Data#3 Limited (DTL) Earnings Call Transcript

Good morning and thank you for joining us for the briefing of Data#3's FY '25 financial results. I'm joined by Cherie O'Riordan, our CFO, who will cover our financial highlights a little later in the presentation. For those of you not familiar with us, Data#3 is an ASX 200 listed IT services and solutions provider in Australia and Pacific Islands. Our vision is to harness the power of people and technology for a better future. We have 48 years of experience in evolving our solutions to enable our customers' success, and we partner with world-leading technology vendors. We are delivering the digital future for our customers through our solutions, which you'll hear more about throughout the presentation. In terms of the agenda, we'll first review the FY '25 highlights and key operational updates, then Cherie will provide more detailed overview of our financial performance. I'll cover IT sector trends and round out with our strategy and outlook before closing with Q&A. Let's begin with the financial highlights. Gross sales was a record $3 billion for FY '25, up 9% on FY '24, driven by growth across all business units, particularly managed services, maintenance services and Software Solutions. Gross profit increased by over 7% on previous corresponding period to almost $290 million with an average gross margin of 9.6% for the full year, slightly down on the prior year due to the sales mix and strong contribution by the lower-margin software business. Profit before tax of $69.1 million was up 11.4% and reflects our improved operating leverage. Earnings before interest and tax was up 12%. We delivered earnings per share growth of over 11%, and we're pleased to announce a healthy final dividend of $0.15 per share, providing a total of $0.281 per share, which is an increase of over 10% for the full year and represents a total payout ratio of 90.3%. Overall, we're very pleased with the FY '25 financial results, a record for the company. We successfully navigated through ongoing global economic uncertainty, federal and state elections and vendor program changes. Our business model held strong, and we remained agile in adapting to these changes and challenges. I'll now touch on a few of our operational highlights for FY '25. Moving on to Slide 6 and the FY '25 overview. Our company growth continues to build, as evidenced by the increase in gross sales, which exceeds the calendar year 2025 Australian IT market growth rate of 8.7%. Our recurring business has grown to 69% from 67% in the prior year, boosted by growth in managed services, maintenance services and Software Solutions. This also reflects the ongoing shift by our customers to multiyear subscription and as-a-service offerings. As we enabled success for our customers during FY '25, our customer satisfaction rating also increased. With security still our customer's #1 priority, we increased our investments in security solutions during FY '25. We officially launched our Brisbane-based security operations center this time last year, and many customers have now chosen Data#3 to monitor and manage their IT environments. We also recently launched 3 new Microsoft managed security services with a focus on managed detection and response, data loss prevention and managing customers' Microsoft Sentinel environments. It is also pleasing that we've been successful in 5 major sectors, including federal, state, local government, commercial and enterprise. In recent years, we've been able to talk about our 30% growth in security solutions. We now have another 30% growth solution, Device-as-a-Service. The Device-as-a-Service solution includes all stages of the solution life cycle from planning to purchasing and deployment through to management, end of life and refresh. Most are 3-year contracts, which contribute to our recurring revenue, plus the contracts have higher renewal rates. Another benefit of our Device-as-a-Service solution is that it supports our sustainability initiatives. Data#3 is a 5-star and award-winning HP Amplify partner, winning the Amplify Impact Partner of the Year for ANZ in FY '25. This, combined with our new solar system implemented on our warehouse and integration center are practical examples of our sustainability initiatives. In FY '25, Data#3 has been busy integrating AI into our business. Slide 10 shows just some of the areas where we have leveraged AI internally, while at the same time, helping over 100 customers navigate the pitfalls and benefits of AI through dedicated workshops. And we'll talk more about this in our strategy section. All of these solutions aren't possible without our world-leading vendor partners. We closed the year in leading positions with our major partners, Microsoft, HP and Cisco. In addition, we were ranked the top partner with other major software vendors such as Adobe, Veeam and Mimecast. Each year, we receive national and international recognition from our global partners, and we are delighted to have received several awards again this year, highlighting that where we invest, we succeed. I'll now pass to Cherie to provide you with more detail on our FY '25 financial performance.

