Audinate Group Limited (AD8) Earnings Call Transcript

I'm Josh Rush, I'm the CMO here at Audinate, and I'm joined today by Sean Wargo, who's the VP of Market Intelligence for AVIXA. AVIXA is the main trade organization in our industry, and we work with them on a number of different fronts, not just market intelligence, like we'll be talking about today, but we also work closely with them on training, obviously, events and a number of different areas. We've invited Sean to come talk to us today because I think there's been a desire to learn more about the AV industry overall, and to understand the trends, the vertical markets and then, ultimately, where does AV over IP and what Audinate does play into that. So Sean's been kind enough to give us some of his time today, and he's going to run through that. In terms of the format for the event today, I'm going to turn it over to Sean. He's prepared about a 15- to 20-minute overview of the AV industry. So we'll run through the prepared slides. And then I'm going to do a little bit of Q&A with Sean and drill down in a couple of different areas. And then we'll turn it over to questions that folks in the room might have as well at the very end. The session will be recorded. So if you miss parts of it, don't worry, we'll make this available through our investor website after the session is over. So with that, Sean, why don't I go ahead and turn it over to you, feel free to introduce yourself, and we can go ahead and kick things off.

Great. Thanks so much, Josh, and thanks for joining us, everyone, today. Sean Wargo, Vice President of Market Intelligence here at AVIXA. Just to give you a little bit of background about us, who we are and kind of what we're offering today. We are perhaps best known, as the acronym says on the screen here, Audiovisual and Integrated Experience Association, perhaps best known for our CTS certification for those professional AV who are working in the industry and looking to get credentialed as they go about their work, education to go along with that, trade shows like Infocom, ICE. We also now have launched AVIXA TV and AVIXA Exchange as kind of social platforms for companies to interact and engage and basically to learn about what is Pro-AV and the various opportunities within it. The part of AVIXA that I come from is our Market Intelligence team. It's something we've always done as an association is to try to quantify the opportunity that exists within the space Pro-AV that I'll kind of define for you in just a moment. About 5, 6 years ago, I joined AVIXA to help them kind of step up that game, do a little bit more deep dive and expand our offerings, enhance our offerings around Market Intelligence. So we have a lot of that to share with you today. As we attempt to set the context, tell the story for what is Pro-AV, how is it growing, how is that impacting technologies like Dante and other AV over IP types of technologies that you might see in the market. So we've got a lot to share. I've got kind of latest forecast information peppered throughout that we can ask -- that we can dig into and then, of course, answer your questions as we go. So let's set a little bit of context before we dive in. So we wanted to tell you how we're defining this market we're calling Pro-AV. Unlike perhaps other analyst firms that may track it, we've drawn a very large circle around it. We really think it can consist of 3 primary parts as we talk about it. One are, of course, the markets. The end user, decision-maker types of organizations that purchase solutions, these solutions are bundles of products and services. So on the market side, you're talking about education, hospitality, retail, solutions would be digital signage, conference collaboration, live events, performance entertainment. The products, of course, are everything that you're familiar with, audio and video technology, speakers, microphones, media servers, lighting. So those are the things that are often you would see as populating the trade show floors at Infocom or at ISC. We include services in this component, too. as things that are wrapped into the solutions by the channel to solve ultimately a company need. From a top-down or a profile of the types of companies involved, this is the eye chart, but what it really shows you is that we're looking at buyers on the far left, they are influenced in their purchases by this category, we call influencers. You have solution providers in the middle. This is AV integrators, installers, distributors, of course, provide them with products, sometimes service components. And then, of course, on the far right is vendors, the companies like an Audinate, who are producing components or the end technologies themselves. So we -- this is kind of how we define the market. We look then how distribution is happening. We look at how integration is happening across the market. But essentially, this is what we're measuring as we look at our research. So as I noted, we do a number of different studies to kind of profile what's happening in Pro-AV. So as we go left to right here, what we're talking about is outside and into the industry. So on the macroeconomic side, META, macroeconomic trends analysis. We have research that comes out quarterly that's made available exclusively to our members to look at outlook for demand of products -- AV products and services. You're going to see macroeconomic factors here like GDP construction, remodel, employment, a whole host of different things that we're watching since we understand that Pro-AV really exists within the broader economies of any given country and, therefore, serves all the markets, as you saw on previous slide, most of the markets that exist within an economy since we touch so many facets of business and engagement. That macroecomic work feeds our middle category of forecast. So our Industry Outlook Trends Analysis study is where we actually do a 5-year rolling forecast of Pro-AV spending on products and services as segmented by solutions, verticals, products, geographies, et cetera. This is where a lot of companies like Audinate will go as they're doing their TAM analysis, total addressable analysis, to figure out how big is my