Comms Group Limited (CCG) Earnings Call Transcript & Summary

Welcome to the Comms Group First Half FY '26 Investor Presentation Webinar. My name is Daniel Ireland from DataIR, and I'll be hosting the call today. I will introduce you to Chief Executive Officer, Peter McGrath; and Chief Financial Officer, Matthew Beale, who will be presenting on the call today. At the bottom of your screen is a Q&A function, so please put your questions in there and they will be out at the end of the presentation. I will now hand it over to Peter to take you through the presentation.

Thank you, Daniel. And as Daniel has mentioned, we've got Matthew Beale, our CFO, who will cover some of the content today. And thanks, everyone, for joining this particular presentation. So hopefully, that is coming through fine. Thanks, Daniel. So what we'll cover today is obviously, an overview of the business, financial highlights, operational update, strategy and outlook, and then we'll have some time for Q&A. So a little bit on Comms Group. We're a specialized communications and managed IT service provider. We've got effectively a domestic business that has a number of key business units within that. And then we also have our global business where we have some unique characteristics as a business that we've built over a number of years. We're really proud of what we've achieved within that business, and we've got some exciting announcements that we'll be talking about today as well. A bit on the Board and key management personnel. We've got Ryan as our Chair, myself as CEO and MD; and then a number of very experienced directors, including Ryan, Ben, Claire and Steve with strong expertise either in the telco market, commercial or legal areas and Matthew Beale, our CFO. In terms of shareholders, a bit of an update today. That's what our shareholder base looks like today. So interestingly, kind of about 1/3 of related parties, so typically directors and key management. And then institutional around about 33% and then retail at just over -- or circa 36%. And you can see some of the shareholding of some of the larger shareholders within the business as listed there. We have a number of other [ instos ] on the register, but have not hit the 5% level. So there isn't any disclosure publicly in relation to those. So the businesses that we have for those who are joining us for the first time today, we have a business called communications and collaboration business. So that's providing a range of telco-related products and services into the Australian domestic market such as broadband, voice services, mobile services and then some collaboration services such as Teams calling, value-added services in that space and then contact center solutions where we team up with a number of key contact center providers. We've also put into that particular business, the TasmaNet business that we acquired maybe circa 6, 9 months ago. Our secure managed IT solutions with a focus on security and managed security solutions for customers, targeting mid-market business. So all of our divisions' focus on business customers, typically managed services, high level of recurring revenue. We don't tend to go out and do one-off IT work. We tend to do managed services within that business and with a high level of recurring revenue, as I just mentioned. And we're seeing really strong demand with our Security Essentials offering where we provide a managed security service for our customers. And finally, our global business, which operates offshore, also covers some of our domestic customers who are buying wholesale voice services. And it's -- we're a specialist, and we've grown that business quite significantly with some very exciting developments that have occurred over the last 6 months. So really proud to announce today that we've delivered strong growth, organic and through strategic growth and a very solid EBITDA performance within the business. So you can see there for our first half FY '26, our total revenue came in at $37.6 million, which is an increase of nearly 40%. We had very strong performances from our global business, also from our managed IT services business and very good performance as well from our comms and collaboration business, seeing some organic growth within that business as well. Our services and recurring revenue maintained at over 90% compared with the previous period. Gross margins circa the 48% mark. So they've held up to be very strong. But importantly, our underlying EBITDA was $4.5 million. So it's an increase of nearly 90% compared to the prior period. So some big growth in global. We'll come to that shortly. And interestingly, our underlying EBITDA margin increased to be 12% of revenue. So really happy with that result. Also reported a positive net profit before tax of $0.8 million versus a loss before tax of $0.3 million. So almost $1 million net profit before tax in this period. So really happy with that result. And then our underlying net profit after tax and before amortization, which is a very common measure, particularly in the telco space because it tends to equalize your results to exclude amortization, and that increased to $1.8 million versus $0.9 million previous corresponding period. So circa 100% increase. Had a very strong period as well with new contracts signed comparable to last year where we were at $10.4 million. We signed $5.4 million in new ARR, and I'll cover that in a little bit more detail later, but really happy with that result as well. So last year was a record year for us. And the first half, we've been able to kick the first half off with very strong new business as well. This is new sales. Some of that's been converted to revenue. Some of it hasn't. We tend to contract with our customers and then provision those services