Thanks, Brad, and good morning, everyone. It's my pleasure to now take you through our FY '25 financial results. The first slide shows the consistency in our ability to deliver growth in gross sales and net profit over several years as we successfully deliver on our strategic priorities, strengthen our competitive advantages and adapt to new technologies and vendor programs with speed and agility. We're delighted to report that gross sales for FY '25 were over $3 billion for the first time, representing growth of 9%. This growth was delivered in a landscape of challenging macroeconomic conditions and federal and state election cycles, which caused some uncertainty and delayed decision-making by customers. Our PBT of over $69 million was up 11.4% on the prior year and was supported by relatively stable gross margins and improved operating leverage, which I'll provide further detail on later in the presentation. A final dividend of $0.15 per share was declared by the Board, which equates to a full year dividend of $0.281 per share and a payout ratio for FY '25 of 90.3%. Before moving on to the financial results by line of business, I'd like to inform you that during the year, the group undertook a review of its accounting policy relating to the group segment reporting. It was determined that the group is comprised of 3 operating segments: Software Solutions, Infrastructure Solutions and Services; as this better aligns with internal reporting structures and how management reviews operations in addition to providing enhanced transparency of disclosures. These 3 operating segments or lines of business will supersede the previous terminology of reporting Product, that is Software and Infrastructure combined, and Services. You'll also note a new profit metric reported for each segment being management profit, which is effectively net profit before tax and corporate allocations. It should be noted, however, that Data#3 remains a highly integrated business with a large volume of cross line of business sales and costs. Therefore, while it has been disaggregated to the greatest extent possible, some financial information presented by segment may be blended in nature. Moving on now to the results by line of business or operating segment. This next slide provides an overview of the FY '25 gross sales generated by each of our Services business units as well as the Services gross profit, gross margin and management profit. Services gross sales of almost $400 million were up 6.7% on FY '24 and driven by a strong performance by our maintenance and managed services business units of 8.6% and 25%, respectively. As communicated with the half year results, managed services continues to onboard new contracts and customers, and we've had some success with expansion in the mining sector during FY '25. Maintenance services had a stronger first half due to the lumpiness of some larger deals, particularly with enterprise agreements. Our Consulting, project services and people solutions business units were impacted by economic uncertainty and the Queensland state election this financial year as customers delayed infrastructure and transformation projects, and we saw a temporary slowdown in public sector demand for contingent labor. On balance, our Services business performed well with gross profit growth of 7.4% and an improved gross margin to 36.6% with the growth in the higher-margin business units. Management profit increased 10.5% to $32.2 million, which was pleasing considering the aforementioned headwinds faced by some areas of this business during the year. We also continue to make system and people investments in Services to deliver future growth. Moving on now to our Infrastructure Solutions FY '25 financial result. After finishing the first half down almost 13% on PCP, we are delighted to report that the business finished over 4% up for the full year. The second half saw a ramp-up in end-user compute sales, fueled by Windows 11 related upgrades and device refresh cycles. We're also seeing solid sales activity in data center and networking. With renewed focus on improving deal margins, Infrastructure gross profit grew 10% on FY '24 to over $71 million, and gross margin improved from 11.8% to 12.5% during FY '25. Most pleasing was that management profit of $17.5 million was up 27% on the prior year as we improved operating leverage through the automation of ordering and invoicing processes and following a restructure of this business in the first half. The next slide provides an overview of our Software Solutions results for FY '25. Gross sales hit $2 billion for the first time and were up almost 11% on the prior year. Sales were boosted by demand for security software products, cloud subscriptions and Adobe, predominantly in the public and education sectors. Software gross profit of $72.6 million was up 4.3% on FY '24 and average gross margin decreased slightly from 3.8% in FY '24 to 3.6% this financial year. This was driven by some larger, more competitive deals done at lower margins across a range of vendors during the year. Management profit for the Software business increased almost 8% in FY '25 to over $38 million with improved operating leverage through automation, process improvements and cost management. Slide 18 presents a summarized view of our FY '25 statement of comprehensive income, noting that statutory revenue includes adjustments made under the revenue accounting standard to present our software licensing and vendor-delivered maintenance support sales on a net revenue basis. There has been no change to accounting policy this year other than to segment reporting, as mentioned earlier. Operating expenses increased just over 6% on PCP, driven by wage inflation of around 6% after stripping out $1.1 million in one-off redundancy costs, increased investments in IT projects such as a cloud solutions provider platform and a new payroll system and higher software licensing costs related to new platforms and cloud consumption. Interest income earned was approximately $10.2 million, up over $500,000 on the prior year. We are currently forecasting interest income of about $7.5 million for FY '26, assuming an average cash position similar to FY '25 and a few interest rate reductions throughout the year. The next slide shows our summarized consolidated balance sheet as at 30 June '25. Key callouts include the usual inflated cash, trade receivables and trade payables balances at 30 June each year, resulting from the May-June sales peak and which subsequently reduced in Q1 of the next financial year as debtors are receded and vendors are paid for the products sold. Net cash flows from operating activities were an inflow of $126.3 million in FY '25 compared to an outflow of $86.2 million for FY '24. This is due to a larger number of May-June sales being invoiced and paid pre 30 June in FY '25 compared to the PCP. Investing activities in the current year included some IT project costs capitalized as software assets, including those for the cloud solution provider platform. The last call out on the cash flow and our working capital is that our average daily cash balance increased from around $246 million in FY '24 to about $267 million in FY '25. The final slide in this FY '25 financial overview supports our internal focus in recent years on steadily improving our internal cost ratio, a key internal measure of operating leverage. In FY '25, our internal cost ratio reduced to 79.7%, down from 80.6% in the prior year. The reduction was driven by a restructuring of our Infrastructure Solutions business in the first half, in addition to various automation and AI-related initiatives, system improvements and effective cost management across the business. Thank you, again, for your time this morning, and I'll now pass back to Brad to cover IT sector trends and strategy and outlook.