category, how fast is it growing from a top level so they can peg growth against a top line metric for the industry. Take some whittling down to get at specifics, but ultimately, this data allows them to do that. This is where you start to get into subscription types of products from our organization served through dashboards and other reporting vehicles. IOTA is great. It gives you kind of the rearview mirror. It's based on past performance. It's put together by Omdia, our partner, who have deep analyst connection into the industry. That is useful information for kind of long-term strategic type of analysis, but we knew we needed something more timely. So that's where we created our market opportunity analysis reports more on the far right here, where we drill into vertical markets to understand the specific buyer opportunities, how -- what our people -- what our company is buying, what's their focus, what spaces, what technologies, how does it fit into budget, all those sorts of things, and I'll give you a sample of that today, too. Two other quick pieces that we look at. We look at, of course, employment trends in our industry, and we have a monthly business index that just tracks kind of sentiment in a diffusion index sort of methodology, useful for getting just trajectory month-to-month for how we're doing. So I'm going to dig in and talk about kind of what we're watching, what we've seen as trends for our industry and kind of -- so we can highlight what the opportunities are. As you look at this revenue slide taken from our IOTA report, you'll note, as most are aware, 2020 was a brutal year for any industry sector that's serving broader economy due to pandemic impacts. Technology was perhaps more impacted than other areas, where we saw -- and we saw, as a result of that, 17% decline since we were more remote, whereas technology for Pro-AV tends to serve in-person activity. As in-person returned over the last 2 years, 2020, '21, '22, slow return, we saw strong growth in those years as we climbed back out from that tranche that was the slump of 2020, 11%, 10%, almost 11% growth in '22. Newer data is suggesting that number is more like 12.6% in 2022. What we saw is a continuing theme of pulling forward demand. We recovered faster than we thought. So each successive year, we adjusted. That's now kind of hit the wall of '23, where we're starting to see return to more historical normal growth levels. We have a 5.9% compound annual growth rate expected from '22 out to '27. And that looks like, in newer forecasts, it's holding pretty well. But you're seeing that declining growth in '23 as we return to a little bit more normalcy. We think that '23 probably comes in under that number or maybe closer to a 7.6% due to potential recessionary threats and other sorts of challenges in the market. How that breaks out in terms of regional? Well, the story is consistent with what you've seen in broader publication or news. APAC, as a whole, so we know China, of course, had a zero-COVID tolerance policy in place even as more recent as last year. But India was kind of an offset to that. Other parts of Asia did very, very well. So Asia Pacific was the first and fastest to recover from what we saw in the pandemic slump of that 16%, 17% decline. EMEA hit a little bit harder, Americas in the middle. Since then, you're seeing this 10%, 11% growth up through '22. Now we do expect across the regions without -- almost without exception is that, that growth would slow a little bit in 2023. But there, again, it's largely a story of returning to a little bit more normalcy, long-term compound annual growth rates that we saw in the Pro-AV industry prior to pandemic, 5.9%, 6.0%, those sorts of range of growth. So that's forecast. But how is Pro-AV looking against that forecast? This was all put together actually last year. So in 2022, in first half, we're going through the process now of updating, Josh, Audinate, and we're seeing those results in short order as we go into Infocom in the coming weeks. I wanted to call out just really elephant in the room in terms of challenges that have been existing in our industry and even broadly speaking. Three really come to mind as we talk to our integrator installers about things that they're facing. The first and foremost, the supply chain constraints across a lot of product categories. And this was not even just chipsets, it was also logistic challenges, it was component challenges in some perhaps unexpected areas. That's taken a while as demand ramped very, very quickly as you'll see from future slides, ramped very quickly in '22. It was difficult for the market to keep up. A part of that shortage, in a sense, of supply chain challenge is staffing. We know across economy, there's low levels of unemployment. It's harder to find staff, even though many of our AV providers did scale back in terms of their staffing as a result of slumping demand in 2020. It's been a challenge to bring them back and, therefore, difficult to keep up with a lot of the project work. And so it has created a little bit of an overhang in the market for project work as you look down the value chain that I showed you a minute ago. Last but not least is the ever-present conversation of recession. I'm not going to dig too deeply into that. This room probably knows a little bit more about that even than I do. We have an economist on staff as well who's kind of following that. It seems to be the ever-moving bull's eye of when that might actually occur. But certainly, we're seeing it as companies even hedge a little bit in terms of their spend to prepare themselves for what could be downturn in demand, though we still see some strong demand. The good news for Pro-AV and this goes back, so we've looked at prior recessions to kind of see how Pro-AV fares. The exception, of course, this would be the pandemic where technology was hit hard, at least in terms of in-person technologies. What we found is that Pro-AV tends to be more robust against recession. So if we look at kind of recession versus not, so GDP, let's say, we were down 1% for 2023 versus perhaps an optimistic outlook of a 3% increase in global GDP. You see on the right side here, Pro-AV stands to