer that. But I'll just make 1 point, and that is the Gartner figures are based on a calendar year. So it's calendar year, not a financial year. So there's a slight mismatch in what's being said, but I'll ask Brad to comment.

Look, I do find that the analysts are more like our weather people, they always talk about the future, not the retrospective. So with regards to that sometimes we do talk about how things have traveled in the past versus how they set it was. I think we used the end user compute as an example, last year, where -- the industry, in general, was expecting a lot larger growth last calendar year, particularly around the COVID refresh and the Windows updates opportunity, and the industry didn't see what even the analysts were expecting.

I think at the time, they're expecting like 9% growth, and it was like 5% growth. So -- so we do go back and review how that's going also just to to look at what that means from a future opportunity perspective because if we took the end user compute example where customers didn't upgrade as quickly as the industry expected. That means that the opportunity is still there and an accelerated opportunity moving forward. So we do review that internally. We don't necessarily publish that but it is available.

Okay. The second thing is on the presentations. I understand why gross sales are really important from a historical perspective. But given that we're now actually statutory reporting differently, it would be really good to have that in the presentation, so we can start following how that goes without sort of drilling down into the annual report. And I did note that into the -- it wasn't on the screen, but it was mentioned, -- can I please request the EBITDA does not come in? If you understand why, just look at what Charlie Mongeral.

Okay. I'll take that point.

Peter Richardson, shareholder. Congratulations on the results. Congratulate you on probably the only AGM to get through the Chairman's talk without mentioning AI. I led that. But on AI, I mean, it's good to say that you're not just, I guess, throwing money trying to chase the gold and ticket of whatever AI might be, but you must be doing something. Is there anything that you could share us how AI is affecting your business internally.

Yes. Look, I'll get Brad to provide some detail on that. But from a Board perspective, I mean certainly is part of our conversation every board meeting. I suppose we need to divide it into 2 parts. One is how we're using AI internally to drive efficiencies, operational efficiencies in the business, and Brad can talk a bit about that, but also how we advise our customers and clients on the adoption of AI. And they're sort of interrelated, some of the lessons that we learned from adopting it ourselves, we then apply to the processes and systems and advice that we give to our customers. .

Thanks, Mark, and I thought we might get a question on AI. So have some prepped. So in the FY '25 results announcement, we did include a slide there just at the highest level internally. That we are using AI across finance, HR, IT, cybersecurity, sales and customer experience. So we are using AI fairly comprehensively across Data#3 and what we're finding is that our vendors, our suppliers that we use internally as well as represent externally, AI is embedded in a lot of the solutions that we're purchasing. So when we're purchasing Microsoft products, for example, we recently invested in Microsoft Fabric, which is a data platform that data platform has AI all the way through it. So we get that as part of the application, and we're implementing and using that. And same with our -- even our LinkedIn subscription, LinkedIn Sales Navigator now has AI within its and say with a lot of our development tools. So we're making the most of that, and we're also helping the customers on that journey as well.

Does that answer the question?

I guess the follow-up would be how is AI going to affect your business? Are we going to see cost efficiencies? Does it provide greater margins, greater opportunities?

So and also sort of back it up in terms of automation in general in addition to -- we've been on a journey over a few years now as most organizations are modernizing their applications. And we implemented a new ERP a few years ago and then the sales order processing, warehousing components of that. And just through implementing automation in that. One example is when we get to May, June, which are 1 of our busiest periods, we sometimes have to get contractors into our administration teams, or the processing teams just to get the orders in because there's so many -- and we -- at 1 stage, we had 9 contractors in, we didn't have to do that at all last year. So that was a direct saving to staff costs in that regard. And that's just an example in terms of automation in general. .

As far as AI is concerned, we're using it more as an opportunity to drive further efficiency, but also it will probably mean that we don't need to invest in people as much as we move forward. We're not necessarily looking at replacing resources at this point in time, but it's an opportunity for us to grow and do more and take more solutions to market.

While we're still on AI replacing resources -- is there any chance that the customers may be able to cut that out using AI from some of the services we presently supply.

Potentially, we may be doing and providing different services for our customers than we have traditionally. So -- and it also depends on the customer and the profile. So if the I think software development house, for example, that's 1 of the areas where AI is working really well in terms of helping software development organizations to develop code. So -- but one of the areas that we've always been very strong at is providing the infrastructure to operate the AI tools on. So -- and then we have our consulting businesses in terms of helping them to look at their data and their systems and how they can implement AI. Is there data secure? How are they governing their data before they put AI crosses and whatnot. So our solutions and offerings are evolving, and there might be some really basic looking at our general manager services over here, but our network management or deployment activities that can assist with and then we'll provide additional value services over the top of that. But we're not concerned at this point in time. We see it as a massive opportunity for Data#3 as opposed to a risk.

My name is Ozas. I'm a shareholder, a long-time shareholder [indiscernible]. Well, first of all, Brad, congratulations and the executive team, very good results. I'm not surprised. I mean you have fresh -- I think last year, I was here just freshly appointed in March last year. not new to the company, though. So well done and being 28 years, is that right? Or something like that?

October was 30%.

Wow. And we see that example of Micheletti after 38 years as well, it's a very healthy sign, if you follow the growth. This year, earlier this year, actually attendant 1 of the meetings, which I think was closely worldwide. That's Bahasa in Omaha, Nebraska, where Buffett actually announced his retirement this year. And the fantastic result you delivered was 5.5 million for his shareholders. I think one of the way he delivered is not only doing the great job, which you guys do, but also not paying dividends. You know where I'm going to and buying back shares when it made actually financial sense. Is there any plans for the company to buy back shares or not pay dividends? I know in the U.S., it's quite popular because they don't have this franking credit system over there. However, I would rather prefer the management to reemploy or retain the earnings and invest into the growth because that proved time and again that's one of the best way to grow shareholders as well, basically.

So perhaps I can answer that question. And Brad may want to add something to it. But look, we continually discuss and monitor that situation as to as to what our capital management strategies should be. It's an active discussion around the Board table at most meetings. We consider options such as buybacks, special dividends, and we obviously look at where we should be deploying our capital in the most efficient way. So it's an active discussion. The position we've taken to date is as we've demonstrated as we paid out dividends. but we continue to look and press management to come forward to the Board with investment decisions that will grow shareholder value.

Look, I have a question in regard to competitor intelligence. I look in the market and closely follow investment markets in Board spectrum. Constantly I see technology on gets a limelight a lot of sell-side analyst coverage. Now prior to the meeting, I can't remember who it was -- said about 12 or 13 analysts on board for Data#3. Now Data#3 truly has done very well, both in profit growth, dividend growth and I've been a shareholder for a very long time, and that's already been examples given today. Now what is -- why has the technology 1 had such exponential growth compared to Data#3. Are there any particular markets in the future where data 3 could move into?

For instance, I suspect the municipal government that technology on might have a bit of a foothold at better handle or are there aspects of technology, 1 market that you don't want to go through. Broad spectrum [indiscernible].

So I'll let Brad answer that.

Yes, absolutely. And congratulations none. They've done an excellent job technology you want to have actually been a customer of ours from time to time as well. So they're a software development company. They developed software. And as you're probably aware, a very successful initially with local governments. And and others. So they've developed the IP with in the software, and they can continue to leverage that from a sales perspective. we're quite a different organization. We actually don't develop software applications. We represent world-leading vendors. Some of those world-leading vendors like Microsoft, for example, develop software, and we represent that software in market. So we are quite a different organization to a technology one.

In terms of the general, I guess, analyst activity and advice on Data#3, which you mentioned earlier. Certainly, Serinonvalts for the activity is a lot larger and higher than it ever used to be. So I think that we're adequately covered. We've got some very good people that cover us that know us well, and that's good to see.

Sorry, I feel as a fellow shareholder, I need to talk about the question about dividends. I'd encourage the Board to talk to as many people as shareholders as possible about dividends. Your dividend fund my retirement. If you cut your dividend, I have to sell Data#3 shares. I don't want to do that. And I think in Australia with the franking credits, dividends are very important. People say Day 3 is on a low yield. It isn't at my by price. I've been here since 1998. Peter store, by the way. Sorry, I've forgotten to introduce myself both times. So I think the dividends are important. And the really important thing about Data#3 is all of the growth that you've had has been able to fund it from cash flow. And that's a big thing for me as a shareholder is I want to see strong cash flows. There's been no need to buy back. The share price has gone on is pretty high. You wouldn't be buying back at a PE of 30. It doesn't make sense.

Thanks, Peter. Those are certainly part of the considerations we take into account in our deliberations around the Board table. Thanks for that comment.

This seems to have turned into a general question time. I thought it was about the finance. Is there going to be a chance to ask general questions later on.

Yes, there is an opportunity at the end to ask general questions. Okay, fine. Yes, we have sort of let this go on a bit. We might round it up. but then go to Haley. Do we have any online questions? Haley? .

Yes,. There are a couple of online questions. There were a few around AI. So I'll summarize what I think has already been answered. There is a question from Jeff Rogers. We'd like to know if we have a clear pathway to generate profits from data centers and AI factories that aren't part of that traditional Microsoft and Intel office architecture that our government and corporate customers are probably used to and how we're adjusting our sales and customer engagement architecture to address that shift in the market.

Okay. I'll answer that in terms of what I think the question is. And if I don't answer it properly, please just ask again. So we -- when Microsoft invest in their data centers, for example, they're investing in their cloud solutions, whether it's Azure or modern work or the dynamic applications and we're reselling those obviously and implementing those with our customers. As far as data centers are concerned. So when Microsoft make an announcement about investing billions of dollars into -- even into Australia and into data centers, and they're building out that compute power. So we don't play in that market. We're not providing compute to globals, for example, like a Microsoft or an AWS, they would deal directly with the respective vendors in that regard.