Thank you, Cherie. Well, let's take a few minutes to review technology industry trends plus our strategy and outlook. In calendar year 2025, Gartner expects Australian IT industry spending to increase 8.7% to approximately $147 billion. Sales growth generated from software is expected to grow at 13.4% to nearly $46 billion, while devices is expected to grow by 9.1%, which is substantially up on the lower-than-expected growth of 5.9% that was experienced last year. The projections that both software and devices are up for 2025 are good news for Data#3 as they are core offerings. IT services growth is forecast to be steady at 7.2%. In the last 12 months, our services growth exceeded this rate, and we expect to do so the same in FY '26. Communication services is lower at 3.2%. However, this is a large sector, including a lot of telecommunications equipment. We expect to see more positive growth in this sector in the areas in which we engage such as networking. Data center is expected to grow by a healthy 11.3%. While much of this gain will be seen in the hyperscalers such as Microsoft as they continue to build generative AI processing capability, it means additional capacity from our vendors to sell into customers as part of our integrated solutions. We also expect customers to continue to invest in their own data center capability and provide additional processing power. Let's explore a summary of our strategy before reviewing the outlook. Our strategic priorities drive our strategy. This includes: our solutions, developing solutions and services that deliver customer success; customer experience, differentiating Data#3 through the experience we deliver to our customers; operational excellence, connecting and simplifying Data#3 to deliver an agile and efficient business; and people and community, connecting Data#3 with its people and the communities in which we operate. Our customer experience combines customer segmentation and digital experience that ensures customers receive access to the right resources at the right time. This is a unified experience for customers to gain secure digital access to the Data#3 solutions capability. Customers want more digital engagement combined with in-person engagement, and that is what we're delivering in FY '26. Our solution sets and lifecycle services capability are where we will continue to focus and invest in FY '26. It is our ability to integrate these solutions through the solution's lifecycle, that is one of our competitive advantages. With AI pervasive across all our solutions, it provides significant opportunity for FY '26. Let's look at an AI customer case study. Our team worked with Penrith City Council on a Microsoft Copilot Readiness Assessment to drive real business value for the customer, working with the customer to help them understand the risks associated with AI, including data governance and security, understanding the importance of change management, and most importantly, understanding the use cases where Copilot could be deployed to increase efficiency and help council employees to deliver exceptional services to the community. Data#3 is another example of an AI case study. We are an extensive AI user ourselves, helping us to gain operational efficiency and increase sales. We have use cases across finance, HR, IT, cybersecurity, sales and customer experience. Through our use of AI, we gain benefit from the use of the technology, plus gain valuable experience to apply this knowledge to our customers. While Microsoft has decreased channel incentives for enterprise agreements, we're now well into our transformation journey. Microsoft is rewarding partners for focusing on the cloud solution provider program, Copilot, security and Azure migrations. We're having success in all of these areas. We also had success with our other key partners, and our plan is to still mitigate the downside in enterprise agreements during FY '26. We expect headwinds for Software in the first half of FY '26 with recovery to a similar position to the previous corresponding period for the full financial year. We expect continued growth from Infrastructure Solutions during the FY across devices, the network and multi-cloud. We expect growth in managed services and project services based on additional services capability and offerings. While we plan for growth in people and consulting, it's not without its challenges as the public sector continued to in-source. Consistent with previous practice, we are not providing specific guidance for FY '26. In line with previous years, we continue to expect a sales peak in the months of May and June, and our goal remains to continue to deliver sustainable earnings growth for our shareholders. In summary, Data#3's agility, capability and partnerships position us well for continued success. Thank you, and we'll now open for Q&A.