gain in either case. So contextually, we see, even in recession, given where technology is seated right now as a key component, a key player for an adaptation to hybrid modes, et cetera, we see 2% in the worst case and an 8% growth in 2023 for sort of a best case. We think right now that we're looking more towards like that best case scenario, and here's why. So we do a monthly survey. This is out to our panel of AV providers internationally, diffusion index. So any score above a 50 is indication of growth. So on the top here, you're seeing that sales from prior month. So the latest data is from April '23 comparing their sales to March of '23. You'll note that actually, after a period of long decline following the sparkline here, we saw March come up and April hold pretty well. So this suggests actually a little bit of a rebound in the market as we're seeing a little bit of strength in provider sales. That's a good indicator that the market seems to be doing better than we would have expected coming into and out of Q1 of 2023. So we're going to continue watching that. It's 2 months trend. We'll see -- we would like to see 3 in order to really call -- say that we're holding strong or doing better. Perhaps better for us from a confidence index is this bottom line of employment, which is showing a continued strength of hiring within the provider. So obviously, hiring is going to lag. So companies have to feel good before they're willing to keep hiring, and that's what has held pretty well throughout the full chain -- the full year of this study. So I'm going to turn now to the next data point, which is our quarterly demand study, where we ask several questions about expected purchase. So a lot of AV work comes within capital improvement projects, CapEx type of spending. So we ask a question, are you planning to continue your CapEx projects for the coming quarter? And we ask also how does that budget for capital expenditure look compared to last year? You'll see both of these graphs are majority saying both that they have projects and that those budgets represent an increase over the prior period -- I'm sorry, over the prior year. You'll see that the slight -- there's a slight downward trend in each case. We feel that, that's perhaps a sign of the hedging, the broader challenge in the economy, but still a strength and an indication of growth. What we've been watching along the path too, is 2 other questions, what percentage of that capital improvement budget is allocated to AV? And what percentage of capital -- of operational expenditure budget is allocated to AV? During the pandemic, those percentages were really, really high, historically high, as companies really focused a lot of their investments on some technology areas instead of perhaps space or other types of components budget. That's been normalizing since then. So we still think that demand is high. We feel it's moderated somewhat based upon this allocation story and the top line of both of the budgets kind of slightly less saying that they have cap improvements but planned and that those budgets represent an increase. So a slight moderation in demand, even though it's remaining at a fairly elevated level. Which markets? So we do ask. We are able to segment -- since that study is 9 countries, 2,000 end users, we're able to segment by vertical market to get a sense for which of those markets are planning to have the best -- the most optimistic outlook for their capital improvements. So this left side graph here is the percent planning to increase their capital improvement budgets. Look at the top 2 here, at the very least, even top 3, and that's consistent with markets that we've heard of strong consumer recovery or interest in spending. Transportation, certainly, airline travel is up. If you look at TSA checkpoints, for example, you'll see more travelers in '23 than there were in 2019, even going through TSA checkpoints. So that's feeding into strength for transportation. Retail has done well. Manufacturing, as actually a purchaser of AV technology, these are strong markets. On the right side, though, is the allocation of AV. So of the budgets, which -- how much of that is flowing into Pro-AV? You'll see an outlier here is venues and entertainment, 40% allocation to AV. This is what I mean about these numbers being very high. Typically, we'd see 6%, 8%, 10% of budget. But since pandemic, we've seen this really, really high and the trend down, but certainly, still a strong one. It points out areas, markets, customers who are adopting more readily the technology. What technologies? Well, what we've found out from a question about which spaces are you targeting for your AV upgrades? Some of them are likely candidates. So the top 3 here, boardrooms, individual workspaces, classrooms, corporate training facilities, kind of support this notion of somewhat return to work, hybrid mode, investment in collaborative spaces. The next 2 are perhaps a little bit more interesting and different than long-term expectations. These are control rooms and AV production rooms for broadcast. We're just seeing a lot of democratization of the concept of a control room, a lot more distributed control room, same thing with production room for broadcast. So it's this idea that companies are spending more on routing content, distributing content, managing content across their organization and are stepping up their capabilities to do so. So bear with me on these next few slides. There's a lot of data here, but it's meant to show the landscape of Pro-AV. So I showed you kind of how we structure ourselves, where we think -- how we think our buyers break out. So this is our vertical markets and which ones are spending the most on AV products and services in, and this was 2022, along with the compound annual growth rate. You'll see the largest, and this has historically always been the case, corporate, office spaces, collaborative spaces being a large part of that, that's the $58.6 billion in 2022. Though largest, it's not necessarily the fastest growing, and this is where the story of recovery post-pandemic has really played in. Markets that were hardest hit were the fast -- who are now, of course, the fastest