However, to help answer the question where I think it might be going is that our customers still have compute power. So whether it's on the PC, on their own server or in the cloud, data the helps the customers to deploy and manage that. we -- and as far as their customers own compute power, that would typically these days rather than sitting in the corner of their building or in a dose in the build, but typically being a a purpose-built data center facility like a ex DC, for example. And so we would supply that server for the customer's application into an XTC and then ideally manage that for them.

So -- so we have a data center practice, and we still have great, great opportunity in the data center space. But when we're talking about data center, we're really talking about providing server and storage and compute into a physical data center and then managing that for the customer.

Does that cover the question?

[indiscernible] for me, I think so. Thank you, I've got another question, though, from Stephen Maine. -- had a question on accounts. I'd like to know when the external audit was last tended, when will it next be tendered? And do any of our directors have any history or association with PwC.

So that's a fairly straightforward answer. The audit was tendered last year. This is PricewaterhouseCoopers first year doing the audit. So we don't tender for another few years yet. And to my knowledge, no directors have any association with PricewaterhouseCoopers. Any other questions? .

That's all for this item of business. .

Okay. We'll now move to the next item of business. Second item of business is to adopt the remuneration report for the financial year ended 30th of June 2025. Please note that the vote on this resolution is advisory only and does not bind the directors or the company. However, when reviewing the company's remuneration policies each year, the Board considers the level of shareholder support received and matters raised by shareholders.

Voting exclusions applied to this resolution as set out in the notice of meeting. As in previous years, targets have been established to produce earnings growth and the management team's remuneration is structured in line with these targets, with a significant proportion comprised of short-term and long-term incentives. These are awarded based on the achievement of appropriate financial and operational targets. We measure remuneration against industry benchmarks on a regular basis to ensure it is set competitively, -- during FY '24, we engaged with an external remuneration consultant to review the remuneration of the directors and senior executives to ensure that the structure and levels of remuneration are in line with the market.

This external review remains current, and we would generally intend to engage an external remuneration consultant for a detailed independent market review of executive and non-executive remuneration every 3 years. I'd now like to invite questions for this item of business. Are there any comments or questions from shareholders attending in person.

Good morning, Steve Mabb. Representing the Australian Shareholders Association today. A couple of quick comments and then to my question. So first of all, thank you for a very constructive engagement and also the opportunities that you gave retail shareholders this year with Brad and Cheri coming and engaging that was part of the reason we recognized you as the most effective shareholder communication company for the year. So congratulations on that. So to my question, we understand you don't give really detailed forward guidance, and we're very supportive of that. I appreciate you're not wasting management's time on predicting things that are inherently unpredictable. And as a result, there's not really detailed metrics in the Rem plan. So we understand that and accept that. Just on the long-term incentive, could you just give us a comment on just give us a comment on why we have 3 years for our long-term incentive plan for management as opposed to a just give a general view there. Thank you.

Sure. Thanks, Stephen. Look, in principle or in theory, 5 years is probably long term, I come from an economist background and 5 years is probably long term, 10 years is probably long term. in economic terms. However, when you come to the tech sector, 3 years long time in the tech sector. And in particular, with technology and the rate of change that's occurring in society in 3 years is a long time to come to grips with. I mean to sort of put 5 years in context, I can only sort of go backwards and sort of say, project back 5 years ago, Five years ago, COVID was just getting underway. -- inflation hadn't taken off and spiked at 9% or 10%. And the Ukrainian war hasn't started, the Chinese conflicts, the Middle East conflicts, all these things hadn't occurred. AI hadn't sort of emerged on the scene.

So it's very, very difficult to sort of cast your mind beyond 3 years in terms of setting LTIs. Certainly, we have -- in terms of strategy, we have aspirations to look out 5 years and beyond. But in terms of something specific like LTI is 3 years a long time in business as it is in politics.

Any other questions? Okay. Are there any questions online?

Yes, Chair. There is a question online from Stephen Maine. Last year, I asked if any of the proxy advisers recommended against the CEO's LTI grant. Could the Chair please share with shareholders his knowledge of what the proxy advisers have recommended on this remuneration report. Also, next year, could he please disclose the proxy votes early to the ASX, along with the formal addresses as this is becoming standard and leads to a more fully informed AGM discussion.

I'm not sure that the practice is becoming standard at all at this stage, and we see no need to necessarily do that. The proxy voting extends up until just close to the AGM, and then there's further voting occurs at the AGM. To give a complete picture, we can only give that complete picture after the voting is finished. And we do that through the ASX and on the website. That gives a complete picture rather than a partial picture. Any other questions? .

That's all. .

Okay. The proxies received in relation to this resolution are now shown on the presentation -- sorry, did I miss.

I have a question about the -- I think it's on Page 25 in regard to the skill matrix of the Board. I think is this an appropriate time to raise this question. Congratulations to the Board and the chair for defining the skills matrix by type and also by the directors name. I've gone to many AGMs. I haven't seen this detail -- while I do see 2 salient things or 2 site trends, the sustainability, 1 and industry sector skill sets are probably not as strong as many other skill sets shared by the directors and the chair. Now is this a concern to the Board and if it is, what do you tend to do? Or does it compare reasonably well with other ICT companies.

Thanks, Paul. Firstly, thanks for the comments about the skills matrix, and we're very pleased with what we've presented there. And I think Stephen's recognized that in the award that we've got. And I think you use it as a bit of an example, Stephen, [indiscernible]. So very proud of that. As your specific comments, Paul. I mean, on sustainability, I suppose that's a bit of a journey for us all. And we're probably being a bit modest there, but that's certainly part of the reason why we brought Diana on board, and she's obviously got 3 ticks there, and sustainability will be certainly something that Diana is going to bring added horsepower to the word with. So I think we've taken some initiatives there to address that. Any apparent weakness we have there. In relation to industry and sector, again, I suspect we've probably been a bit modest. I suspect Diane has been a bit modest there. She certainly has enormous [indiscernible].

You can't find them because they are. Not in detail anyway. With the overall company strategy and the budgets we set. So those financial parameters very much aligned with the budget and the 30% is a series of nonfinancial parameters, generally around sort of culture and people issues, but also some of them are very specific and personal to individual members of [indiscernible],

[indiscernible].

There are general comments, but there is no detail. Something for us to ponder in the future.

So we can turn to the proxy votes received in relation to this resolution are now shown on the screen -- on the presentation slide, shareholders may wish to cast their votes for Resolution 1 now.

Item 3 of today's business is to approve by ordinary resolution for the purposes of ASX Listing Rule 10.14 and for all other purposes, the grant of a maximum of 39,314 performance rights and any fully paid shares issued on vesting of those rights to Mr. Bradley Colledge or his nominee. Mr. Bradley Colledge is Managing Director and Chief Executive Officer of the company and a related party of the company by virtue of him being a director, and so is within the category of persons in Listing Rule 10.14.1.

Accordingly, the company seeks shareholder approval for the purposes of ASX Listing Rule 10.14 and for all other purposes, to grant a maximum of 39,314 performance rights within the terms of the company's long-term incentive plan and any fully paid shares issued on vesting of those rights to Mr. Bradley Colledge or his nominee. The Board has decided to grant these rights as part of Brad Colledge College's remuneration package and in recognition of his contribution to the company. Details of the remuneration package are contained in the explanatory statement, which forms part of the notice of meeting. Are there any questions from the floor on this resolution?

Thank you. I hope I'm not hogging the the questions. On the notice of meeting, and it's in relation to Item 3, the company has attributed the value of $350,000 to rights, which have been determined referenced to in benchmarking and vice began in bread Cole's remuneration. Can you please inform the meeting -- what is the independent benchmarking. How did you go about it is done annually.

So I referred in my comments in the lead up to this, that we had an independent consultant look at this back in FY '24. I -- so that was our last market review. So it's sort of 18 months old. The key recommendation here was in relation to this item, I suppose, at a general level, was the benchmark is sort of roughly 50% base remuneration, 25% LTI, 25% STI. We're not quite there, but we are sort of moving to that over time. It's about -- I think it's about 58% base remuneration for Brad at the moment. But we are looking to lift the LTI component gradually over time. I would say that Brad's LTI component is pretty modest compared to its peers. Any other questions from the floor? Are there any questions online? .

No Chair.

Okay. So the proxy votes received in relation to this resolution are shown on the presentation slide. Shareholders may now wish to cast their votes for Resolution 2. .

Item 4 of today's business is to approve by ordinary resolution that Ms. Bronwyn Morris, AM, who was appointed as a Non-Executive Director by the Board on 1 December 2024. And and retires in accordance with Rule 18.3b of the company's constitution and being eligible, be elected as a director of the company. Brunon brings valuable experience and insight to the Board and her qualifications, experience and responsibilities are summarized in the explanatory statement, which forms part of the notice of meeting. Bronwyn also chairs the Audit and Risk Committee. The directors with Bronwen abstaining, recommend that shareholders vote in favor of the resolution. I'd now like to invite Bronwyn to the podium to address the meeting.

Thank you, Chair, and good morning, all. My name is Bronwen Morris, and it's been a pleasure to serve as an independent Nonexecutive Director of Data Tree Limited since December 24. And I'm also Chair of the Audit and Risk Committee as the Chair just mentioned. The success of Data 3 to date is a testament to the skills talent and leadership within the organization over many years. and more currently, the leadership provided by Brad and his dedicated executive team. The Board of Data 3 continues to strive for the highest standards of leadership and governance. I'm a fellow of Chartered Accounts Australia and New Zealand, and prior to moving into a career as an independent nonexecutive director, I served as an audit partner with KPMG.

