Data#3 Limited (DTL) Earnings Call Transcript

My name is Richard Anderson. As Chairman of your Board, I would like to extend a warm welcome to all shareholders and guests joining us today at this 2022 Annual General Meeting of Data#3 Limited. This is a hybrid meeting with in-person attendance and live streaming from the Data#3 head office in Brisbane. We hope that holding a hybrid meeting will encourage greater participation and engagement amongst our shareholders. Before we begin, I would like to introduce your Board of Directors who are with me at corporate head office here in Brisbane. First of all, Leanne Muller, Non-Executive Director, who joined the Board in 2016; Mark Gray, Non-Executive Director who joined the Board in 2017; Mark Esler, Non-Executive Director, who joined in 2019; finally -- sorry, Susan Forrester, Non-Executive Director, who joined the Board earlier this year in 2022. And finally, our Managing Director and Chief Executive Officer, Laurence Baynham. Also in the office today are Brem Hill, Chief Financial Officer; and Terence Bonner, the Company Secretary and General Counsel. I'd also like to welcome the representative from our independent auditors, Pitcher Partners, Dan Colwell has joined the meeting by phone. Now for the formalities of the meeting. I note that there is a quorum present, and I declare the meeting open. The notice of meeting was issued on 19th of September 2022, and the meeting has been properly convened. We will turn to resolutions later in the meeting. Please note that only shareholders, proxy holders or shareholder company representatives may vote on the resolutions. I'll start today's proceedings with a summary address and then invite Laurence to address the meeting before we move on to the formal business of the day. Again, ladies and gentlemen, good afternoon, and welcome to this 2022 hybrid Annual General Meeting of Data#3 Limited shareholders. The last year has been one of extraordinary circumstances for our people and our customers. We saw a number of significant and unexpected events take place, both nationally and globally including severe weather events, the Russia-Ukraine crisis and ongoing supply chain -- global supply chain constraints. These made for challenging conditions for our people who I'm very pleased to say, adapted well to the changing work environment and practices. We are pleased to report that despite these circumstances, we delivered another record financial results and continued to deliver sustained earnings growth consistent with our long-term strategy. We continued to experience a return to market growth with gradual pipeline improvement. During the year, we were pleased to see the acceleration of large integration projects that provides significant work streams for our business across our solutions portfolio. We saw a steady increase in the pipeline across our corporate and public sector customers. The increase in large infrastructure and digital transformation projects and growing contribution from our higher-value services offering supported the strong result. Our total revenue increased by 12% to $2.2 billion, reflecting growing demand for Data#3 solutions in a rapidly evolving market. Once again, we are particularly pleased with the growth in the cloud-based business as major organizations and government departments accelerate the migration to cloud-based infrastructure. Our gross profit increased by 12.1% to $218.2 million, which combined with improved operating leverage, delivered a 19.4% increase in pretax profit to $44.1 million. Our pretax profit would have been at least $6 million higher were it not for the global supply delays in computer chips which our Chief Executive and Managing Director, Laurence will speak to further during his address. The consolidated after-tax profit increased by 19.1% allowing directors to declare a fully franked dividend of $0.1065 per share, bringing the total dividend for 2022 financial year to $0.179 per share fully franked. This represents an increase of 19.3% and a payout ratio of 91.3% for the full year. The financial position of the company remains strong. We continue to be debt free and to optimize the group's use of working capital through very effective management. At the same time as delivering this strong financial performance, we are also making good progress with our long-term strategic plan. It is particularly pleasing that the nonfinancial measures indicating -- indicate that the underlying health of the business continues to strengthen. We achieved record satisfaction ratings from our customers at our people, both truly exceptional outcomes. Again, Laurence will provide more detail in his address. At our FY '22 results, we announced that Brem Hill will retire as CFO at the end of calendar year 2023 having been with the company since 1991, and serving as CFO since 1990 -- 1999. Brem has provided exceptional financial leadership during a period where Data#3 has evolved from a small private company to a successful public company. On behalf of the Board, we sincerely thank Brem for his outstanding commitment, loyalty and contribution, and we wish him very, very well for the future. We also continued to implement our Board succession plan. And in March 2022, we were pleased to announce the appointment of Susan Forrester to our Board of Directors. Ladies and gentlemen, there are 6 resolutions to be formally considered at today's meeting. The first resolution relates to the remuneration report which is included in the annual report and which will be put to the meeting for adoption. This report provides considerable disclosure on our remuneration philosophy and practices as well as historic details of the variable components of remuneration. The second resolution for consideration today is in accordance with the constitution, the election of Susan Forrester to the Board. Susan was appointed as a Non-executive Director on 30th of March 2022, bringing valuable non-executive director experience and insight to the Board. You will hear from Susan later in the meeting. The third resolution is the re-election of Mark Esler to the Board. Mark joined the Board, as I've said, in 2019 and brings extensive IT sector knowledge and experience to the Board. You'll also hear from Mark later in the meeting. The fourth resolution seeks shareholder approval to increase the non-executive director fee pool from $600,000 a to $900,000, with effect from 1st of January 2023. The current maximum aggregate fee pool was approved at the 2018 Annual General Meeting. Since that time, the size and complexity of the company has grown. The size of the Board has increased and the fees paid to non-executive directors have increased in line with market movements. The fifth resolution for consideration is a request to approve the issue of performance rights to the Chief Executive Officer and Managing Director under the long-term incentive plan. The Board has decided to grant these rights as part of Laurence Baynham's remuneration package and in recognition of his contribution to the company. The sixth and final item seeks shareholder approval to amend the company's constitution by way of a special resolution. The existing constitution was adopted at the 2014 Annual General Meeting and has not been amended since that time. As there have been a number of developments in law, corporate governance principles, terminology and general corporate and commercial practices since 2014, the company is proposing to make changes to its existing constitution through an adoption of an amended version of the constitution. I recommend all of these items for your approval. In closing, ladies and gentlemen, our success in FY '22 was supported by the dedication and resilience of our people who went above and beyond to help our customers during extraordinary circumstances. And of course, we thank them for their ongoing commitment to the company. We have a fantastic culture at Data#3, which is undoubtedly underpinned our continued success. Likewise, we acknowledge and greatly appreciate the continued support from you, our shareholders. Many of you have been long-term investors in Data#3. Before getting to the resolutions, I would like to hand over to our Chief Executive and Managing Director, Laurence Baynham, to address in more detail the operational aspects of the company's FY '22 performance and the outlook for the current period.