growing, so venues and events, transportation, energy utility, a little bit of an outlier there, but some of that's Ukraine and/or sustainability types of investments in that market, control room technology, government military is related to infrastructure spend. So some non-pandemic-related but certainly contextual things that have been bolstering the market. So you'll see here a wide range of opportunity dominated certainly by corporate, broadcast and media entertainment venues, education, government, our top 5 markets for Pro-AV, but certainly a lot of overlap between them in terms of what they're buying. Same idea, but this case, solution, so the bundling of products and services together to make a solution to a need, conference and collaboration learning, digital signage, et cetera. So largest here, similar to the corporate story, conference and collaboration, $52 billion, not the fastest-growing. That's where we see the recovery post-pandemic really impacting. So performance, entertainment, so fixed install types of entertainment, like auditoriums or stadiums, leading growth. Live events returning in earnest in 2022 and continuing in '23. So we're seeing that spend return as consumers go back, audiences return. This translates into the following product areas. And this is where we start to get close to what's happening with Dante and other AV over IP technologies. So the largest product category for AV is this content management hardware, $70 billion. This is where we put things like media servers, AV servers, network attached storage, not only the largest but the fastest growing. So 8.4% compared to a top line compound annual growth rate average for the industry of 5.9%. So we see those back-end infrastructure technologies really being a large chunk, a fast-growing component of the industry. And this has been true across our forecast for quite a while. You see video display is also growing well. You see control collaboration, another category dominated by AV over IP, 8.9% growth there, $16.7 billion. So this is -- this could be Crestron, AMX, Kramer, other routing technologies or control technologies there. Some other technologies show up in infrastructure, but more of that is going to be things like general mounts, racks, et cetera. So I would look for things like AV over IP to be in both content management hardware, control collaboration, services and some of the capture and production equipment, too, as you look at a blended story here. So those technologies are interesting and useful. But where there is often the opportunity, especially for upside potential, is in the frontier, the new technologies coming in and making impact to the market. There's 3 big ones that everybody is talking about. I'm sure you've all been following these stories here: AI, 5G, AR/VR as technologies that are really pushing the frontiers of what we're seeing overall. Those -- of these 3, I think AI, big data is perhaps the one that we're watching most closely as we go into our midyear show, Infocom, as kind of powering some remote analytics and related to this next topic of managed services. So we show right now managed services reaching about $9 billion in 2027. It's one of our faster-growing categories. It's within that service component, where we also have cloud-based services. But I'd say, at this point, it's a fairly conservative and new opportunity for our space. This notion of kind of an as-a-service offering, remote monitoring, leasing, those sorts of things, have really taken on more prominence as we've come through the pandemic and still are only about 12% of total services. But I look for upside here from things like AI and other connected technologies to kind of help drive this story. In fact, it's gotten harder and harder to split it out from the cloud-based service offerings as well. What that is forcing in our market is really a shift. Now it's been kind of even linked to a shift in the skill set and the involvement of a new type of AV customer or client or professional in our space. This is an old story, to some extent, but has really gained crescendo over the last few years, and that is a greater involvement from the IT department. Rise of as-a-service is somewhat because IT has been historically more structured that way, is looking at as-a-service, procuring their technology that way. But now we're seeing more AV professionals saying they're housed within an IT department. We see 31% of companies in our quarterly studies saying that they have an IT resource as a lead on their projects. 25%, they're saying they use an AV resource, 38% saying an IT manager is directly involved in the decision-making process. What this means is how companies are procuring AV technology has changed and the way in which they look at it because AV is much more often -- much more likely to be a part -- a connected part of the network than it was in the past. And so this is changing the fabric of the market in a meaningful way. So just some closing thoughts before we get to questions. I think as you kind of saw from earlier slides, what we've been saying a lot is that growth is -- it certainly may appear on surface to be declining since we've had 12%, 8%, 10% growth over the last few years as we've recovered from pandemic. What we're actually seeing is more of a normalization, return to what was a historic growth, that 5.9% growth rate. GDP over a 5-year period is about normal what we would have seen pre-pandemic. But I think there is upside and certainly disruptors to account for. And I mentioned some of the technology ingredients that we're watching, this hybrid office mode, the accommodation for that, investments and new approach to offices, all those sorts of things, that innovation. I think we're yet to see how that will play itself out in the market in terms of potentially some upside growth for us. Manufacturers as part of our forecast tend to be conservative, and you're seeing that play out. But it's harder to account for disruptive technology. So I would say these things, these technologies are a part of that as we see business models evolve and offices get reimagined for the future. Josh, with that, I guess, we'll turn it over to questions.