I've accumulated nearly 30 years board experience across publicly listed unlisted government and not-for-profit entities. I've worked across the strategic, operational and financial aspects of diverse industry sectors. With my broad governance experience, strong commercial acumen and expertise in financial oversight. I believe I bring valuable skills to your board. I currently serve as Chair of our [indiscernible] Foundation and as an independent Nonexecutive Director of ASX listed Dalrymple Bay Infrastructure Limited, where I chair the Finance and Audit Committee.

I've previously served as Chair of the Queensland division of both the Australian Institute of Company Directors and Chartered Accountants Australia and New Zealand. I have a passion for strong governance and the important role it plays in helping to shape successful short- and long-term strategy. I have the capacity for this role, and I'm committed to dedicating the time and focus needed to Mydata 3 board responsibilities. I look forward to continuing to work alongside my fellow Board members and the talented team at Data#3 to deliver enduring value for shareholders. Thank you for your consideration.

Thanks, Bronwyn. I'd now like to invite questions from the floor for this item of business. Any questions?

Nothing from the floor. Any questions online?

Yes Chair, we have a question from Stephen Maine. It's unusual to have 3 directors up for election at the first time at the one AGM, which recruitment firm did we use? And could each of the 3 new directors summarize their experience of the recruitment process and whether they knew any of our directors or executives before engaging with the recruitment process.

So the recruitment specialists we use were directors Australia. -- based in Brisbane and widely used by a large number of ASX-listed companies and other companies. They have a very high reputation and -- we're very happy with the services they've provided. We used them in December on the lead up to December around October, November last year. And then again, around April, May, June this year. .

As the other part of the question, I'll let each of the directors answer in respect of their experience of the recruitment process in respect of knowing knowing directors. So I mean, obviously, it's fairly clear that Lawrence knew all of us before hand. I don't think there's any need for any further disclosure on that. But if Bronwyn and Lawrence and Diana would like to comment on the recruitment process, very happy for them to do that.

Thanks, Chair. Well, I was recruited at an earlier time than Lawrence and Diana, so they can obviously speak for themselves. But the Directors Australia process, I found to be very, very thorough. I can't state how many people in the pool because I was just a candidate in it, but the end-of-view process was quite thorough with a number of questions we had to prepare not a formal presentation, but to address a number of issues. The opportunities and strategies and risks and so on that we thought the organization may face. And I think I was interviewed by the whole Board, if I recall.

And yes, the process went from there. So that -- I can only speak to my involvement and Directors Australia, I felt did a very thorough process, and I felt part of it. In relation to the question in relation to the Board, I suppose [indiscernible] is a very small place. But I have to say, I don't think I knew Brad or Laurent or Mark before in Diana, he came after me, but we know came across each other many, many years ago before you moved to Sydney.

Mark, I've known since he was in government and I was on a government board, so that goes back an awfully long way. And we've worked more recently on a Board locally on a local government board. But it is a very small place in Brisbane. We will tend to know each other.

[indiscernible].

Okay. My name is Diana land I'm up for election today, too. I'll shortly be speaking to that. But I went through a similar recruitment process to Bronwyn where I didn't know anyone on the board, by the way, in advance. I had met Bronwyn many years ago when I lived in Brisbane running Suncorp's into our insurance business, but I think we'd probably come across each other. But and strange, I had a number in my phone, but I certainly didn't know. And it was a very robust recruitment process, I have to say.

I think the Board interviewed 10 people but had a list of many tens, I believe. And it was presentations. There were a lot of police checks, reference checks. It was, in my view, and I've been through -- I've been on 10 ASX-listed Boards. I would say it's probably definitely one of the more thorough processes.

I just want to concur with Diana and also Bronwyn, the process was very robust. I went through exactly the same process, irrespective of whether knew people or not, went through the interview process and it was extremely robust. I've got nothing else to compare it against other than the robust process that we've had, bringing on board non-executive directors over many years. Thank you.

Could I just add in terms of the process apart from the interviews by the Board. We did give preferred candidates an opportunity to do their own detailed due diligence apart from obviously reading annual reports and ASX releases and things like that. We gave the preferred candidates and opportunity to speak with members of the executive team, particularly our CFO and our Company Secretary, our opportunity to look at minutes of meetings and other material on a confidential basis. So -- the due diligence process was very exhaustive and worked both ways.

The final comment I'd like to make, I think part of the question was about unusual to have 3 people up for election. We did have a Board of only 5. We had -- the Board has only been 5 for several years. We took the opportunity to increase that to 6 as part of the recruitment process in April, May, June to replace -- [indiscernible]. So that was the reason for 1 of them. I can give a quick overview of the other 2 people who resigned during the year. Leanne Muller, who I've already mentioned, really designed for lifestyle reasons. And as I noted, she spent the last couple of months [indiscernible] around the world.

She did very much retire for lifestyle reasons, and her partner similarly took a decision to step back from a number of boards. So that was very much situation. In respect of Susan Forrester, I think for Susan, it was very much a workload issue subsequent to coming on the board of Data 3. She was already at the time Chair of Jumbo Interactive subsequent to coming on the Board of Data 3. She was there and appointed as Chair of South Bank Corporation, which is significant government corporation here in Brisbane, which sort of looks after South Bank on the edge of the river, very high profile, a very demanding role as Chair. And I think with 2 chair roles, she had to prioritize her workload and chose to step down from this role. So that's the reason why there were 3 positions up for election this year.

Any further questions?

No Chair.

Okay. The proxy votes received in relation to this resolution are shown on the presentation slide. Shareholders may now wish to cast their votes for resolution 3.

Item 5 of today's business is to approve by ordinary resolution that Ms. Diana Eilert who was appointed as a nonexecutive director by the Board on the first of July 2025 and retires in accordance with Rule 18.3B of the company's constitution and being eligible, be elected as a director of the company. Diana is a highly experienced director and senior executive and her qualifications, experience and responsibilities are summarized in the explanatory statement, which forms part of the Notice of Meeting. Diana is also a member of the company's Remuneration and Nominations Committee. Directors with Diana abstaining, recommend that shareholders vote in favor of the resolution.

I'd now like to invite Diane to the podium to address the meeting having given us a preview just a couple of minutes ago.

I'm delighted to you're going to be voting in favor of my election. Thank you very much, colleagues. My name is Diana Eilert, and I'm delighted to be nominated for the Data#3 Board. I bring to Data#3 extensive experience as an ASX Director. I've held roles as a Nonexecutive Director, a Board Chair Committee Chair, as CEO and group executive of more than 10 ASX-listed companies in my career. These companies include such well-known names as realestate.com or REA Group, Elders, Super Retail Group, Domain and others. As an ASX director, I've contributed as companies under [indiscernible] 3 IPOs or floats were taken over 4x a number of CEO successions, large acquisitions, mergers, sales, capital raises and many business challenges.

My executive and Board career are steeped in technology and digital disruption. As I mentioned earlier, I was the group executive running Suncorp's entire insurance business here in Queensland. And during that time, I led the transformation of consumer and business insurance into an online world. At News Corp, my strategy team led significant transformation and thinking as newspapers and magazines and advertising went from print to online versions and now to social media. As a consulting partner with IBM and also as a Board member, 1 of my key focus areas has been enabling the strategy, the skills and the capability to transform businesses to multichannel and online and to robustly scale up those digital businesses. I've held roles as a Chief Technology Officer and Chaired Technology Committees. The skills that I bring to Data 3 complement those of other Board Directors. And together, we bring strong Board leadership to the tremendous business and the experienced executive team of Data#3. I look forward to your support for my election. Thank you.

Thanks, Diana. I'd now like to invite questions from the floor on this item of business. Are there any questions? Stephen.

So very impressive and extensive background there, Dana. Given you're going to be the incoming chair of the Rem Committee, from all of that past experience you have, could you maybe just give us a flavor of your general approach to remuneration, the [indiscernible] side of it and how you're planning to apply that Data#3.

I guess I have chaired 5 remuneration committees. So I'm pretty familiar with that. In the end, I mean, this is a tremendous business, and there are highly motivated executives who've been here for very many years. And it's important to keep that momentum and that motivation in place. That said, I mean, there's contemporary reporting requirements and there are some expectations. So we might have to look at tweaking some things. I don't really know what those are. But in the end, it is about keeping those executives motivated and engaged and continuing to drive the tremendous shareholder value that they have. So that's the starting point, I think.

Thanks, Dinana. Paul?

Diana, thank you for your address and I've given the materials on the flight up from Melbourne, so -- so it's everything is quite fresh and vibrant. Congratulations, I think it would be a great asset to the board. I do notice in the skills matrix that you were a very strong things towards technology and innovation. Where would you like to see Data#3 move? Have you got any new direction you would offer the Board in terms of the technology focus.

I think it's fair to say that the company is quite focused on innovating and driving forward in the first instance. But I think new voices always bring new perspectives. And I think that we're just getting into the strategy planning process strategy. So I think there'll be an opportunity for us to all debate and review different opportunities at that time.

Any other questions from the floor? Haley, any questions online?

Yes, Chair. There's a question online from Stephen Maine. There's 2 parts in the first part is more a request. When disclosing the outcome of voting on all resolutions today, including Diana Eilert election, please advise the ASX how many shareholders voted for and against each item similar to with the scheme of arrangement. This will provide a better gauge of retail shareholder sentiment on all resolutions and insight into the chronically low retail voting rate. The next part.

We'll consider the request.

Also -- as a member of the Rem Committee, could Diana give her response to the 10% protest vote on the CEO's LTI grant, which was only disclosed after the debate had finished.

I think that's a fairly unfair question. I'm going to rule that out of order. Do you want to say something?