over time. The TasmaNet integration continues to track to expectations, in the final stages of that when we're releasing a lot of -- or reducing a lot of costs, releasing a lot of synergies through that process. So really happy with that. And we've announced another interim dividend of $0.0125 fully franked for the period. Just on financial highlights. You can see there our total revenue up circa 40% to $37.6 million. Gross profit, strong result there. That was up nearly 40% as well to $17.8 million. Our underlying EBITDA up almost 90% to $4.5 million on the previous corresponding period. This is all versus the same period first half FY '25. Underlying EBITDA up 100% on previous corresponding period -- sorry, underlying NPATA to $1.8 million and underlying operating cash flow up just slightly to $2.4 million that you'll see in a moment, we had some working capital increases with the TasmaNet business coming on board. So we're really happy with that particular result. So we're maintaining revenue guidance as well of $75 million plus annualized run rate this year and also maintaining that we will hit our run rate EBITDA of $9 million to $10 million as well. Group revenue, you can see that over time, we've had some really good increases over time. But in this particular half, you can see there from $27 million up to $37.6 million for the half, nearly 40%. So really happy with that particular result. Revenue by division, we've got each of our key areas shown here, comms and collaboration, secure managed IT and then our global business. Comms and collaboration. So we've got the TasmaNet business fitting into there, as we mentioned with our full year results circa 6 months ago. So that was up 66%. And as I mentioned, some growth there. Really positive with TasmaNet as well. We won a number of key contracts, some of those I'll mention a bit later as well. So we got the base revenue from that business, but we've actually won some key contracts with some blue-chip corporates and government organizations. So happy with that as well, and that's helped those numbers. Secure managed IT, up 16%, very strong position, some great contract wins and really a solid pipeline of future opportunities there as well. To be won but really excited about the opportunities in that space. Our Security Essentials offering is really resonating with our customers. And then our global business, up 23% to $7.5 million. Now one thing I would mention is that's just to external customers. We also provide services to the internal businesses. So when we look at that, we're up around $7.9 million revenue. So nearly almost $8 million for that particular business in terms of total revenue. Revenue composition is still really positive there, a very strong proportion of services revenue coming in at 93.3% with only a small amount of one-off connection fees. One off connection fees are great, but you don't want to rely on them. And as you can see here, we're building this strong kind of recurring revenue business. Gross profit and margins -- gross profit margin down slightly, but that's really as a result of bringing the TasmaNet business across. And I mentioned earlier, we're extracting a lot of synergies now. So we'd be hopeful that we can increase our gross margin moving forward with the gross profit result up 36% to 17.8% of 13.1%. So really happy with that and some big improvements in gross margin in a couple of our businesses as well, and you'll see that on this particular slide here. Our comms and collaboration, our gross profit has come in at $8.2 million just for the half, and that compared to $10.1 million for the full period last year. So a really strong result there. Our secure managed IT solutions business come in at $5.3 million for the half versus $9.2 million for the full year last year. And then you can see that strong result in global that's come through with a really strong increase in gross profit, $4.4 million versus $7 million last year and gross profit margin or gross margin going up to 59%. So really happy with that particular result. Underlying EBITDA, we're showing you 2 kind of snapshots of that here. We've got the -- by half here. And you can see that in the first half, coming in at $4.5 million versus $2.4 million for the previous corresponding period and maintaining that 9% to 10% full year revenue annualized view as shown there. And then if we look at it by business units, you can see the strong improvement in underlying EBITDA versus some previous halves there. If you look at the comms and collaboration business came in at $2.7 million. That's got the TasmaNet business in it now versus $2 million first half FY '25. But look at the global business, we've gone from $0.7 million to $1.7 million effectively on a previous corresponding period or even $0.9 million to $1.7 million if you look at the second half FY '25. So we've been telling the market that the global business has got great momentum. It's building that momentum, both on the revenue side and that we expect to see growth in the profit, and we've seen that come through in this particular result. We think it's only the start for the global business, but you can see there a really good result going from $0.7 million to $1.7 million EBITDA. And then our secure managed IT solutions business going from $1.3 million to $1.8 million. So that's really, really happy with that result as well. Our corporate overhead has gone up a little bit, effectively $1.6 million to $1.7 million. Obviously, it's an area we'd love to keep flat if we could. But with the cost increases out there in the market, we saw a little bit of an increase there. Overall EBITDA margins going to 12%, really happy with that particular result as well. I'll hand over now to our CFO, Matthew Beale. Thank you, Matthew.