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

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

Paul, thanks for the question. Just to, I guess, clarify, so ECIF is End Customer Incentive funds. So, it's an incentive for the customer for -- typically larger customers who make a very large investment in Microsoft technologies through their enterprise agreements typically, well is the enterprise agreements as opposed to cloud solution provider agreements, where they make a large investment in Microsoft Technologies and then Microsoft provide an ECIF, an End Customer Incentive Fund to help the customers to deploy and use technology. So, the ECIF can be used by Microsoft partners or in fact, Microsoft themselves to help the customer on that road to piloting or implementing the solutions that they purchased. ECIF has actually been around for quite some time for many years. It probably was caught up in some of the most recent blogs from Nicole Dezen, the Microsoft Partner [ Lead ] Worldwide, where she may have mentioned ECIF in relation to a number of other things. So, it's not new for us. But what it does do is it provides essentially revenue opportunity for us because with those ECIF funds that Microsoft are providing, if Data#3 provides the implementation work, for example, or the pilot, we're effectively invoicing Microsoft in that regard for the use of the ECIF funds and the customer gains, the benefit. Does that address the question, Apoorv?

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

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

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

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

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

Potentially. It depends again on the nature of the enterprise agreement. So, you'll remember that commercial -- matter of fact, commercial enterprise customers, Microsoft invoice those customers directly and we receive a rebate. So that's why there's been a lot of discussion around the rebates because when Microsoft reduced the rebates on the commercial enterprise agreements, that's the only leverage that we have really outside of providing services. So, decreasing -- but in the public sector, for example, we still have a buy and sell scenario. But the -- so what Microsoft have announced is the removal of the levels, the levels A, B, C and D, which set the different pricing levels. And so, we'd expect customers to now move into a, almost like a negotiating phase with Microsoft; rather than just getting their respective level, they'll need to negotiate with Microsoft. And if they don't -- if they're not successful with that, then they will be at a higher price level than they may have previously been. The opportunity for Data#3 is that in in the public sector, for example, it would have been providing a margin on a higher-priced item. But because Microsoft invoice directly in the public sector -- in the commercial sector, it doesn't really make a massive difference. However, what it does mean is, it really takes the price advantage away to a large degree unless the customer does negotiate an agreement with Microsoft around the difference between EA and CSP. So, you might find that it provides a better market for Data#3 to help our customers to migrate from enterprise agreements to cloud solution provider agreements where there is better value for Data#3. Plus, we have, as you know, a very extensive licensing business with our licensing consultants and we'd expect that with this complexity that Microsoft have introduced, then that will provide opportunity for our licensing consultants to work closely with the customers to determine how they can have those negotiations with Microsoft.