No, I just think it's an unusual [indiscernible]. I'm surprised to see it when our CEO gets such a relatively low [indiscernible]. That would be my comment. So I would like to understand that.

Any other questions?

That's all Chair.

Okay. The proxy votes received in relation to this resolution are shown on the presentation slide. Shareholders may now wish to cast their votes for resolution 4.

Item 6 of today's business is to approve by ordinary resolution that Mr. Laurence Baynham, who is appointed as a Nonexecutive Director by the Board on 1 July 2025, and retires in accordance with Rule 18.3 B of the company's constitution and being eligible, be elected as a Director of the company. Lawrence is an experienced senior executive and his qualifications, experience and responsibilities are summarized in the explanatory statement, which forms part of the notice of meeting. The directors with Laurence abstaining, recommend that shareholders vote in favor of the resolution. I'd now like to invite Laurence to the podium to address the meeting.

Thank you, Mark, and Hello, again, everyone. It's also great to see so many familiar faces as well. So -- it's been 2 years since I last addressed the data 3 shareholders and announced my resignation as Managing Director and CEO. Since then, observing from an arm's length and detached and my perspective was an interested shareholder. I've been immensely proud of the achievements of Brad and the entire Data#3 team. Back then, I had 100% faith in the team continuing to grow this incredible and iconic business. And this is precisely what's happened.

With over 40 years' experience in the IT sector and 14 years as a fellow of the Australian Institute of Company Directors, I bring knowledge of both opportunities and risk facing Data#3. I will help the company shape long-term strategy and continue to deliver sustainable growth. My role as a nonexecutive director will be to challenge management, constructively and safeguard shareholder value. I believe my extensive network of contacts within the IT sector, both nationally and internationally will be a benefit around the board table. Over the past 20 years, I've actively participated with several advisory boards for world-leading technology companies. And I was inducted into the Australian IT Industry Hall of Fame in 2016 and the HP Hall of Fame in 2023. I'm not sure whether the hall of fame was related to my age or not, but I'm hoping the criteria is a bit more than age.

As defined in the ASX guidelines, I'm not an independent director, but endorse the guidelines, which advocate an appropriate balance between independent and nonindependent directors on the Board. After many years as Managing Director of Data#3, I understand the difference between the executive role and a nonexecutive role. And I know that I can add value to the Board without becoming involved in the day-to-day management of the business. I can assure you that I have no interest in revisiting that role. I have a disciplined focus on governance accountability and we'll work with my fellow directors to act in the best interest [indiscernible]. In addition, I will dedicate as much time as required to focus on diligently fulfilling my director duties for Data#3. Lastly, since the announcement of my appointment, I'd like to thank staff management, customers, shareholders and my fellow directors for their support and well wishes. Thank you. Back to you, Mark.

Thanks, Laurence. I'd now like to invite questions for this item of business. Any questions from the floor?

Yes, I just want to start by saying ASA is very happy to support your election, Laurence and excellent address there. I think you covered off all of the potentially quickly issues well. So thank you for that. Obviously, your knowledge and experience of both the industry and the company is excellent. So simple question. What coming back, what's the thing that you must enthused or optimistic about over the next few years that you think you can help with.

Thanks, Steven. It's actually early days. So being away from the company for quite some time, I am getting up to speed. The biggest thing that I'm enthused about is the people. So technology is always great to be enthusiastic about. But the people are really what makes this business and what makes this business tick. So from my point of view, getting back and understanding the people. We have a board trips planned around the country to see many of our people around the country and staff and customers. I'm certainly looking forward to that. Thank you.

Any other questions from the floor? Any questions online, Haley?

No, Chair.

What a surprise. The proxy votes received in relation to this resolution are shown on the presentation slide. Shareholders may now wish to cast their votes for resolution 5.

Before we close the meeting, are there any other general questions from the floor or online that haven't already been asked. Questions of a general nature. Right, is now your moment in the sun.

3 questions, but you can answer each one of them. I would prefer if you'd like. There's been a number of comments made about awards that have been won or One of them was data [indiscernible] Triumph -- is it [indiscernible]? Is that here you say? Or is it just a -- and it says here, and this was in a Data#3 media release. Our tri-party partnership fuels innovation and delivers unrivaled value to our customers. And that was a partnership with between Data#3 and [indiscernible] Microsoft. I just wondered how that is actually working. And is that relationship exclusive to Data#3 in Australia?

Thanks for the question, Ray. It's -- so [indiscernible] provide backup solutions. And one of the the key areas where where we work with them is providing a backup of mocosoftenvironments. And so that tri-party arrangement with Beam and Microsoft and Data#3 is working really well. We won -- I think the press release was around the partner.[indiscernible] down the back as a couple of our other general managers. So Dr. [indiscernible], we have a relationship with them as we do with a number of specialist security providers. And Microsoft and Cisco, 2 of our largest vendors provide great security solutions within their suites, but we also engage with our specialty security solutions from -- both from a licensing and also from a services perspective.

Is that part of the security. What is it the special security center order? Is that where they fit in?

So the security operations center is around monitoring and managing our customers' environments. And we use a number of tools with that environment. I'm not sure whether we even have that within our security operations center. -- per se, but we partner with them for their solution within customers.

And last question, what liability does Data#3 have if [indiscernible] fails to protect a client from a data hack or other business intrusion.

So you see you're talking about the managed detection and response solution. That's a great question, right? I'll answer it, and then Haley is who our moderator who may also want to -- or Terrence our Chief Legal Counsel, may want to add to it. But security is such a great opportunity for Data#3, but it can also be a risk as well. And I guess, just generally, when we're engaging with our customers, we're providing IT services and solutions to assist the customer to achieve their business outcomes and to protect their environment. .

Ultimately, the customer is responsible for their own environment. And so when we're engaging with our customers, we're very I guess, open and careful around the responsibilities that the customer has and the responsibility that, that Data#3 has. So we're not taking the responsibility for for the customers' environment, but we're providing managed detection and response tools and services to help the customer manage their environment. That cover it?

I think so [indiscernible], yes.

Thanks, Ray. Any other questions from the floor?

Just a quick comment here earlier. I [indiscernible] shareholder I think I did not say to buy at any elevated PE ratio. I think I made myself clear, only if it makes financial sense in terms of the buyback. Now and I would rather get these guys a chance to employ the money that earned at the rate they've been doing. I think it's 57%. Yes. ROE at the moment? I don't know where else -- on the [indiscernible] If you can find a better investment something you do like -- so therefore -- and usually, it is reflected in the share price because unless you guys don't see any growth opportunities. Otherwise, I would try to prefer you employ this capital, instead of paying out the dividends because currently, set-in-payout ratio is about 90%. That's very high. SP1 But I do understand a lot of retirees rely on this. However, using the share price, is it reflected in terms of the business expansion. And the elevated share price will be so high. And as Battista limit example of that. And he said, if you need money, we can sell some of it. It's as simple as that. But again, everybody is different and we can discuss later yes.

And one more thing I wanted to mention, since we talked about 30 years. So this service, one person I would like to mention is Brem Hill, estate. He has actually done a fantastic job. And how do I know? I was actually posted the question into Investor Relations [indiscernible] 2019 actually call me. I was surprised. I said I was CFO. So what -- and he explained me on the server recognition. They had nuances because there were some stuff I couldn't read from financial statement just given the credit to the sky, hopefully histo shareholder. And you guys in touch. Thank you, Brad.

Yes. He still is. Yes. Still in touch, yes. Absolutely. Thanks for those comments. Do we have any questions online, [indiscernible].

We do Chair. Back to AI. Sanjay Patel would like to know how we're building our internal capability with regards to future opportunities, especially with regards to AI opportunities. And just to add to that previously, we had a question from Stephen Maine, who wanted to know our current FTE equivalent and how we expect that to change over time.

Okay. I think I might just address the Steve and remain 1 first because we really addressed that earlier in so much as we're not looking at reducing our numbers because of AI efficiencies. We're more looking at how we can leverage our existing staff and do more in market with what we have. and grow that and continue to improve on our internal cost ratio, but do that in a controlled way. The other 1 was around skilling up of people, I believe. So I guess we're really fortunate so much as -- we are partners with the vendors that are leading the global markets with this in terms of Microsoft and Cisco.

Palo Alto is another and otherwise from a security perspective. But from an AI perspective, all of these software vendors have AI within them. And even our data center partners such as HPE and Dell and then our device partners where the devices that we have here today have a chip that helps with the faster processing of in them and software on them. We achieved technical certifications across all our vendors around the -- around just the technology that they have. And now that, that technology embeds AI within those as our people complete those technical certifications, and we have hundreds and hundreds of individual certifications across the business. That's how we achieve the skilling up of our people within our organization. And because we have some very good people that are already skilled in particular components of our vendor technologies, we're actually able to cross-train them into the AI capability as well.

So you may remember -- 2 years ago, we mentioned about being on the Microsoft early adopter program with Microsoft around CoPilot as well. So our relationships with those vendors sometimes give us early access to the technology, which allows us to scale up our people in advance of the market demand.

Any other online questions?

Have 2 to go at the moment. This question is from Stephen Mayne, who is interested in Data#3's name, particularly in the tag that we have in our name and whether there are any other companies that have symbols in their name as opposed to their brand like Nike uses the wash. He's interested to know what the history of the hashtag is and whether we've ever talked about making a name change to something more conventional.

That's a very interesting question. as the origins of it, and we have in the room, Terry Powell and Graham Clarke, who the founder and also Mark Esler here. I wasn't involved at the time, but the story is in 1984 when the business merged to form Data#3. 1984 was actually the occasion when IBM released its first personal computer. And the first personal computer had a key. It's the first time they had a key with the tag and the 3 on the same key. So that was an example of innovation. And the hashtag is there as a symbol of innovation. So I think it's a very important symbol. And of course, that story is in -- is on the website if you care to read it. And I'd have to say we haven't given any consideration to a name change. We have far more important things to consider.