Great. Thank you so much, Sean, for running through that. So I have a few questions from my side I just want to start with and then we can shift it over to questions from the audience. The first was back on -- I think it was Slide 17. You started to touch on AV over IP and some of the product categories, where we're seeing adoption of AV over IP. From our perspective, I think when we look at the industry, we certainly have seen higher growth rate for AV over IP over the normal growth rate for the industry. And we attribute that to greater penetration within a manufacturer's product line, potentially greater sell-through of the SKUs that have AV over IP and just, I'd say, more adoption by the end customers for that technology. But what are you seeing on your side in terms of the adoption of AV over IP and some of the key drivers for that in the industry?

Yes. It's As you kind of look out at the market, it's been regionally different, too. So different markets adopting say, AV over IP at a different rate. But as we noted, you're seeing as IT professionals have become more involved, perhaps a sentiment cause, you're seeing more and more products needing to work on existing network and harness the bandwidth that's there for distribution of content, you're seeing more interest in distribution of content. You're seeing more Team, Zooms implementation, a whole host of factors kind of converging over the last 2 years that have really driven this to the point where more and more companies are talking about their capabilities in this regard, looking to make sure that they're network-friendly that they are able to play nicely with other technologies and be part of those networks. A difficult thing to track at the level that we are looking, which is much more big picture, as you can see from these product categories, they're larger, broader categories. But certainly, as you start to pull it apart, you see the areas in which AV over IP connectivity has become an increasing part of the landscape. As they -- as vendors offer it, as customers demand it, as integrators become more sophisticated in their ability to service and support which has been perhaps the last step is really getting them kind of involved and up to speed on those technologies to support them.