Thank you, Richard, and good afternoon, ladies and gentlemen. Great to see a lot of faces that we haven't seen for at least 3 years, and welcome to our new head office. We've actually moved in, in August 2020. And this is actually the first major event that we've held here, been able to hold here. So thanks very much for joining us. The -- as Richard mentioned, the last year has been another year of remarkable circumstances for our people and our customers. Given the challenging backdrop, I'm particularly pleased to report another record result with strong growth in revenues and profit, in line with our over-arching goal of providing shareholders with sustainable earnings growth. In FY '22, we increased earnings per share by 18.8%. In addition, we carried forward $6 million of profit, which would normally have been invoiced in FY '22. However, the supply chain constraints forced a carryover into this financial year, FY '23. This compared to a $3 million profit carry-over from the prior year. Hope you're staying with me on this because there's a lot about carryovers between financial years. So our success was underpinned by the hard work, dedication and resilience of our people who went above and beyond to help our customers. Our team coped extremely well with challenging circumstances, including lengthy lockdowns in 2021, high rates of COVID and supply chain constraints. Also, we had localized disasters such as floods, very much pertinent to this location here. The Data#3 team has done an outstanding job managing these constraints while seamlessly progressing customer projects. I'd now like to provide an overview of our financial and operational performance as well as our strategy. In doing so, I'll break down these into 3 main elements: Firstly, the financial and operational performance then the key drivers of the Australian IT market. And then lastly, provide an outlook for the first half of FY '23. So let's start with the financial and operational performance of FY '22. We're obviously very pleased with the strong FY '22 results. It clearly demonstrates the inherent strength and relevance of our solutions in an evolving market. Our total revenues increased to $2.2 billion, up 12% on FY '21. We increased recurring business to 2/3 of our revenues, particularly important when you're starting a new financial year to know that you've got recurring revenues at the start of the financial year. This growth demonstrated our customers' trust in Data#3 as their technology and services partner of choice. The longer the customer relationships, the more revenue and gross profit that generate, which is why we continue to focus on driving our recurring revenue base. This also helps to improve our visibility of earnings. The 12% increase in total revenue flowed through to a 19% increase in net profit and dividends per share, which clearly demonstrates our strong operating leverage. Additionally, we were pleased to see significant growth in our cloud business and particularly the public cloud. In FY '22, we grew public cloud-based revenues to over $1 billion, up 31% on the prior year, and it's now forming nearly half of our total revenues. This growth is consistent with the overall market growth. And in this segment complements our growing services portfolio. The global computer chip shortage and supply chain constraints have continued to impact our hardware vendor partners with shortages and delivery delays experienced right across the industry. This has been heightened by a general increase in global IT project demand and a spike in demand traditionally experienced during fourth quarter, in line with customer procurement cycles. Major infrastructure projects tend to require networking systems from leading global vendors where backlogs have been more acute. In the last quarter of FY '22, we started to see an improved supply for end-user computing as customers upgraded their devices to connect to their own networks and public cloud. We ended FY '22 with a significant backlog of orders that could not be delivered or invoiced and we estimate that to be at least $6 million of additional pretax profit, which would have been invoiced in normal circumstances and higher than the $3 million backlog at the end of FY '21. While we expect some of the profit associated with this backlog to be realized in the first half of FY '23, we are constantly adding to the backlog by winning new business. At this stage, we anticipate a similar level of backlog at the end of the first half. The supply chain constraints are expected to ease through the balance of this financial year. Our team has done an outstanding job managing these supply constraints and progressing our customers' projects. We also have excellent working relationships with our global vendor partners that ensure we're best placed to manage the supply chain constraints and order backlog. I'm pleased to say in many of the critical circumstances, we've been able to secure customer deliveries and mitigate some of these supply chain delays. Overall, we're very pleased with the strong performance throughout the year, which reflects solid contributions from each of our business units and regions. This was underpinned by the diligent execution of our strategy as we grow our software and services business and the recurring revenue base. We maintained strong levels of service to our large, long-term customer base while further strengthening key supplier relationships through a highly experienced and committed team. Now let's move on to the IT market. We expect technology and specifically digital transformation to continue to play a leading role in Australia's economic future. In some respects, maybe Australia's economic recovery. According to world-leading IT research and advisory firm, Gartner, digital transformation is not a 1- or 2-year trend. Rather, it is systemic and long term. Software and services remain the highest expected growth and this will allow us to continue to accelerate growth of our services business in particular. We have continued to expand our offerings across service life cycle with particular emphasis on growing the high-value consulting and managed services businesses. We're especially pleased with the progress that has been made with strong growth across consulting, project services and support services. The growth in services also aligns with our new global vendor incentive programs. Growing software and services is central to our long-term strategy, and this is where our investment will continue to be concentrated. Our services growth strategy will continue to improve our margins and complement our growing software and infrastructure business units. Data#3's customers are accelerating IT investments as they recognize the importance of flexibility and agility in responding to disruption. Cyber security has remained a top priority for the last 3 years, and our security practice has been one of the fastest-growing parts of our business. In FY '22, we consolidated our security focus combining our security offerings across the group. Also internally, our Security Committee continues to keep our business safe from the growing cyber threat. And in FY '22, we achieved a global international standard accreditation with ISO 27001. As I discussed in last year's AGM, over the course of FY '21, organizations had looked to achieve cost savings and improved productivity during the Work from Home revolution. This year, we were -- FY '22, we were pleased to see a return of more normal mix of activities and projects with customers once again investing in larger scale integration-type projects aimed at transforming or reinventing their businesses. These projects extend across our solutions portfolio and typically span multiple financial years. The Sydney Football Stadium and Queen's Wharf development in Brisbane being 2 good examples. Queen's Wharf is one of Queensland's