There's one final question from Sanjay Patel. Is there any M&A activity on the horizon?

Well, there is always activity -- M&A activity swirling around. I think Brad would probably say hardly a week goes by when that an investment bank doesn't knock on the door saying, have we got a deal for you. So there's plenty of M&A activity and opportunities being brought to us. We have a very rigorous process for screening those. And occasionally, something comes up to the Board. To date, we haven't found anything of significant and compelling interest.

Any other questions?

That's all.

All right. With each item of business of this meeting having been dealt with, I now declare that the polls in respect of each resolution will be closed 5 minutes after this meeting ends and formally ask MUFG to count the votes following the expiry of that period. For those that haven't yet voted online, please finalize your votes for each resolution put to the meeting and click on the submit vote button at the bottom of your voting card.

For those of you here in person, if you need assistance, a representative from our share registry, MUFG will be here on hand to help. They'll also collect your voting cards at the end of the meeting. If you require assistance to submit your vote online, please call the help loan number displayed at the top of the screen. I now propose to bring today's proceedings to an end. The results of this meeting will be released through the ASX as soon as possible and will also be displayed on our website, including the video recording of the AGM. On behalf of the Board and management, thank you to everyone for attending Data#3's 2025 AGM, ladies and gentlemen, I now declare the 2025 AGM closed. Thank you very much.

Good morning and thank you for joining us for the briefing of Data#3's FY '25 financial results. I'm joined by Cherie O'Riordan, our CFO, who will cover our financial highlights a little later in the presentation.

For those of you not familiar with us, Data#3 is an ASX 200 listed IT services and solutions provider in Australia and Pacific Islands. Our vision is to harness the power of people and technology for a better future. We have 48 years of experience in evolving our solutions to enable our customers' success, and we partner with world-leading technology vendors. We are delivering the digital future for our customers through our solutions, which you'll hear more about throughout the presentation.

In terms of the agenda, we'll first review the FY '25 highlights and key operational updates, then Cherie will provide more detailed overview of our financial performance. I'll cover IT sector trends and round out with our strategy and outlook before closing with Q&A.

Let's begin with the financial highlights. Gross sales was a record $3 billion for FY '25, up 9% on FY '24, driven by growth across all business units, particularly managed services, maintenance services and Software Solutions. Gross profit increased by over 7% on previous corresponding period to almost $290 million with an average gross margin of 9.6% for the full year, slightly down on the prior year due to the sales mix and strong contribution by the lower-margin software business.

Profit before tax of $69.1 million was up 11.4% and reflects our improved operating leverage. Earnings before interest and tax was up 12%. We delivered earnings per share growth of over 11%, and we're pleased to announce a healthy final dividend of $0.15 per share, providing a total of $0.281 per share, which is an increase of over 10% for the full year and represents a total payout ratio of 90.3%.

Overall, we're very pleased with the FY '25 financial results, a record for the company. We successfully navigated through ongoing global economic uncertainty, federal and state elections and vendor program changes. Our business model held strong, and we remained agile in adapting to these changes and challenges. I'll now touch on a few of our operational highlights for FY '25.

Moving on to Slide 6 and the FY '25 overview. Our company growth continues to build, as evidenced by the increase in gross sales, which exceeds the calendar year 2025 Australian IT market growth rate of 8.7%. Our recurring business has grown to 69% from 67% in the prior year, boosted by growth in managed services, maintenance services and Software Solutions.

This also reflects the ongoing shift by our customers to multiyear subscription and as-a-service offerings. As we enabled success for our customers during FY '25, our customer satisfaction rating also increased. With security still our customer's #1 priority, we increased our investments in security solutions during FY '25. We officially launched our Brisbane-based security operations center this time last year, and many customers have now chosen Data#3 to monitor and manage their IT environments.

We also recently launched 3 new Microsoft managed security services with a focus on managed detection and response, data loss prevention and managing customers' Microsoft Sentinel environments. It is also pleasing that we've been successful in 5 major sectors, including federal, state, local government, commercial and enterprise.

In recent years, we've been able to talk about our 30% growth in security solutions. We now have another 30% growth solution, Device-as-a-Service. The Device-as-a-Service solution includes all stages of the solution life cycle from planning to purchasing and deployment through to management, end of life and refresh. Most are 3-year contracts, which contribute to our recurring revenue, plus the contracts have higher renewal rates.

Another benefit of our Device-as-a-Service solution is that it supports our sustainability initiatives. Data#3 is a 5-star and award-winning HP Amplify partner, winning the Amplify Impact Partner of the Year for ANZ in FY '25. This, combined with our new solar system implemented on our warehouse and integration center are practical examples of our sustainability initiatives.

In FY '25, Data#3 has been busy integrating AI into our business. Slide 10 shows just some of the areas where we have leveraged AI internally, while at the same time, helping over 100 customers navigate the pitfalls and benefits of AI through dedicated workshops. And we'll talk more about this in our strategy section. All of these solutions aren't possible without our world-leading vendor partners. We closed the year in leading positions with our major partners, Microsoft, HP and Cisco. In addition, we were ranked the top partner with other major software vendors such as Adobe, Veeam and Mimecast.

Each year, we receive national and international recognition from our global partners, and we are delighted to have received several awards again this year, highlighting that where we invest, we succeed.

I'll now pass to Cherie to provide you with more detail on our FY '25 financial performance.

Thanks, Brad, and good morning, everyone. It's my pleasure to now take you through our FY '25 financial results. The first slide shows the consistency in our ability to deliver growth in gross sales and net profit over several years as we successfully deliver on our strategic priorities, strengthen our competitive advantages and adapt to new technologies and vendor programs with speed and agility.

We're delighted to report that gross sales for FY '25 were over $3 billion for the first time, representing growth of 9%. This growth was delivered in a landscape of challenging macroeconomic conditions and federal and state election cycles, which caused some uncertainty and delayed decision-making by customers. Our PBT of over $69 million was up 11.4% on the prior year and was supported by relatively stable gross margins and improved operating leverage, which I'll provide further detail on later in the presentation. A final dividend of $0.15 per share was declared by the Board, which equates to a full year dividend of $0.281 per share and a payout ratio for FY '25 of 90.3%.

Before moving on to the financial results by line of business, I'd like to inform you that during the year, the group undertook a review of its accounting policy relating to the group segment reporting. It was determined that the group is comprised of 3 operating segments: Software Solutions, Infrastructure Solutions and Services; as this better aligns with internal reporting structures and how management reviews operations in addition to providing enhanced transparency of disclosures.

These 3 operating segments or lines of business will supersede the previous terminology of reporting Product, that is Software and Infrastructure combined, and Services. You'll also note a new profit metric reported for each segment being management profit, which is effectively net profit before tax and corporate allocations. It should be noted, however, that Data#3 remains a highly integrated business with a large volume of cross line of business sales and costs. Therefore, while it has been disaggregated to the greatest extent possible, some financial information presented by segment may be blended in nature.

Moving on now to the results by line of business or operating segment. This next slide provides an overview of the FY '25 gross sales generated by each of our Services business units as well as the Services gross profit, gross margin and management profit. Services gross sales of almost $400 million were up 6.7% on FY '24 and driven by a strong performance by our maintenance and managed services business units of 8.6% and 25%, respectively.

As communicated with the half year results, managed services continues to onboard new contracts and customers, and we've had some success with expansion in the mining sector during FY '25. Maintenance services had a stronger first half due to the lumpiness of some larger deals, particularly with enterprise agreements.

Our Consulting, project services and people solutions business units were impacted by economic uncertainty and the Queensland state election this financial year as customers delayed infrastructure and transformation projects, and we saw a temporary slowdown in public sector demand for contingent labor.

On balance, our Services business performed well with gross profit growth of 7.4% and an improved gross margin to 36.6% with the growth in the higher-margin business units. Management profit increased 10.5% to $32.2 million, which was pleasing considering the aforementioned headwinds faced by some areas of this business during the year. We also continue to make system and people investments in Services to deliver future growth.

Moving on now to our Infrastructure Solutions FY '25 financial result. After finishing the first half down almost 13% on PCP, we are delighted to report that the business finished over 4% up for the full year. The second half saw a ramp-up in end-user compute sales, fueled by Windows 11 related upgrades and device refresh cycles.

We're also seeing solid sales activity in data center and networking. With renewed focus on improving deal margins, Infrastructure gross profit grew 10% on FY '24 to over $71 million, and gross margin improved from 11.8% to 12.5% during FY '25. Most pleasing was that management profit of $17.5 million was up 27% on the prior year as we improved operating leverage through the automation of ordering and invoicing processes and following a restructure of this business in the first half.

The next slide provides an overview of our Software Solutions results for FY '25. Gross sales hit $2 billion for the first time and were up almost 11% on the prior year. Sales were boosted by demand for security software products, cloud subscriptions and Adobe, predominantly in the public and education sectors.

Software gross profit of $72.6 million was up 4.3% on FY '24 and average gross margin decreased slightly from 3.8% in FY '24 to 3.6% this financial year. This was driven by some larger, more competitive deals done at lower margins across a range of vendors during the year. Management profit for the Software business increased almost 8% in FY '25 to over $38 million with improved operating leverage through automation, process improvements and cost management.

Slide 18 presents a summarized view of our FY '25 statement of comprehensive income, noting that statutory revenue includes adjustments made under the revenue accounting standard to present our software licensing and vendor-delivered maintenance support sales on a net revenue basis. There has been no change to accounting policy this year other than to segment reporting, as mentioned earlier.