Thanks, Peter. If we turn to the income statement. So as Peter has already mentioned, we've had a significant increase in the revenues from the first half of last year from $27 million up to $37.6 million, a large part of which is obviously accounted for by the TasmaNet acquisition and the inclusion of a full 6 months of its trading. The gross margin or gross profit is also up. The margin, as Peter has already mentioned, was slightly down, and that's primarily the result of the inclusion of TasmaNet, which has generated slightly lower margins than our existing businesses. Operating expenses up from $10.7 million to $13.3 million. And once again, that's from the inclusion of the TasmaNet business. The net effect of all of which is an increase in our underlying EBITDA from $2.4 million to $4.5 million for the 6 months. In terms of some of the costs below that line, we've incurred acquisition restructuring and one-off costs of about $900,000. And the majority of that actually relates to the TasmaNet acquisition. And there's not only costs in terms of legal fees, adviser fees, various valuation fees that have been incurred, but also we've incurred a significant amount of employee time that's been involved with the consolidation of the TasmaNet network with the existing business. And also during the period, we had a migration of a number of billing systems within the Next Telecom business, and that's also incurred a significant amount of employee time through that process. There were also other significant costs in relation to the TasmaNet acquisition such as the transition costs that we incurred from the vendors or the vendors or the receivers of that business and hence, classifying them as either restructuring or one-off. The -- so that's led to an EBITDA of $3.4 million for the 6 months relative to $1.4 million of the prior year. And finally, a net profit before tax of $800,000 relative to a loss of $300,000 of the prior year. Just in terms of the underlying NPATA with some of the -- with the costs that have been added back there, the amortization of intangibles of $900,000 represents the amortization of the contracts and brands that we made during the month. If we can move to the next slide, the cash flow overview. So during the 6 months, we've -- sorry, the closing cash at the end of the 6 months is $4 million relative to $2.7 million as at the 31st of December prior year. That's -- that represents -- or it's -- for that 6-month period, it's actually a cash out -- net cash outflow of $1.5 million. We had an opening cash position of $5.5 million as at 30 June. That includes underlying operating cash flows of $2.4 million relative to the first half of the prior year of $2.3 million. So that's slightly up. It's -- although we've had the inclusion of the TasmaNet business during the 6 months, we have had a significant investment in the working capital, particularly for that business during the period. If we just look at some of the other payments, some of the other payments incurred. So we -- prior to CapEx, we had operating cash flows of $1 million. The CapEx of $700,000 relative to the prior year, $200,000. A large part of that actually consists of an upgrade to infrastructure of one of TasmaNet's significant or largest customers. They've actually reimbursed us for most of that cost in January, which will obviously get reported in the cash flow of the second half of this year. So that's given us a free cash flow of $0.3 million or $300,000 for the 6 months. Just looking at some of the other payments that have been incurred below that line. We had $200,000 in lease payments, which we classified as nonproperty. They relate to some finance leases for equipment that have been picked up or that we took over as part of that acquisition. We had $500,000 received from a share issued to Stephen Picton, one of the new directors that came on in July last year. The bank borrowings repaid of $300,000 relates to the Regal loan, which was a loan repayment under that facility in September. And that's -- the net amount, all of which gave us a cash flow -- sorry, cash outflow for the 6 months of $1.5 million. So if we could turn to the next slide to the balance sheet. At December -- 31st of December, we reported net assets of $37.9 million, and that's up from $36.7 million as at 30 June. And just to note with the June numbers, they have been restated for finalized opening amounts that we had to recognize for the TasmaNet acquisition. So during that 6-month period, we actually finalized those opening balance sheet numbers and the accounting standards actually require us to restate the prior period comparable numbers. So the total current assets was stable at $15.2 million relative to 30 June. We've had a slight decrease in the noncurrent assets from $54.2 million to $53.5 million. The total current liabilities has decreased slightly from $24.5 million to $23.9 million. Within that figure of current liabilities, we've still got the Regal loan of $10.5 million, which was subsequently refinanced during January and paid out. And as we've now got a long-term loan with Westpac, that amount has now been subsequently or will be classified as a current and a noncurrent liability, the majority of which will be classified as a noncurrent liability. If we just move down to noncurrent liabilities, we've reported $7 million versus a comparable figure as of 30 June of $8.3 million. So that's primarily just from the repayment of those lease liabilities during that period. Just in terms of the net debt, we've recorded a figure of $6.5 million as at 31st of December, which is up slightly from $5.2 million at 30 June, and that's really a factor of the decrease in the cash balance over that 6-month period. So I'll hand back to you, Peter.