largest IT infrastructure projects and Data#3 was selected to design and implement an innovative digital network. This combines the great skills of our people with world-class digital technology to provide a platform for future digital transformation initiatives. I'm pleased to report there are similar projects underway, and we have a healthy pipeline of opportunities across our corporate and public sector customers. A key differentiator in winning these major projects is the strength of our leading global vendors. The most significant relationships being with Microsoft, Cisco, HP and Dell. These vendors account for a large proportion of the addressable market and in large corporate and public sector organizations and approximately 70% of our customers' total IT spend. Data#3 has multimillion dollar investments with these vendors. And it translates into many specialist certifications. This limits the number of partners endorsed by the global vendors and further strengthens our competitive position. In FY '22, Data#3 won 3 prestigious global awards from Cisco and Microsoft. Cisco's Global Commercial Partner of the Year was a particularly pleasing award as Data#3 was selected ahead of 60,000 other Cisco partners globally. Additionally, there are over 350,000 Microsoft partners globally. So for an Australian company to win their global awards is a really significant achievement. We're pleased to be recognized by our vendor partners on the global stage and awards continue to form part of our -- form an important part of our external validation for our work, which is beneficial in winning new customers and also in attracting new talent or new people to our business. We have a diverse base of customers, many large and high-profile government and private sector organizations across many sectors, especially in the health care, education and resource sectors. Our breadth of solutions and our highly skilled services team remain key differentiators in the Australian IT market. We've continued to gain competitive advantage using data from within our solutions for customers to understand and measure every touch point and to improve the overall customer experience. The life cycle of services for our solutions continues to provide opportunities to expand our relationship with existing customers as well as attract new customers. This life cycle approach to improving the overall customer experience has helped to deliver consistently high levels of customer satisfaction. To place even greater emphasis on our customers, we invested in the appointment of a Chief Customer Officer in July to further leverage our customer success teams and to optimize services opportunities across all functional areas. In addition, we recently appointed a Chief Technology Officer specifically to build solutions and strengthen our relationships with world-leading technology partners to ensure that we are ahead of the technology curve. As mentioned previously, our people were incredibly resilient during FY '22, which is certainly a challenging year of disruption for our team. Following the phased and partial return-to-office plans for each location that were introduced in FY '21, we continue to operate very effectively with a flexible hybrid working model across most of our business. Staff productivity remains high, and our staff satisfaction at record levels with staff valuing the flexibility of the hybrid model. In addition to awards for our solutions and technical expertise, we were delighted to have been named as the winner of Employer of Choice Award for 2022 by the Human Resources Director Magazine. This is the seventh year in a row we have achieved the HRD Employer of Choice Award for organizations of more than 500 employees. The award is not limited just to the IT sector but covers all industries and includes many multinational entries. In a constrained and extremely competitive labor market, we've been aware of the challenge in hiring the right talent, especially in the technical services area. Our in-house recruitment and contracting business, People Solutions has been a major differentiator in attracting the best talent to the Data#3 group. We work in a diverse community, and this is also reflected in our workforce. Over the past 5 years, female representation at Data#3 has increased and 33% of our people are now female. This is above the industry average. However, we recognize that we can do more to add diversity to our workforce. One of the key business objectives is to lead our industry in ethical practices and increasing our environmental, social and governance program, in other words, ESG. In fact, this week, our ESG strategy has gained global recognition by the Frost & Sullivan Institute who are impressed by our 2022 Sustainability Report. This year, we were pleased to announce the formation of a reconciliation action plan working group consisting of committed staff who are passionate about reconciliation and understand its cultural importance. Similarly, we have been pursuing environmentally sound practices to incorporate in our daily business activities. And we have a target for Data#3 to be carbon neutral by 2032. During the year, we continue to enhance our operational efficiency and gain greater leverage from our cost base. The largest project was our ERP replacement, which has spanned several years. We were pleased to report that the system went live in March 2022 and replaced an aging legacy system. The new system is based on Microsoft Dynamics 365 cloud platform. And we expect it to generate a solid return on investment over the long term. Now I'll move on to the outlook for FY '23. The Australian IT market continues to grow, and we are well positioned to capitalize on the return to large-scale digital transformation projects. Even in challenging economic times, our customers are looking to technology for increased productivity and competitive differentiation. The ongoing global supply chain constraints are predicted to improve in the coming months. However, it is likely some constraint will continue through the remainder of FY '23. We are confident in the outlook for our business, and we continue to focus on delivering customer success, growing our security business and of course, accelerating our services growth. With that background in mind, we are pleased to make -- we are pleased to have made a strong start to the year with a solid first quarter performance. 66% of our business is under contract and we have continued to secure new contracts and projects while benefiting from the positive momentum and order backlog from FY '22. We expect to improve on last year's first half pretax profit of $18.5 million. However, the extent to which we can do this remains dependent on opportunities that need to be realized in the second quarter and the timing of product deliveries impacted by ongoing supply chain constraints. Our current first half projection is to deliver pretax profit in the range of $21 million to $25 million, with the expectation that the backlog will not be materially different to the backlog at the start of FY '23. This is in line with our full year objective of delivering sustainable earnings growth. As in the past, we have a skew to the second half and our fourth quarter is expected -- is again expected to contribute significantly to our annual profit. The first half results and interim dividend will be announced on 16th of February 2023, and it is also our intention to maintain our usual dividend practice. Longer term, we remain committed to delivering sustainable earnings growth underpinned by our leading market position, built up over 45 years, unrivaled vendor relationships, long-term customer base and highly experienced and committed team. I would like to thank all our shareholders for their support during last year and look forward to reporting on our progress in the months ahead. Thank you.