Operating expenses increased just over 6% on PCP, driven by wage inflation of around 6% after stripping out $1.1 million in one-off redundancy costs, increased investments in IT projects such as a cloud solutions provider platform and a new payroll system and higher software licensing costs related to new platforms and cloud consumption.

Interest income earned was approximately $10.2 million, up over $500,000 on the prior year. We are currently forecasting interest income of about $7.5 million for FY '26, assuming an average cash position similar to FY '25 and a few interest rate reductions throughout the year.

The next slide shows our summarized consolidated balance sheet as at 30 June '25. Key callouts include the usual inflated cash, trade receivables and trade payables balances at 30 June each year, resulting from the May-June sales peak and which subsequently reduced in Q1 of the next financial year as debtors are receded and vendors are paid for the products sold.

Net cash flows from operating activities were an inflow of $126.3 million in FY '25 compared to an outflow of $86.2 million for FY '24. This is due to a larger number of May-June sales being invoiced and paid pre 30 June in FY '25 compared to the PCP. Investing activities in the current year included some IT project costs capitalized as software assets, including those for the cloud solution provider platform. The last call out on the cash flow and our working capital is that our average daily cash balance increased from around $246 million in FY '24 to about $267 million in FY '25.

The final slide in this FY '25 financial overview supports our internal focus in recent years on steadily improving our internal cost ratio, a key internal measure of operating leverage. In FY '25, our internal cost ratio reduced to 79.7%, down from 80.6% in the prior year. The reduction was driven by a restructuring of our Infrastructure Solutions business in the first half, in addition to various automation and AI-related initiatives, system improvements and effective cost management across the business.

Thank you, again, for your time this morning, and I'll now pass back to Brad to cover IT sector trends and strategy and outlook.

Thank you, Cherie. Well, let's take a few minutes to review technology industry trends plus our strategy and outlook. In calendar year 2025, Gartner expects Australian IT industry spending to increase 8.7% to approximately $147 billion. Sales growth generated from software is expected to grow at 13.4% to nearly $46 billion, while devices is expected to grow by 9.1%, which is substantially up on the lower-than-expected growth of 5.9% that was experienced last year. The projections that both software and devices are up for 2025 are good news for Data#3 as they are core offerings.

IT services growth is forecast to be steady at 7.2%. In the last 12 months, our services growth exceeded this rate, and we expect to do so the same in FY '26. Communication services is lower at 3.2%. However, this is a large sector, including a lot of telecommunications equipment. We expect to see more positive growth in this sector in the areas in which we engage such as networking.

Data center is expected to grow by a healthy 11.3%. While much of this gain will be seen in the hyperscalers such as Microsoft as they continue to build generative AI processing capability, it means additional capacity from our vendors to sell into customers as part of our integrated solutions. We also expect customers to continue to invest in their own data center capability and provide additional processing power.

Let's explore a summary of our strategy before reviewing the outlook. Our strategic priorities drive our strategy. This includes: our solutions, developing solutions and services that deliver customer success; customer experience, differentiating Data#3 through the experience we deliver to our customers; operational excellence, connecting and simplifying Data#3 to deliver an agile and efficient business; and people and community, connecting Data#3 with its people and the communities in which we operate.

Our customer experience combines customer segmentation and digital experience that ensures customers receive access to the right resources at the right time. This is a unified experience for customers to gain secure digital access to the Data#3 solutions capability. Customers want more digital engagement combined with in-person engagement, and that is what we're delivering in FY '26.

Our solution sets and lifecycle services capability are where we will continue to focus and invest in FY '26. It is our ability to integrate these solutions through the solution's lifecycle, that is one of our competitive advantages.

With AI pervasive across all our solutions, it provides significant opportunity for FY '26. Let's look at an AI customer case study. Our team worked with Penrith City Council on a Microsoft Copilot Readiness Assessment to drive real business value for the customer, working with the customer to help them understand the risks associated with AI, including data governance and security, understanding the importance of change management, and most importantly, understanding the use cases where Copilot could be deployed to increase efficiency and help council employees to deliver exceptional services to the community.

Data#3 is another example of an AI case study. We are an extensive AI user ourselves, helping us to gain operational efficiency and increase sales. We have use cases across finance, HR, IT, cybersecurity, sales and customer experience. Through our use of AI, we gain benefit from the use of the technology, plus gain valuable experience to apply this knowledge to our customers.

While Microsoft has decreased channel incentives for enterprise agreements, we're now well into our transformation journey. Microsoft is rewarding partners for focusing on the cloud solution provider program, Copilot, security and Azure migrations. We're having success in all of these areas. We also had success with our other key partners, and our plan is to still mitigate the downside in enterprise agreements during FY '26.

We expect headwinds for Software in the first half of FY '26 with recovery to a similar position to the previous corresponding period for the full financial year. We expect continued growth from Infrastructure Solutions during the FY across devices, the network and multi-cloud. We expect growth in managed services and project services based on additional services capability and offerings.

While we plan for growth in people and consulting, it's not without its challenges as the public sector continued to in-source. Consistent with previous practice, we are not providing specific guidance for FY '26. 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 sustainable earnings growth for our shareholders. In summary, Data#3's agility, capability and partnerships position us well for continued success.

Thank you, and we'll now open for Q&A.

[Operator Instructions] Your first question comes from Apoorv Sehgal with UBS.

A couple of questions for me, just related to some recent Microsoft developments. Firstly, Brad, can we talk about this Microsoft ECIF program, which I think came out a month or so ago. So my understanding is, it's related to Microsoft incentives for FY '26 for Aussie resellers. And like what I've heard is that they're pushing Copilot really hard, but it's with a focus on much larger enterprises, like typically like 1,000-plus seats. Can you just talk us through what is this ECIF program? How is it different to the changes Microsoft put through from 1st of January? And what that all means for Data#3 going forward?

Paul, thanks for the question. Just to, I guess, clarify, so ECIF is End Customer Incentive funds. So, it's an incentive for the customer for -- typically larger customers who make a very large investment in Microsoft technologies through their enterprise agreements typically, well is the enterprise agreements as opposed to cloud solution provider agreements, where they make a large investment in Microsoft Technologies and then Microsoft provide an ECIF, an End Customer Incentive Fund to help the customers to deploy and use technology.

So, the ECIF can be used by Microsoft partners or in fact, Microsoft themselves to help the customer on that road to piloting or implementing the solutions that they purchased. ECIF has actually been around for quite some time for many years. It probably was caught up in some of the most recent blogs from Nicole Dezen, the Microsoft Partner [ Lead ] Worldwide, where she may have mentioned ECIF in relation to a number of other things.

So, it's not new for us. But what it does do is it provides essentially revenue opportunity for us because with those ECIF funds that Microsoft are providing, if Data#3 provides the implementation work, for example, or the pilot, we're effectively invoicing Microsoft in that regard for the use of the ECIF funds and the customer gains, the benefit.

Does that address the question, Apoorv?

I think so. I mean, so net-net, if I interpret that correctly, from Data#3's perspective, it's not a net negative by any means into '26 from those -- that ECIF program?

No. In fact, the more ECIF that Microsoft provides to customers, the better for Data#3 because we're able to essentially treat that as Services revenue if we're able to partner with Microsoft and the customer on delivering that.

Okay. But wasn't -- sorry to push on this, there wasn't any sort of change in the ECIF this year because I thought maybe they were pushing for bigger customers or more on the Copilot side of things? Or is it kind of just what it is normally?

Well, it is what it is normally, although they have been looking at extending it to the cloud solution provider program, but we haven't seen any evidence of that as yet. So, it is typically linked to the enterprise agreements and those larger customers, particularly in public sector that are making substantial investments in Microsoft technology.

Got you. Okay. The second development, which I think came out a couple of weeks ago, I was reading that Microsoft announced some pretty material price increases where they've kind of eliminated discounts on enterprise agreements. Is that right from your perspective? And could that be an incremental positive as well for Data#3 given that at least some of your customers are still on EAs. So, if there's been a price increase, I presume that might flow through for you guys?

Potentially. It depends again on the nature of the enterprise agreement. So, you'll remember that commercial -- matter of fact, commercial enterprise customers, Microsoft invoice those customers directly and we receive a rebate. So that's why there's been a lot of discussion around the rebates because when Microsoft reduced the rebates on the commercial enterprise agreements, that's the only leverage that we have really outside of providing services.

So, decreasing -- but in the public sector, for example, we still have a buy and sell scenario. But the -- so what Microsoft have announced is the removal of the levels, the levels A, B, C and D, which set the different pricing levels. And so, we'd expect customers to now move into a, almost like a negotiating phase with Microsoft; rather than just getting their respective level, they'll need to negotiate with Microsoft. And if they don't -- if they're not successful with that, then they will be at a higher price level than they may have previously been.

The opportunity for Data#3 is that in in the public sector, for example, it would have been providing a margin on a higher-priced item. But because Microsoft invoice directly in the public sector -- in the commercial sector, it doesn't really make a massive difference. However, what it does mean is, it really takes the price advantage away to a large degree unless the customer does negotiate an agreement with Microsoft around the difference between EA and CSP.

So, you might find that it provides a better market for Data#3 to help our customers to migrate from enterprise agreements to cloud solution provider agreements where there is better value for Data#3. Plus, we have, as you know, a very extensive licensing business with our licensing consultants and we'd expect that with this complexity that Microsoft have introduced, then that will provide opportunity for our licensing consultants to work closely with the customers to determine how they can have those negotiations with Microsoft.