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

So, [ I think ] you said it would be similar to like high single digit. It depends -- I might just break it down. The last couple of slides of the deck was around those 3 areas in terms of Software, Infrastructure and Services. So, from a Software perspective, we actually expect Software to have, as we call it, headwinds in the first half. So, Software could actually go backwards in the first half, and we plan to recover over the full financial year to be at a similar level to the previous corresponding period for the previous financial year. So, you'll know that because the incentives decrease started from the 1st of January, we've already dealt with half of that from January through to June. But all our customers that have anniversaries and renewals from July through to December, we're still managing that, and that is quite a large revenue component for us. And so that's why we expect a decrease from a software perspective. From an Infrastructure and Services, it's business as usual. In fact, there's great momentum with both Infrastructure and Services, and we expect growth from both of those businesses in the first half and second half. So, the Software -- to summarize, I guess, the Software business will decrease the growth percentage for us in the first half more so and to a lesser extent for the full year.

The next question comes from Edward Woodgate with Jarden.

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

Yes, mainly in Canberra. So, Queensland is by far the biggest territory for all business aspect and our consulting business and Canberra is the second. And they're the 2 that have the biggest public sector influences. And last year in particular we saw disruption with that with Queensland and federal government with a lot of in-sourcing activity. And we do expect that to continue. So, I guess our opportunity is to expand our customer base where we can. Obviously, it's easier in Queensland than it is in federal government. But we do still have opportunity, particularly around outcome-based initiatives as opposed to just putting consultants in at a daily or weekly rate, if that makes sense.

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

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

Yes, sorry. Yes, Infrastructure and Hardware.

Right, right. So -- yes, so in the first half, in particular, it was affected by the various elections, but also there was still -- it seems like so long ago now, but first half of last year, we still had relatively higher interest rates and customer sentiment wasn't where it needed to be. And we -- so we had lower overall growth. In fact, we had decline from an Infrastructure perspective in the first half last year. And then into the second half, we saw a rebound with that. And as interest rates started to ease, customer sentiment improved, and we had a much better second half for our Infrastructure business. So, we're expecting that we will continue momentum with the infrastructure business into the first half of FY '26 and beyond.

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

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

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

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

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

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

Your next question comes from Chenny Wang with Morgan Stanley.

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

Yes. Thanks, [ Chang ]. Thanks for the question. The customer decision-making that we've referred to over recent times has been as a result of 2 factors. One is the IT environments and governance and all of that becoming just more complex. So, the number of decision makers within the customer has increased substantially. And whereas a few years ago, it used to be 2, 3, 4 people would be able to make the decision to move forward. We're now seeing 10, 11, 12 people involved in the decision-making process for our customers. So that, by its very nature, delays the decision-making and makes it more drawn out. That won't go away. That looks like that will continue. As far as customer sentiment is concerned, though, in terms of actually moving forward with projects and having that compelling reason to get everybody on the same page and move forward with their purchases, that is improving, and we've seen that since the start of the calendar year with interest rates easing. So, we expect that, that will continue to be good for the market. As far as the different segments are concerned, obviously, we're large in the enterprise and public sector space. In the mid-market, the mid-market seem to be able to move forward with decisions a little bit quicker than some of the enterprise customers for those reasons and there's less people involved in the decision-making process. So that's a good thing. And we expect the sentiment to continue to improve in mid-market. And in the small business, we don't really play in that area. So, the retail and SMB, any organizations that really with less than 50 to 100 devices, while we do sell to that market, it's not really a focus area. So that won't affect us too much. Does that provide some color to -- the answer to the question for you?

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

Okay. I'll just address the first one first, and then we might come back to that second one. So, as far as the managed services growth, yes, we have done very well with our managed services over the last couple of years, and we had a 25% growth last year. So, we're continuing to invest in managed services. And you can almost break out managed services down to 2 offerings, if you like. Overall, is that enterprise managed services where we're managing many vectors for the customer from their network to their data center to their devices and really outsourcing a lot of their IT infrastructure. So, we're investing in more sales and marketing capability there. We already have very good delivery capability, and we'll just scale the delivery capability as we need to. And we also spent some investment on systems and tools over the last couple of years with managed services. So, we expect that enterprise managed services business to continue to grow. And then, we've also been busy building out packaged managed services. So, this is managed services for specific things. And I mentioned around some of the Microsoft managed services that we've developed around managed security. We're also developing out additional packaged managed services across the network. And of course, I mentioned the Device-as-a-Service, which is not just the device, but a wrapper of managed services around it as well. So, we are going to continue to invest in managed services over the period because we see good growth potential there. The second one, could you just repeat that? I think it was about pricing confidence.

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

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