Thank you, Laurence. Before we consider each item of business, I would like to outline the proceedings -- 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 get a voting card, ask a question and download the AGM documents, being the notice of meeting, the annual report and the virtual meeting online guide. The ask-a-question and get a voting card buttons are replicated at the top of the web page. All shareholders will have the opportunity to comment on and ask questions in relation to the resolution. I will hold comments and questions until the item of business has been introduced. For shareholders who joined us here today in Brisbane, please raise your yellow or blue card and our staff will provide you with a microphone. Please state your name and if you are attending today as a shareholder or a proxy holder. For those shareholders using the online platform, you can ask your question during the meeting by clicking the ask-a-question button. You can then select the item of business that your question relates to, write your question and click submit. You may submit questions online at any time. You do not need to wait until we get to the relevant item of business. Shareholders can also dial in and ask questions by voice if they wish to do so. To utilize this facility, shareholders must use their unique phone pin provided to them by the share registry, Link Market Services. If you don't have a phone pin and would like to ask a question via the phone, please contact Link on 1-800-990-363 now to get your pin. When you have your pin, call the shareholder conference line number as listed in Page 5 of the virtual meeting online guide. In order to ensure that all shareholders have a reasonable opportunity to comment and ask questions, we ask you to please keep your questions or comments as concise as possible. And please ask no more than one question at a time. We will do our best to address as many questions as reasonably possible. There have been no questions received in advance of the meeting. For each item of business, we will address questions received from shareholders attending in-person first, then from shareholders using the teleconference facility and then those received through the virtual meeting platform. If you are having any difficulty submitting a question online, please refer to the virtual meeting online guide or call the help number you see at the top of your screen. Voting. I would now like to briefly summarize the voting procedures, which will apply to this meeting. Voting on each resolution will be conducted by a poll. Shareholders who are attending the meeting in person will have been given a voting card on registration. And the voting -- 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 getting a voting card box at the top of the web page or below the presentation slides. The share registry will have sent the relevant proxy numbers to proxy holders validly appointed by shareholders prior to the proxy cutoff. To obtain a voting card, please click on the get a voting card box and key in your proxy number under proxy details in the pop-up box on your screen. If you have misplaced your proxy number or have not received your proxy number, please ring the helpline number displayed at the top of your screen for assistance. You may submit your votes via the online platform at any time during the meeting. 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. Where undirected proxies have been given in favor of the Chairman, the Chairman 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. Your votes will be counted by personnel from Link Market Services after the meeting closes. The result 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 helpline 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 will now move to the formal items of business for this meeting. Item 1, financial statements and reports. The first item of business for discussion today is to receive and consider the financial report, Directors' report and independent auditor's report for Data#3 and its controlled entities for the year ended 30th of June 2022. The reports are placed on the agenda for comments or questions only. There is no voting on this item of business. Dan Colwell, the audit partner with Pitcher Partners is available to answer questions relevant to the conduct of the audit and the presentation and content of the independent auditor's report. We will now address questions for this item of business. Are there any comments or questions from shareholders attending the meeting in person.