Understood. And then, just one final question, please, Brad. If I just put it all together from a gross profit perspective then. So, I mean, at the group level, you've done 5% gross profit growth in the second half of '25. You did 10% in the first half. So, I'm guessing that slowdown is a bit -- largely related to the Microsoft transition impact that started on the 1st of January. So that mid-single-digit level you've done in the second half, is that probably more or less fair for first half '26 as another 6 months of that impact comes through before you're expecting for a bit of a rebound probably second half '26? Is that kind of the framework for us to be thinking about it?

So, [ I think ] you said it would be similar to like high single digit. It depends -- I might just break it down. The last couple of slides of the deck was around those 3 areas in terms of Software, Infrastructure and Services. So, from a Software perspective, we actually expect Software to have, as we call it, headwinds in the first half. So, Software could actually go backwards in the first half, and we plan to recover over the full financial year to be at a similar level to the previous corresponding period for the previous financial year.

So, you'll know that because the incentives decrease started from the 1st of January, we've already dealt with half of that from January through to June. But all our customers that have anniversaries and renewals from July through to December, we're still managing that, and that is quite a large revenue component for us. And so that's why we expect a decrease from a software perspective.

From an Infrastructure and Services, it's business as usual. In fact, there's great momentum with both Infrastructure and Services, and we expect growth from both of those businesses in the first half and second half. So, the Software -- to summarize, I guess, the Software business will decrease the growth percentage for us in the first half more so and to a lesser extent for the full year.

The next question comes from Edward Woodgate with Jarden.

So, I just wanted to talk initially about the consulting revenue. So, that was down slightly, but I understand that was mostly due to the impact of state election. If you were to look at the rest of the country, is there any sort of trends you could talk to in relation to business aspects ex-Queensland?

Yes, mainly in Canberra. So, Queensland is by far the biggest territory for all business aspect and our consulting business and Canberra is the second. And they're the 2 that have the biggest public sector influences. And last year in particular we saw disruption with that with Queensland and federal government with a lot of in-sourcing activity. And we do expect that to continue.

So, I guess our opportunity is to expand our customer base where we can. Obviously, it's easier in Queensland than it is in federal government. But we do still have opportunity, particularly around outcome-based initiatives as opposed to just putting consultants in at a daily or weekly rate, if that makes sense.

Yes, that makes sense. And then also, it was pleasing to say product revenue was stronger than our forecast and the Street had as well. So, just be interested to understand the dynamics there. Did you benefit partly from a deferral of revenue in the first half? Was there any underlying improvement in demand trends for hardware? And also, have there been any deals that have been deferred into '26 for services or products?

So the very first word that you said was really hard to hear. Was it revenue from Infrastructure? Is that what you said or...

Yes, sorry. Yes, Infrastructure and Hardware.

Right, right. So -- yes, so in the first half, in particular, it was affected by the various elections, but also there was still -- it seems like so long ago now, but first half of last year, we still had relatively higher interest rates and customer sentiment wasn't where it needed to be. And we -- so we had lower overall growth. In fact, we had decline from an Infrastructure perspective in the first half last year.

And then into the second half, we saw a rebound with that. And as interest rates started to ease, customer sentiment improved, and we had a much better second half for our Infrastructure business. So, we're expecting that we will continue momentum with the infrastructure business into the first half of FY '26 and beyond.

Okay. Great. That sounds promising. And just quickly, apologies if you mentioned it, I might have missed it, but is there any sort of guidance you can provide on interest revenue for the first half of the full year? And then would you mind calling out what the average cash balance was for the -- for FY '25?

Yes, sure, Ed. So, I advised that the forecast for interest income for FY '26 was around [indiscernible]. That's usually weighted to the first half. Average cash, I did [ fall out ] as well, sorry, let's jump into that. So, we had about $267 million in FY '25, and I've assumed that carries over into FY '26, just with the potential changing profile of the software revenue, if we successfully convert some EAs to CSP, the top line may come off slightly. So, I've just assumed average daily cash is consistent with this year for next year.

And so, just to clarify that, the conversion of those, does that have a negative impact on cash?

It might just flatten our cash position for at least the next 12 months, just while we work through the Microsoft transition and [Technical Difficulty] sales mix.

Yes. And so, if you were to have got more than expected or less than expected, I guess that has a dampening -- kind of a dampening impact. So, if conversions are stronger, then that's good for your business, but your interest revenue will be lower and if conversions are weaker, it will be offset by higher interest revenue. Is that the right way of thinking about it?

Yes, potentially. It's still to be seen, but I can give an update with the half year results if it's wildly different to expectation.

Your next question comes from Chenny Wang with Morgan Stanley.

Maybe just first one, more broadly on customer sentiment, budget and decision-making. I think it's been pretty well known over the past 18, 24 months that it's been a bit of a tougher backdrop. So, just kind of interested in how you're seeing that backdrop today and also maybe how that differs across customer segments, so across your small, mid and large customers?

Yes. Thanks, [ Chang ]. Thanks for the question. The customer decision-making that we've referred to over recent times has been as a result of 2 factors. One is the IT environments and governance and all of that becoming just more complex. So, the number of decision makers within the customer has increased substantially. And whereas a few years ago, it used to be 2, 3, 4 people would be able to make the decision to move forward. We're now seeing 10, 11, 12 people involved in the decision-making process for our customers.

So that, by its very nature, delays the decision-making and makes it more drawn out. That won't go away. That looks like that will continue. As far as customer sentiment is concerned, though, in terms of actually moving forward with projects and having that compelling reason to get everybody on the same page and move forward with their purchases, that is improving, and we've seen that since the start of the calendar year with interest rates easing. So, we expect that, that will continue to be good for the market.

As far as the different segments are concerned, obviously, we're large in the enterprise and public sector space. In the mid-market, the mid-market seem to be able to move forward with decisions a little bit quicker than some of the enterprise customers for those reasons and there's less people involved in the decision-making process. So that's a good thing. And we expect the sentiment to continue to improve in mid-market.

And in the small business, we don't really play in that area. So, the retail and SMB, any organizations that really with less than 50 to 100 devices, while we do sell to that market, it's not really a focus area. So that won't affect us too much. Does that provide some color to -- the answer to the question for you?

Yes. No, that's super helpful. And maybe just a second one. In your opening remarks, you talked about the continued growth in managed services. Maybe could we get an update on that pipeline? I guess over the past few halves that you kind of talked about the momentum across managed services, and the pipeline in particular, continuing to expand every half. So, just kind of how you're seeing the broader managed services market? And also, any questions you may have -- sorry, any comments on competitive intensity and discounted pricing? Any of that would be super helpful as well.

Okay. I'll just address the first one first, and then we might come back to that second one. So, as far as the managed services growth, yes, we have done very well with our managed services over the last couple of years, and we had a 25% growth last year. So, we're continuing to invest in managed services.

And you can almost break out managed services down to 2 offerings, if you like. Overall, is that enterprise managed services where we're managing many vectors for the customer from their network to their data center to their devices and really outsourcing a lot of their IT infrastructure. So, we're investing in more sales and marketing capability there.

We already have very good delivery capability, and we'll just scale the delivery capability as we need to. And we also spent some investment on systems and tools over the last couple of years with managed services. So, we expect that enterprise managed services business to continue to grow.

And then, we've also been busy building out packaged managed services. So, this is managed services for specific things. And I mentioned around some of the Microsoft managed services that we've developed around managed security. We're also developing out additional packaged managed services across the network. And of course, I mentioned the Device-as-a-Service, which is not just the device, but a wrapper of managed services around it as well.

So, we are going to continue to invest in managed services over the period because we see good growth potential there. The second one, could you just repeat that? I think it was about pricing confidence.

Yes. Just in terms of like competitive intensity and yes, the broader landscape there, whether competitors are discounting and how kind of price looks like?

And you're not referring to just managed services there, you're referring to.

Sorry, just within managed services.

I see. So, look, managed services is always very competitive. So, we're not seeing anything unusual that we haven't seen in the past. For us, it's a matter of getting the right messaging across to the customers -- and one of the -- I'll say unique because we are #1 with those top vendors that I mentioned before from a product and solutions resell perspective. It's where other managed services providers are just providing a managed service. We've also got that -- those vendor relationships as well.

So, for us, it's about articulating our value to the customer and taking our value propositions to the customer where we can improve their operations rather than just getting bogged down into a competitive bid for something that the customer has determined that they need to be managed. So, it's really sales 101 and solutions delivery and focusing on the things that we do well. And if we do that, then we should maintain our margins.

Your next question comes from Nick Harris with Morgans.

Appreciate the call. I just had 2 really. One was just to understand your kind of OpEx going forward because it looks like it came back in the second half of '25 versus the first half as you've obviously adjusted your cost base given what's been going on with the incentives. I'm just curious to understand, as we think about the year ahead, is that kind of the right base to run off? Or might you be putting additional investment into the SMC side of things? I'm just trying to get a kind of directional feel because it's been a bit lumpy over the last 2 halves. And then the second one was maybe a question for Cherie, which was just around the software assets. I saw there was a bit over $1 million of payment for software assets in the cash flow. Is that a customer thing? Or is Data#3 doing something with that investment? And if it is Data#3 specific, could you elaborate, if possible?

Yes. Thanks, Nick. I can deal with the second question first. So, most of what you see in the software asset capitalization for FY '25 related to the build of the cloud solution provider platform to service the CSP customers going forward. So, that was an internal investment. We had a third party help us with that as well as internal staff time, some of which was capitalized. And then in terms of the OpEx outlook for FY '26, I'd expect increases in staff costs to moderate around the 5% to 6% mark for next year, which will predominantly be wage inflation. I don't expect huge increases to headcount numbers for FY '26. But as always, any increases would be predominantly in billable headcount and/or services staff to deliver work one.