Okay. Thank you, Matthew. Just on the capital management framework, we get asked this question in terms of priorities. Obviously, we want to ensure we have a strong balance sheet with sufficient liquidity to operate in all operating environments with a focus on reducing debt, but also continuing to invest in technology and service. We are still pursuing M&A opportunities that are strategically aligned and value accretive, but we want to be able to continue to provide returns to shareholders as well. So continuing dividends, et cetera. Matthew mentioned that there was a bit of an uplift in CapEx and quite a bit of that was one-off and a significant proportion of that was for a customer-related project with the customers paying for that as well. So we generally got a business in all 3 divisions that are strong cash producing with a minimal level of CapEx within the business expected moving forward. Just turn now to operational update. So we had a strong start to FY '26 as outlined. The TasmaNet integration is on track and the network synergies are approximately 50% complete, and we expect those to be completed towards the end of June this financial year. In terms of the businesses themselves, we had strong performance across all the divisions. We're seeing good organic revenue growth and strong new sales contracts signed of $5.4 million and also a number of key wins with a range of corporate and government clients plus a strong pipeline in all divisions. Global has got circa $450,000 MRR in the pipeline. Convert that to annual recurring revenue, you just multiply that by 12. So that's around the $5 million of annual recurring revenue in the pipeline. Our domestic networking and cloud investments. So in line with the TasmaNet acquisition and the consolidation of our network, we're continuing to upgrade and synergize our Australian mainland network, and I'll show you a little bit more on that in a moment. And we have incurred some one-off CapEx to facilitate that upgrade. So we bought some newer equipment, some more higher capacity equipment, and we believe that will be around the circa $500,000 to be incurred within FY '26. So that greater capacity core network, if you like, enables us to sell higher speed services, 1 gig type services, but also to replace what we effectively have with 3 networks. And we're also upgrading our private cloud instances as well. That key rationalization project that I alluded to expected to deliver circa or up to $2 million per annum in savings. Our new sales performance, just giving a little bit more granularity on that in this update. If we look at FY '24, FY '25, you can see the first half figures coming in at approximately half the FY '25, but a really good balance of sales across the various divisions. So these are new sales contracts signed and these are expressed in terms of annual recurring revenue. Typically, we sign a total contract value with a customer and depending upon the division that is, but that could be 6 months, 12 months, 2 years, 3 years in terms of the TCV. But really good to see that balance across the business. We did secure a major contract and expansion of connectivity with a key customer in TasmaNet, a major global food producer. Really happy with that contract. Global itself saw very strong growth with 500-plus new orders to about circa 80 international and domestic customers within the period, typically MNCs, multinational corporate business type customers. And then in late November 2025, we secured a major contract with a leading foreign government valued at circa $70,000 of monthly recurring revenue. So really happy with that. As at February 2025, Global had about $2 million in annual recurring revenue to be provisioned with a further $72,000 in MRR at the contracting stage. So $2 million in ARR that has already been contracted, but isn't on our books yet. In other words, we're not billing for that and then another $72,000 in MRR. You could just convert that to ARR multiplied by 12 and at the contracting stage that in other words, we've got an indication that we've won those deals, and we're just finalizing the contracting. Separate to that, open opportunities in the global pipeline of circa $5 million. So we're seeing a lot of great opportunities in global across our footprint. Just on some of those key projects. So we signed a global SaaS provider. We announced that to the market in September '24. 100% of those countries and services have been delivered at 31 December, all 11 jurisdictions. So that service is up and fully billing or tolling as we call it. We also signed a large global technology company for a significant service. We announced that to the market in November '24. We have delivered technically on that service. We're just going through final testing and there's been some delays, not with us, but with some other parties in relation to that. We're hopeful that we'll get that up and tolling around the Q3 type period, FY '26. And at this stage, we're only billing around about the 5% level for that particular customer. A major Australian global food producer, I mentioned that one before. We've delivered around 40% of that project, and that's been rolled out over the next few months. And then that leading foreign government in the Asia Pacific, we've delivered 100% of the services as at 31 December. So that particular service is up and tolling at circa $70,000 a month. Just on our global network, we're just keen to give the market a bit of an update on what's happening there. So