My name is Paul Donohue, I'm a proxy holder and today I represent the Australian Shareholders' Association, and we hold 315,000 proxy votes today. My first question is on the Board skills matrix. So the annual report and corporate government statement both referred to a Board skills matrix but I don't see it published anywhere. The ASX corporate governance principles, say the matrix -- they recommend the matrix be disclosed, but I know it's not a requirement.

Yes. Look, we've considered this item, obviously, and considered it very carefully over quite a number of years. We feel that basically the information that's included in the skills matrix is released in the descriptions of the various directors who sit on the board and who all are here with us today. We also feel that there is some commercial in confidence type of information included in that matrix. And we particularly feel that we're in a pretty competitive industry and competitive in a number of ways, not only for business from our customers, but also for employment of our people -- very valuable people. And so we've made the decision that it's not desirable for us to release that information publicly.

Second question relates to diversity. So you've got diversity policy and has targets for all the employees, the management team and the Board. But there's no target for the senior leadership team, and that's 100% male. Is there any intention to introduce a gender diversity target for the SLT in the future?

Look, again, we've decided that after due consideration, that targets are not appropriate for Data#3. So essentially, we've decided not to -- particularly not to publish any targets that we might have. And I think, as Laurence stated in his address, we do across the workforce, have a very significant achievement in diversity, particularly on gender diversity, and we are seeing that increase on a yearly basis. Laurence or Mark Gray as Chair of the Remuneration and Nomination Committee, anything further that you'd like to add to that question?

I'm happy, I'm happy to go first. As I mentioned in my address, diversity is very high on our agenda. And we do -- at the senior executive level, we have 4 males with 20-plus years' experience. There's some pros to that -- some advantages to that. There's also some disadvantages in terms of just diversity. What I will point out pretty obvious is that we've got a retirement of one of the individuals, Brem, and that provides us an opportunity of perhaps having a different balance going forward.

Laurence stole my thunder.

I can also say, Paul, that I'm seeing some faces of very senior members of the company's workforce looking at me here from the audience. And there are a number of ladies amongst those faces.

Thank you. And a third question, if I can.

Yes. keep going while you have got the floor.

I just trying to put a positive slant on cyber security. Are you expecting any uplift in business given the rash of data breaches we've had recently Data#3 selling intrusion detection services and networking equipment and things like that. Do you expect some of your customers might be looking to refresh some of the IT [indiscernible].

Thankfully, that definitely is a question for the Chief Executive.

The short answer to that is, yes. As I mentioned before, over the last probably 4 to 5 years, it's been one of the fastest-growing parts of our business. And it's been on any survey that we do with our customers, it's their #1 priority. So it's before any of the recent things that are happening right now. It's -- all that's going to do is increase the importance at all levels within our customer base, not just the IT organization, but throughout the organization and many boards. So we expect that spending in cyber security will increase significantly.

Any other questions from the floor?

I'd hate to let you down. Peter [indiscernible], a shareholder. I'm not -- I'm going to spare the discovery question this year, but I am going to look at another small component of the business. The Fiji in the Pacific area, which is a very tiny part of the business, less than 1% of the revenue. And that revenue itself fell 12% this year. So could you just give us an idea of what the opportunity is in Fiji in the Pacific? Why we're there, what the opportunity is and whether we're profitable at the moment, please. Okay.

Laurence?

Certainly, I can answer that. One little bit of history. We've been operating in Fiji for over 20 years. So there's a -- and we actually started with the consulting arrangement by one of our long-term personnel who's here, Michael Bowser, who performed a consulting exercise with the Fiji government. We expanded that into various elements of our portfolio with the Fiji government. It's now as you say, Peter, it is a small component. We also use it as a base for other South Pacific business as well. The -- the business is profitable and has been profitable for several years. Last year, Fiji, the economy, the government in particular, was badly hit with tourism, almost nonexistent for at least a couple of years. We see that picking up. So we will continue.

We're hanging in there.

We're hanging in.

Anything else? Any other questions from the audience here today with us. Thank you, ladies and gentlemen. We now move on to the teleconference participants. Phone operator, are there any questions from shareholders participating by teleconference.

Thank you. There are no questions from shareholders participating by teleconference.

Thank you, operator. We will now address questions received online for this item of business. Moderator, are there any questions from the virtual meeting platform.

Yes, there are Chairman. We have 5 questions from the online platform. The first one is from [ Stephen Mayne ]. Stephen would like to know, did any of the 5 main proxy advisers, ACSI, Ownership Matters, Glass Lewis, ISS and ASA recommend a vote against any of today's resolutions? Which of the proxy advisers are covering us? And have there been any material proxy protest votes? Will you disclose the proxy votes before the debate on today's resolutions so shareholders can ask questions about the reasons if there have been any protest votes? And why not disclose them to the ASX with the formal addresses like many companies do now.

Goodness me. Brem, I need help. Look, I will ask Brem, if he could respond as much as possible to that series of questions because Brem actually has been monitoring the coverage by proxy advisers. So I think over to you, Brem.

Good afternoon, everyone. Just a quick summary. We have obviously been -- have received reports from each of those proxy advisers. To comment on the votes, I think consistently, the one item that they recommend against with the amendments to the constitution, purely because of reluctance to have the right to hold a virtual-only meeting. And that seems to be a fairly consistent approach taken with any company looking to make that change. A couple of the reports also are recommended against the issue of rights to Laurence Baynham, simply because we don't disclose what the target is for -- the forward-looking target. We only disclosed the target retrospectively. And that's...

And that's done in the remuneration report.