Yes, that's great. And the other thing that came to mind is you talked about the as-a-service component and more and more products tying into that remote management and control play. And it certainly we see AV over IP as one of the precursors to enabling that. Just wondering if you can touch on that convergence of AV and IT and what that means from a skillset perspective, what that might mean for, again, solutions like the as a-service component for the industry moving forward.

Yes. If we think of technologies, once they're sitting on the network, there's so much more that is possible from a remote monitoring, troubleshooting, utilization, all that sort of tracking. In fact, those of you that are following Microsoft, where there's copilot technologies and Teams MTRs, the Microsoft Teams Room concepts, there's a lot there that facilitates the as-a-service offering, remote -- managed services, remote monitoring, et cetera. AI powers that, too, as it's able to help distill that data into insight for organizations. So I think all of that sort of coming to a head. You've got more product connected to network. So you have more ability to monitor and track utilization. You've got, of course, cloud-based services, allowing companies to work and collaborate remotely. You've got more organizations needing their teams to be able to kind of managed technology from a remote perspective. You've got more IT who's involved who is used to and supporting and dealing with technology in that fashion. So kind of coming together of all those factors, we feel really is setting a different trajectory possible for managed services. As I noted, it's been a fairly smaller chunk of the overall market so far. But in terms of a great revenue kind of value-added opportunity for recurring revenues for integrator and sales who sought that for decades, we now seem to be finally seeing the conversion of things to allow that to happen. And AV over IP certainly is a facilitator of that in addition to those other technologies we mentioned.

Yes, agreed. That's great. The other area I want to touch on real quick, and this is actually a good slide to lead into that, is the transition from hardware to software and then to cloud. So it's something -- from an Audinate perspective, we look at from a few different perspectives. We obviously have seen some of the traditional chips cards and modules that we make transition to software solutions as manufacturers or looking at using more of an off-the-shelf architecture. And then even within product categories, we're seeing historical products that were hardware now being offered as software solutions. So do you mind touching on that real quick and just how you see that kind of playing out maybe some of the product categories where that's more relevant?

Yes. For sure. It's presented a challenge for us. We have this ongoing debate. You'll notice here, we have this category, stand-alone software, $5.2 billion. What -- the challenge every year has become determining what is truly stand-alone versus what is bundled. So almost across -- gosh, if you look at audio, video, content management, certainly control collaboration, absolutely, there's embedded software, right? There's the firmware that may be running, but there's also software toolkits that are coming, that are provided alongside a lot of the products to enable further capabilities beyond just firmware that could be upgraded over time. Firmware is going to be almost a consistent commonality across a lot of the other products, but bundled software also has become an increasing part. So we see that. It's made us wonder should we eliminate software since it's so bundled. But now more and more, we're seeing increasing toolkits come out that are offering additional capability. The other area where we've continually had to revise upward is underneath services, we actually have a line for cloud-based services. And every year as we look at it, we see more and more services for content management, collaboration, this is where we would put Zoom and Teams type of licensure the portion of which that is flowing through AV integration. So we've had to revise that up almost without fail across several -- last several forecast iterations to further pump up that number beyond traditional services. So it's across the board. It really is. Now what's interesting is you do see rise of those things, cloud software. But in the end, -- in some cases, it's facilitating additional hardware. So while it's not fully replacing hardware in all cases, it's providing new opportunity for hardware. In some cases, for sure, when you're talking about signal processing and some other amplification, some other issues, distribution, that may replace what was a hardware component but there's a certain synergy that's happening too that I think a compounding effect that happens. I'll use it as an example. So AI, what we're hearing now for conference room installation, for example, is a multi-camera type of approach since AI offers the ability to focus cameras on speaker, and therefore, you would want optimal cam replacement. It's actually creating an opportunity to sell -- to install more cameras. So you're actually creating a hardware opportunity because of the more robust capabilities of the software. So it's a -- I'd say there's a synergy there even though a long-term trend certainly arise in services and software over the years.