we tend to only go into a market, a new market when we have customer demand. We don't go into the market for no other reason. We've continued to expand that network and now the Asia Pacific coverage is pretty well at a point where we have 95% coverage. We made a decision circa 5 years ago to get licenses in key markets because we could see that the regulators were making it difficult for some resellers out there. So you can see our license markets over on the left there. It is our view that we would be the most licensed provider across the market. And as a result, we're servicing a lot of large global carriers, significant carriers from around the world who then want to provide the services to their multinational corporates. They want to make sure that the provider is fully compliant. And so they're not going to go to some of these resellers out there in the market that really don't have the wherewithal the reputation, the coverage or the licenses. Within the period, we obtained a license in Vietnam. We understand that we're the first foreign company to obtain that license, and we'll probably be making a bit more of an announcement on that in the next couple of weeks. And in addition to that, we have circa 6 European markets where we have licensed or registered to provide those services there as Europe is also tightening up. And keep in mind, we're providing local voice services with local telephone numbers in markets and the regulators generally want to make sure that you're compliant in that particular area. So that's Europe and Rest of World where we're expanding. And so we have a number of key markets that we're currently expanding into that are on foot currently. Our key differentiation is the fact that we do have these local telco licenses in key markets. And hence, we have the ability to provide compliant voice services and satisfy the requirements of some of the world's biggest companies. Separately, from that footprint expansion, we're looking at expanding our go-to-market channels, including adding some new carrier partners over the next 6 to 12 months. In terms of the TasmaNet transition update, you can see there that we've been very successful in terms of getting customers and suppliers across. So that's all been done. And now we're working on the integration and rationalization of that network and cloud platform, and we're circa 40%, 50% done on that. We estimate that the TasmaNet-related revenues within the period, the first half was circa $9 million. So really happy with that result. So that's made up of the customers and revenue that came across, but we've also been able to grow that base and win some additional key contracts. We mentioned the global food producer. We also won some really good business in regional New South Wales with some key corporates and also with a government organization. This slide, which we've shown you before, really outlines what we're doing with that rationalization and consolidation process where we're bringing together a number of our core networks and our cloud platform. And in doing this, we're also upgrading the technology so to give us a state-of-the-art network and cloud environment. So we'll end up with a cloud environment, private cloud environment in Brisbane, in Sydney and in Tasmania, in Hobart and key points of presence in Sydney, Melbourne, Brisbane and Hobart as well. I'll just turn now to strategy and outlook. So in terms of strategy and outlook, continued focus on corporate mid-market government sectors domestically and then as I mentioned before, within the Asia Pacific and beyond, servicing multinational corporates. Most of our businesses or most of our customers and users on our global network at the end of the day are multinational corporates, whether they're coming in directly or indirectly. We do win some business directly. We've just brought a major Australian bank online in a particular country in the Asia Pacific. We expect to see more of that over time as well with Australian corporates saying, well, who can we deal with that can provide us these global voice services. And we want to continue to cross-sell and upsell to these key strategic accounts of ours. Financial outlook, we're looking at annualized revenue of $75 million-plus once TasmaNet fully transitioned. And as you can see for the first half, we were already over the halfway mark for that. And we expect annualized EBITDA of $9 million to $10 million once that transition and rationalization process is finished. We want to continue to grow our operating and free cash flow a little bit within this period of additional costs that were incurred and a working capital increase. But as moving forward, we expect that to go back to that growth period that we had before and continue to deliver good shareholder returns. In terms of the final figure for this year, I think as we get closer towards the end of the year, we can give the market a bit more of an update there. Growth opportunities, I think I've covered a lot of those. We're seeing some really good organic growth opportunities and/or inorganic in the market. We still have some active M&A discussions ongoing. But the last 6 months, the key focus has been on that rationalization process and getting the TasmaNet business fully integrated and pulling out those costs, those synergy costs that we saw, and we're working on that, expect to finish that around the June period. At this stage, I'm going to hand back to Daniel and very happy to take any questions from yourselves.