Yes, that's definitely. The reason we don't like showing that the forward-looking target because effectively, that's giving guidance, which we're reluctant to do. The other part of the question is we will -- we display the proxy votes before we get to each item of business. So that will be shown on the screen. However, I did not include that in the material that went to the ASX earlier, but that's certainly something that we can do. There's no reason not to.

Thanks, Brem. Moderator, do you think that more or less answered the questions?

I do.

Wonderful. Thank you, moderator. And what's the next one, please?

The next question is about our Queen's Wharf project. It's from Mr. Jeff Rogers. He would like to know if the overall project is on the same schedule and if changes, for example, an extension, will there be any negative impact to Data#3's revenue or timing or margin?

Laurence, I think that's probably a question for you to pass on.

Happy to answer that. The -- whilst the overall project has some delays, the component that we are working on, effectively, the IT project has had no delays. To date, we've done -- we've also done a risk assessment as well on that particular project. So we do not believe it will impact our business or project going forward, and it is multiyear as well. In terms of the breakdown of the dollars, it's not something that we disclose, it's commercial in confidence with the owners of Queen's Wharf Destination Brisbane Corporation, TBC.

Just following on also from Jeff's question. Is that the same with the split between hardware, software and project services and support.

Yes, that's right. We don't disclose that either. Does that answer all the questions?

It does. Thank you.

Thanks, Haley. Next one.

I've got another question for general business from Alex King, who says congratulations on another strong result. Could you please give an example of where you have lost a customer contract and the reasons behind losing the contract. Alternatively, what has been the historic reason behind why Data#3 has lost out on a tender process for a large customer contract?

Laurence?

We don't tend to disclose any of the losses. We -- what I can say in taking it the other way around, we have a very strong and probably an industry-leading win rate. So we have a significant sales team that are very close to our customer base and consequently understand customers' business requirements for their technology solutions. And as a result, our win rate continues to improve as you've seen in terms of our organic growth and revenue increase in the market, we continue to take market share. So the short answer is no, we don't talk about the losses or we don't promote them.

Thanks, Haley.

Our next question is actually for Dan Colwell, the auditor. Dan, are you prepared for this one?

Yes.

Great. Data#3 now has a mark, sorry the question is from Stephen [indiscernible]. Data#3 now has a market capitalization of $1 billion, but the audited accounts claim we only have net assets of $62 million. Could the auditor please explain why the market things the company is 16x more valuable than the directors and the auditor. Also how many other $1 billion plus ASX listed companies is Pitcher Partners auditing and when was the audit last put out to tender?

Okay. Thanks for that question. Look, I probably won't make too much of a comment around why the market thinks the company's value is 16x more than its net assets. What I will say there is that market capitalization is basically a market value of the shares on issue in the company. Whereas for accounting purposes in the financial statements, the net assets, which are presented on the balance sheet are carried at typically historical cost. So the difference between the net asset value and the market capitalization is due to, let's just call it, intangible assets within the business that have not been brought to account under accounting standards. So examples of those intangible assets would obviously include things such as goodwill. Goodwill relates to future maintainable earnings and growth prospects of the business as well as probably intangible asset values around our customer and supplier relationships that Data#3 has within its business. I'll probably leave that there on the market cap question. I think the next question was around how many other companies, this Pitcher Partners audit with revenue greater than $1 billion. To be fair, I got this question late, but I don't actually know the answer to that question. But what I will say is -- I'll probably point shareholders to Pitcher Partner's website. On that website, we have a transparency report, which we release annually. And within that transparency report, we listed out all the publicly listed audit clients that we audit across the network in Australia. So if shareholders are interested in having a look at what other ASX-listed companies, the firm audit, I would direct their attention to our website. I think the third element of the question was when was the last -- when was the audit last put out to tender. I don't believe the audit has been put out to tender since Data#3 listed on the ASX, which was back in 1997. I hope that answers the questions for that shareholder.

You did cover off all the points. Thank you.

All right, next question?

There are 2 more questions. This is a 2-part question. It's from [ Stephen Mayne ]. He says it's very unusual to have a fast-growing tech industry company that doesn't have a substantial shareholder with a stake of about 5%. No founder remains and no institution has chosen to build up a concentrated exposure. Are we aware whether the 3 big index global index funds, BlackRock, State Street and Vanguard, on our register. And when engaging with shareholders, who do you talk to, given that no individual shareholder is substantial. There is another part, do you meet with institutions that own more than 1%?

Look, I'll have a go at answering that question, and then I'll hand over to Laurence and again, Brem to elaborate a little further. I'm not aware of the shareholders that were named or the institutions that were named as being shareholders of Data#3. However, Brem will undoubtedly be able to clarify that. As to whether or not we speak to institutional investors of that nature. We certainly do. I think that, again, Brem and Laurence will be able to give us numbers, but I think there have been a considerable number of requests that have largely been able to be accommodated by not only institutional shareholders, but certainly by analysts and stockbrokers and people of that ilk. And that is something that both Laurence and Brem spend a lot of time -- a lot of their time doing, and it's something that's been an ongoing aspect of their duties for several years now. So with that, I'll hand over to Laurence.