Otherwise, general OpEx, I think overall, including staff costs, we had an increase of about 9% this year. So, I'd probably expect maybe slightly less than that, but probably similar levels. So what we're going to maintain the software staff base and potentially redirect staff into those higher growth areas. If any sort of actions are required after that initial 12-month transition period, then we'll reassess.

Your next question comes from Ross Barrows with Wilson Advisory.

Just one question, a couple have been answered already. Maybe just some more color around the incremental government in-sourcing or internalization that I think you referred to earlier. Could you just elaborate on that a little bit and maybe approach the answer from 2 angles. One is just kind of around any segmental observations you can make, but also whether there's any impact from AI solutions that they're using being more efficient and just having any impact on Data#3 at the margin?

Thanks, Ross. Yes. So the government in-sourcing is no change to last year. We actually saw this last year. And you also see it more so in -- well, I guess it depends on the customer. Queensland government with the change of government, there's always a move to move from contractors to in-sourcing to try and save some costs and provide benefit to public sector until they realize that they don't have the skills or the budgets to be able to execute on their requirements, so then they have to go back and start using contractors again. So it's a bit of a cyclical story, and we've seen that in Canberra as well. What -- where we do then have success, of course, is still around the outcome-based projects, as I mentioned earlier. So the reason for mentioning that is it does impact our People Solutions and our BA consulting business the most as opposed to managed services and professional services or project services.

So, we're still planning for growth for both People Solutions and BA, but we're just calling out that it certainly does make it hard when governments continue to try and in-source rather than working with local partners. On the second one around AI, the comments really had nothing to do with AI. I think the government is like a lot of organizations are certainly trialing AI in different -- around different use cases, but we haven't seen anything affect where Data#3 is working at least in the customers in terms of reducing headcounts or even cutting contractors because of the use of AI.

And I guess a lot of what we do is the higher-value services as well as opposed to -- we're not really providing even data entry staff or any of those sort of lower level tasks, we're providing more IT consultants. So we wouldn't expect that to affect us too much at least in the short term.

That's great. And maybe just a follow-up on AI, if I can. Obviously, you've had some exposures to that being -- getting the early access that you did and you have called out how you're using it today and you've got benefits. It tends to be more qualitative in the commentary that you've made. Are you able to make any quantitative comments around the savings you've made or improvements of saving 10% to 20% of time in certain tasks? Maybe put some numbers around it, if possible.

So I guess the -- overall, the numbers are reflected in our operational efficiencies. It's reflected both in terms of cost, but also better service levels. And you also saw that our customer satisfaction increased as well during the year. So, in terms of providing individual dollar amounts per individual use cases, we won't be sharing that necessarily to the market. But we actually do work both internally on our business cases around the ROI and with our customers ensuring that there's appropriate ROI, which could be financial or it could be a better outcome. So I don't have really a level of detail that you're probably looking for there, Ross.

Your next question comes from Apoorv Sehgal with UBS.

I just wanted to follow up on the -- Cherie, just the staff cost comment. So, you're saying probably up 5% to 6% in FY '26. But first half versus second half, like should the first half '26 be maybe closer to a flattish or low single-digit outcome, just given you have the benefits from the redundancies and automation projects that played through in the second half result just gone by. Presumably it needs to annualize in the first half. So I was just wondering if like it's a case of first half staff costs are up like very low single digit and then second half is up kind of high single digit and you blend out at kind of 5.6% for the full year.

Yes, I think that's probably a fair assumption, I think, sorry, we don't look at our business half-on-half as much as you guys do. But yes, I think that would be fair given the redundancies that occurred in the first half last year. Yes.

Okay. Got it. And then I've heard some of these like big global services type companies have been shedding staff recently. Is that something you've seen? Is that an opportunity for Data#3 to maybe hire people from some of those competitors? Are there any market share opportunities that have arisen from that as well?

Yes, quite possibly. And yes, we have. So, we have hired a couple of excellent resources, thanks that for, and we do see it as a good opportunity for us.

Okay. And there's one final question, just on Copilot, Brad. How has that product performed for you in the last 6 months? Just like some feedback that I've just heard is that Copilot in Australia hasn't quite been that successful. Have you -- what has been your experience? And how meaningful is Copilot from an incentive perspective compared to 365 and Azure?

So, 2 questions there. So, our use of Copilot has been as expected be having access to the technology early. We've been able to, I guess, have our people ramped up and trained and using it very, very efficiently and effectively. So, it has provided a great benefit for us. And the second piece of that was around -- what was the second piece again?

Just from an incentive perspective, like [ GGP ] dollars perspective, you've got Azure, 365, Copilot are 3 kind of important Microsoft products. How material actually is Copilot versus those 2?

Yes. It's -- I guess the first thing is that the Copilot for M365, which might be what you're referring to. But as you know, there's also a Copilot for sales, there's Copilot for developers. There's many different types of Copilot. So, it is becoming very, very pervasive. The other piece that sort of gets lost in the marketing for Microsoft is the Azure AI. And we are also using Azure AI and Azure Foundry very extensively within Data#3 and with our customers as well. So, a lot of customers' data is based in Azure. And so a true AI consultancy, if you like, is not just looking at where Copilot touches it, but where other tools and systems touch it as well.

So we're already seeing some good return from the channel incentives around Copilot and the various forms of Copilot, but also with Azure consumption and Azure AI and it's becoming more and more material. So I can't talk to the relativity because I don't have the reports in front of me. But I guess the most pervasive software has traditionally been the M365, which was your Office and your Windows. And then over the last literally 10 years, Azure has -- the Azure revenue has been incredible and the growth has been incredible. So there's your 2 big, I guess, revenue generators and incentive generators. And now the AI is going across Azure and M365. So we're -- while we can measure the individual incentives, we really look at the clouds, the 3 clouds that Microsoft have got, including their Dynamics 365 cloud and how AI, whether it's Copilot or Azure AI is included within those numbers as well.

So, it's certainly -- Microsoft has put a lot of investment behind it and the incentives are very attractive.

Your next question comes from Adam Dellaverde with Taylor Collison.

Just a question on the end-use computing. That was a massive hardware number in the second half. Are you able to just sort of expand on what you're seeing there in terms of sort of PEC mix, ASP, AI PCs, that kind of thing? And where you think the channel is at in terms of getting those computers upgraded before the expiry date on Windows 10?

Yes, absolutely. The -- as we expected, the devices number, and I mentioned the Device as a Service offering as well in the presentation. But even just our device numbers were well up in the second half, which was pleasing because the industry in general were a bit disappointed with the number of upgrades that customers were making during calendar year 2024. So because a lot of customers didn't upgrade during 2024 and have let their run a bit late, we actually still see even though Windows 10 support will expire in October that there will be a number of customers that still haven't upgraded. So we still expect a great opportunity in this current half, but also into calendar year 2026.

In terms of what we're seeing in terms of the mix, the number of AI PCs is just naturally improving as more devices become available from our vendors and the price points are reasonable for those devices as well. We sell into many markets, everything from education with very low-end devices that don't have any real AI embedded into the devices through to the very advanced enterprise systems that have AI chips with them and also AI software installed on them. So, we are seeing that percentage steadily increase as customers replace their fleets, and that might be on the back of the Windows 10 to Windows 11 refresh or it could be just a general refresh requirements.

So certainly, AI PCs is -- the percentage is increasing as we progress.

Okay. So, if I'm thinking about the set-up then, we're kind of coming from this period where we were talking about delays or patchiness and also we had Windows 10, what was going to happen with the end of life. Now looking forward, we've got quite a lot of infrastructure happening in Queensland in other sectors, hospitals, schools and we've got this end-use computing. So, there's really quite a strong pipeline for that part of the business. Am I reading that right?

That's absolutely correct, Adam. Yes.

Yes. Okay. And then just on the software side, I'm just kind of curious, I know we're kind of now lapping in and starting to see what happens on some of these renewals. And there's also that whole of federal government contract, which comes up, and there's been a lot of noise around that because people feel like you're getting an edge with Copilot into government. What are you thinking -- I'm appreciating we're in a public forum here, but what can you say around contingency planning on that if that does get split up? And also, what are you seeing on the competitive intensity on some of these renewals for customers? I'm thinking the globals are coming in and being quite pointy trying to win work or at least I'm hearing that. Any comments there?

With the federal government renewal, I can't really talk to that. As far as -- as far as that's concerned, we'll play the ball that's in front of us. And we've been very, very good at showing our value to the federal government. So when that does come up, we will be putting our best foot forward again for that in whatever form that is. And there's been no indication that, that form will change at this point in time. From a competitive perspective, we're seeing that our direct competitors in the software space have their own challenges, particularly in the U.S. and also in the U.K. Those large globals are exposed to a larger degree than Data#3 is. So – so, we're focusing on our customers locally, and we're having great success with our local customers because we're a local business headquartered in Brisbane, Australia, and we've been agile and working closely with our customers, unlike some of the globals are able to do. So we still feel that we're very well placed competitively.

Your next question comes from Edward Woodgate with Jarden.

Just quickly, I just wanted to follow-up on the 5% to 6% employee cost growth. Is there [ featuring ] any capitalization in that? And then also just in relation to the capitalized amount for this year, they -- did you have the staff in place last year? So I guess if you haven't capitalized with that, would you otherwise have expensed that capitalization?

Yes. So, only a small amount of those capitalized costs was internal time edged. The vast majority of it was third-party consulting, so not a material impact on staff costs. And sorry, you're a little bit crackly there. What was your first question around the 5% to 6%?

Is that assuming further capitalization of staff costs?

No, no. That's not factored in, no.

Well, it looks like we're at time. So, we might need to close off the Q&A at this point in time.

Sure. There are no further questions at this time. So, Mr. Colledge, please go ahead with the closing remarks.

I think we could just close it off. So thank you very much, everybody, for joining us today.