Yes. Something we're certainly all tracking very closely. Last question from me and then we'll turn it over to questions from the audience. ESG, I know that's not an area that you personally work on very closely, but I know it's something that AVIXA spends a lot of time and energy looking at. And I know it's front and center for a lot of the investors in the crowd today. Can you just talk a little bit about AVIXA's approach to ESG and some of the initiatives that you guys have underway?

Yes. We've noted certainly it's become a very important topic for our membership vendors, integrator-installers, as they've heard from their clients who are interested in that, particularly in certain parts of the world that are dealing with more energy crisis, challenges, those sorts of things. So it's become more prominent for us as an organization to the point where we stand up a sustainability council to kind of help us look at the issue, get input, kind of determine how we can better work collaboratively on as an industry, flag it as feature set, those sorts of things. So it's an ongoing discussion among our membership as well. It isn't something that we're yet tracking within our product set, but we have asked questions about it in terms of demand side, whether it's something that end users are focused securely on as they purchase. And it did rise up to near the top of the list of things that companies were -- that we're really focused on and considered a priority for themselves. So I expect -- we're in an era, right, where this has now become an increasing part of consideration. We are, as we just noted, right, as we have more hardware installed across more venues, doing more sophisticated things, drawing from network bandwidth, we are consuming a large consumers of energy. And so therefore, it behooves us to kind of consider that even from just a cost management perspective for an organization, let alone a sustainability and environmental consideration standpoint. So clearly, it's something that AVIXA will stay focused on in the coming years as well.

That's great. Thanks, Sean. So Rob, I think, at this point, we'll turn it over to you and see if there's any questions in the audience.

Thanks, Josh. Thanks, Sean. We've got a microphone at the back of the room. I think we've got a question from Danny at the back, we'll start with you. Thanks, Danny. You don't need to turn it off or on. It should just work.

Great. A couple of questions, if I can. Firstly, on -- if we go back to that AVIXA sales data chart, I think there was a big uptick in the March month. And at the time that data came out, there wasn't a lot of information as to what exactly was happening. I was just wondering, in the interim, there's been more information as to how much of that was a one-off uptick to I think it was 66%, 67%.

Let's just start with that one, Danny. So I think we were talking -- Sean, we're talking about the business sentiment index. It is a sentiment index, so I think it's, by its nature, does bounce around a little bit. But I'm sure at the time there would have been some commentary around why March was particularly high.

Yes. So I pulled it up -- I'm not sure if you're showing the slides in the room again, but I do have that chart visible, where we do show that March bounce up to 66% or so, down to 62%. It was surprising to us. I mean, we -- this is a consistent panel that we go to each quarter, we get 200 to 300 responses. People can come in and out of the panel as they participate in the survey. So we were surprised by that. But as we kind of look at commentary, for example, we track what's your predominant issue that you're facing as an organization. No surprise, supply chain was, over time, one of the biggest things that you commented on as an impact to a company's ability to fulfill projects, carry through projects. They were waiting for, say, final components, in some cases. And so we've heard of that finally getting resolved, released. And so that March may be where we started to see some products really flow through. There was improvement. Companies were coming to the table. They still felt good about go-forward plans. And so it popped back up a little bit and then held in April. That April is perhaps a little bit more compelling even than the March because I could have downplayed a single month. But now we've got 2 in a row that are fairly strong, eagerly awaiting the May data once that comes out in early June to see kind of how we held. But I think, all things considered, given sentiment, given challenges, given resolution on supply chain, that seems to be what's driving that score and that bump in March.

That's great. Thanks, Sean. I think just for the benefit of the broader audience, both of those indexes are published on a monthly basis. They're freely available. They're very useful barometer of how the industry is performing and they're published with commentary on a monthly basis. So you find it useful that that's something that you can freely access. So I think we had another follow-up question. Go ahead, Danny.

Just 1 more. Just going back to that 2027 CAGR of, call it, 6%, 2-part question. Do you have the splits in terms of spending or investment in terms of new versus existing facilities or greenfields versus brownfield? You don't see a lot of that data. And secondly, in that CAGR number, how much of it is in terms of the new innovations as a cloud? Is it remote in-field connectivity? Is it the transition into software further? Or is it a move to 10 GB?