Yes. As Richard said, in terms of do we meet with institutional investors? Absolutely. We meet with a lot. We meet with as many as we can, whether they're 1% or above. And we also meet with institutional investments, even if they're not shareholders as well. So as an example, we've -- the FY '22 results and the briefings that we conducted straight after those results, we met with 40-plus organizations, 40 plus organizations with one-on-one meetings. So it was individual meetings, not just one meeting with 40 people in it. Many of those meetings had many different institutions in them as well. However, in addition to that, we don't have direct contact with those global index funds organizations who sometimes come in and out of our register. So does that answer the question? Or Brem, do you want to elaborate or...

The only I would add all of those 3 global funds are on our register, BlackRock, State Street and Vanguard. But as Laurence said, it's really difficult to get to talk to them, but they definitely meet with all the Australian-based institutions.

I might also just add in finalizing the answer to that question that 3 of the founding shareholders are actually present here today, and they remain significant -- very significant shareholders in Data#3 and maintain their absolute interest in the company's not only fortunes, but the way in which it operates and take a very, very active interest in the way in which the company has been progressing and greatly thank them all for their participation.

Another question for this item of business. It's from Jeff Rogers about the Queen's Wharf project. He'd like to know if there is any risk to Data#3 from the hiccup in the assessment of the credentials of the casino license at Queen's Wharf.

Laurence?

I think I hinted at that in my answer to the previous question, the risk assessment that we've done is very much related to that item, and we do not envisage for our part of the business risk associated with the work that we're currently doing.

No further questions, Chairman.

Thanks, moderator. That appears -- does appear to address all general questions. So we will now move to the next item of business, which is the adoption of the remuneration report. So the formal resolution is to adopt the remuneration report for the financial year ended 30th of June 2022. Please do note that the vote on this resolution is advisory only and does not bind the directors of the -- or the company. However, when reviewing the company's remuneration policies each year, the Board does consider the level of shareholder support received and matters raised by shareholders. Voting exclusions apply 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 every year against industry benchmarks to ensure it is set competitively. During FY '21, we engaged with an external remuneration consultant to review the remuneration of the directors and senior executives, and we intend to repeat that exercise in FY '23. So as to ensure that the structure and levels of remuneration are in line with the market and appropriate to produce the results we are targeting.

Having said that, we will now address questions for this item of business. Are there any comments or questions from shareholders attending the meeting in person? Yes, Paul.

I got 2 questions. The first one is CEO remuneration at risk. So by my calculations, only 42% of the CEO's remuneration is at risk. That seems low when compared to companies of a similar size? Do you have a comment on that?

Look, we have considered this item just recently in -- particularly in reviewing both the results achieved for FY '22 and in setting remuneration for FY '23. I think Brem, Laurence's variable reward component is increasing to 47%. Am I right in saying that? So it is certainly increasing. As I understand the situation, various organizations recommend or state that they would like to see 50% of remuneration being in variable components. And so all I can say is further is that we're getting very close to that number in the case of our Chief Executive. And we -- having reviewed remuneration for last year and in setting remuneration for this current year, we have certainly taken all those factors into account. Mark, as Chair of the Remuneration Committee, anything further you'd like to add?

I think between you and Brem has covered it pretty well. We are conscious of that benchmark, and we are moving towards that benchmark. As Brem has indicated, it's 47% in this current year. And we certainly take that into account, recognize the importance of that at-risk component here certainly.

Second question is again about the CEO remuneration. 100% of the CEO's short-term incentive is paid is cash. Many other companies split STI into cash and equity components. And the ASA prefers at least 50% of STI to be equity with a minimum 12-month holding lock. Is there a reason why the entire bonus is paid as cash?

Look, I think, to be quite honest, there's some history here. It is historical that all short-term awards within Data#3, I think are paid in cash and Laurence is -- or the role of the Chief Executive is no different. So it's really down to historical remuneration practices within the company. We certainly -- and Mark may like to comment as well, we certainly do consider these sorts of things from time to time. And as Mark has said, we have engaged with remuneration consultants on this in broad matters.

Paul, just to add to that, I suppose, whilst you say a number of companies split short-term bonuses between cash and equity, there's a lot of other companies that pay short-term bonuses fully in cash, and that's the practice we've adopted. Certainly, the LTI component is equity and clearly, there's a difference in the incentive structures between SCOs and LTIs. We think the split between cash and equity for SCIs and LTIs is appropriate.

Thanks, Paul. Are there any other questions from the floor?

It's not a question, but if I may just comment on that previous thing, I hate this term at risk. There's nothing at risk. It is -- annuity income, and we've got recurring revenue starting to come in now, which is great. That's a big plus. I hate this idea of at risk. There's nothing at risk, the right term was used over here. It's a bonus. So there is a base salary that the CEO gets and the rest of it is a bonus if the CEO -- if the company meets certain targets. So I really dislike this term that's used at risk. Laurence has got nothing at risk. He's got a base salary and he gets a bonus if the company performs. I know it's a term that's widely used. I think it's one of the things that's fundamentally wrong with the way the shareholders' association should have a think about this. Please give that feedback to the shareholders association, I think it's a nonsense term. Let's go back to bonuses. I think that gives a better reflection of what it actually is.

Thanks, Peter. Comment Noted. Any other questions from the floor? If not, let's move on to teleconference participants. -- phone operator, are there any questions from teleconference participants.

There are no questions from shareholders participating by teleconference.

Thanks, operator. We will now move on to online questions. Moderator, do we have any questions on this item?

We do. We have one question from Mr. Stephen Mayne. Mr. Mayne asks when disclosing the outcome of voting on all resolutions today, including the remuneration report, could you please provide the ASX, how many about 600 shareholders voted for and against each item, similar to what happens with the scheme of arrangement. This will provide a better gauge of retail shareholder sentiment on all resolutions and was a disclosure initiative adopted by the likes of Metcash, Altium and Dexus last year and by Tabcorp after its AGM in Brisbane yesterday.

Thank you, Moderator. I can only say that, as stated earlier, the results of the poll on each item of business will be reported to the ASX and will be disclosed on the company website as soon as possible after the completion of voting and the completion of the meeting. And Brem Hill, who is responsible for that reporting, I'm sure will do an excellent job in meeting those requirements. So we'll -- in other words, we'll report as we're required to report. Brem, anything you'd like to add to that.

Sorry, a quick update. What we've done is consistent with the past and the standard reporting. So we show the number of votes and the percentage of votes on each item. We don't actually disclose the individual number of shareholders associated with that. And that's the standard report that comes from the share registry. Having said that, we've got no concerns disclosing that additional information. So it will probably be too difficult to do that today, but in future I'm happy to have that information.

Thanks, Brem. Moderator, any further questions on that item 2.

No Chairman, no further questions on this item.

Thank you, moderator. As that appears to address all questions or comments, I ask that shareholders now please cast their votes for resolution 1. The proxy votes received in relation to this resolution are now shown on the presentation slide. As Chairman of the meeting, as I've already said, I intend to vote all undirected proxies in favor of this advisory resolution. I would like to remind shareholders that a poll on this resolution will be conducted at the end of the meeting. I shall now move on to Item 3, which is the reelection or the election of Mrs. Susan Forrester. The formal resolution is that to approve by ordinary resolution that Mrs. Susan Forrester, who was appointed as a Non-Executive Director by the Board on 30th of March 2022 and retires in accordance with Rule 18 3B of the company's existing constitution and being eligible, be elected as a director of the company. Can I just say that Susan 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. Susan is also a member of the Remuneration and Nomination Committee. The directors, with Susan abstaining, recommend that shareholders vote in favor of the resolution. I would now ask Sue to the podium to address the meeting.

Thank you, Chair. It was funny hearing the term Mrs. Forrester, that's my mother-in-law, so I was looking around for her. Ladies and gentlemen, directors, I consider a privilege to join Data#3 Board at such an exciting time in the company's journey. And today, I seek your support to continue to represent you further as a director. As you have heard, I was appointed as a director in March 2022, and currently serve as a member of the Remuneration and Nomination Committee. Data#3 is a dynamic Queensland business with a clear vision, and I believe I complement the Board's existing skills with my legal, strategic, commercial and governance expertise gained from a wide range of professional endeavors. I believe, bring diversity to the governance -- sorry, I bring diversity of governance, experience gained as both a Chair and a Director of other ASX 200 companies in the legal consulting professions. I have the relevant experience in strategic governance of organizations seeking transformative structural change, risk management and maintaining and enhancing workplace culture in times of major change. I'm looking forward to contributing to the Remuneration and Nomination Committee to broaden the committee's remit, governance framework and work plans. An important focus of the Board during 2022 was the evaluation of strategies with a focus on the attraction of high-quality talent retention and succession planning and employment engagement and experience. These strategies are the key foundations of our governance framework that will be needed to support adverse, inclusive and high-performing national workforce. I believe I have the capability, capacity and commitment to continue to effectively contribute to Data#3 in its strategic direction and governance. I'm honored to be part of a company with such a talented and diverse workforce, sharing a passion for technology, innovation and engaging customer experiences as well as being part of a well-formed Board, and I thank my fellow Board members for their support on my reappointment. It is with great pride and enthusiasm that I put myself forward.

Thanks, Sue. We will now address any questions for this item of business. Are there any comments or questions from shareholders attending the meeting in person? Paul.

Ms. Forrester, is very well qualified and her focus on governance and equal opportunity, in particular be a valuable contribution to any Board. ASA's concerned is your workload. So she's Chair of Jumbo Interactive and HealthEngine and a Non-Executive Director of Plenti. These existing commitments are already at the maximum recommended by ASA's guidelines. Is Ms. Forrester confident she has sufficient capacity to serve on the Jumbo board?

Well, I'm happy to answer that for starters. But Susan can obviously speak for her own workload. That was a consideration when we went through the recruitment process. We discussed that at length with Susan at the time, and she reassured us. I'm sure she will make the comment herself that the HealthEngine role is actually fairly limited and it doesn't take a great deal of time. So I wouldn't consider it a sort of full board role, but I think Susan can probably elaborate on that. But it was certainly a factor we considered during the recruitment process.

That's quite correct. And I'd probably just like to add that as a professional Executive Director, and a CEO and HR Director and a Non-Executive career, we certainly not tired with hard work. And I think the value -- ones contribution is often reflected and paid back from other board members and [indiscernible], so I'm absolutely committed and I am acutely aware of my duties as a director and really being there to contribute valuable [indiscernible].

Thank you. Any other questions from the floor? Peter?

Just a comment again. As a long-term shareholder, I think since 1998, it is great to see 2 females sitting to my left.

Any other questions or comments? All right. So we will now move on to the teleconference participants. Phone operator, are there any questions from teleconference participants?