Thank you, Peter. So we have a number of questions online, and I'll read out the first question. Peter, can you clarify whether the $9 million to $10 million EBITDA exit run rate guidance includes the $2 million benefit from the rationalization project to be completed in Q4?

Yes, that is correct. One thing I would state is we're already starting to see some of those benefits come through. You can see there that we mentioned in the deck that we're around the 40% mark. So we've already actually done quite a lot of that project and we expect to finish the project by around about the June month or thereabouts. So yes, that $9 million to $10 million pretty well includes that rationalization project.

Second question. After signing Vodafone, the Vodafone Global partnership mid-2022, global segment revenue grew from $10.2 million to $15.3 million from FY '22 to calendar year '25. How much of that revenue delta is from Vodafone? And how much further growth does this partnership provide the group?

Yes. Look, the Vodafone partnership has been very instrumental for us and the fact that we could deliver the services that we delivered to them. So a number of key unified communications products globally for them. Our product set with Vodafone is pretty well steady now, but we are adding additional countries over time for them. So we see some further growth opportunities there. Look, I'm not at liberty to say what the total revenue is with Vodafone, but it is very decent. They would be one of our top global customers, but we do expect that to continue to grow over time. In addition to Vodafone, we would have a number of other key partners similar to Vodafone that we've been able to bring on as well that are almost as significant as Vodafone as well, and we would expect that strategy to be replicated with additional partners over time. So I think the Vodafone thing, firstly, gave us a lot of credibility in the market. We were able to deliver really well for Vodafone. Vodafone are very happy with our performance and the types of services that we deliver for them. We took them to Operator Connect for those who are aware of that marketplace. So all in all, a very, very positive relationship with good momentum and continuing to grow and build over time. We also deliver quite a lot of services into Europe with -- in conjunction with Vodafone, not just in the Asia Pacific region, so in other parts of the world. And as we expand our market reach into other markets, other parts of the world, whether that be Europe, Asia Pacific, I don't want to name the specific parts of the world, but we've got some active expansions underway currently. We would expect to see both Vodafone and a number of other carriers take those services from us. So all in all, a really positive relationship, which is growing. But I think you can assume that the revenue that we're getting from Vodafone is in the millions but it's not just them that's a key customer for us now. Just on -- Daniel, if I just extend the question a little bit wider. Yes, I think you can see that the revenue has gone from circa $10 million. And I think if you -- the person asked that question has indicated, yes, circa $15 million. I think if you look at our gross revenue of $7.9 million, which is selling also to our domestic businesses who want sell to their customers, we're more like about $16 million with our work in progress, as we call it, our WIP contracts signed. You can see that, that's probably going more like $18 million, $19 million. So we probably see that, that global business, we look at that as around a $20 million turnover business today. Yes, we haven't delivered that yet, but that's what we're seeing that is with the customers in the pipeline, et cetera. So we've largely -- haven't got there yet, but largely doubled the revenue in that business in the last 2 or 3 years. So really happy with the performance within that business.

We have a question here. So this week, Aussie Broadband acquired Nexgen at 6.3x EBITDA. Considering the company, Comms Group is trading at 4x, has the Board considered a strategic review to achieve a sale outcome like Nexgen?

Look, the Board, myself and the Board, we're always looking at ways to maximize value for shareholders. And we have various people approach us over time. So I think you can be rest assured that the Board considers all strategic options on a regular basis, and we do need to discuss these things regularly. So I can't go into any specifics, but it is something that we're very mindful of as well.

Regarding the Secured Managed IT Solutions segment, do you see or expect any positive or negative impact as customers accelerate AI capability adoption, modernizing their IT capabilities in-house? And then just a follow-on from that. Are you pricing -- is your pricing seat-based and potentially subject to the risk of customers reducing their IT team headcount replacing with AI capabilities?

Look, we tend to target mid-market within that business, so corporate mid-market, so a little bit bigger than the SME. But I think in general, the SME in the mid-market, the biggest issue that they've had is not just what product do I get? Do I get the latest virus checker or is that going to work? Can I do AI or whatever? I think it's making sure that they're covering all bases. Cybersecurity is a really, really big issue. Security risks are a really big issue, but the fact that they're continuing to move to the cloud. So what we're finding is that the mid-market corporates are more and more interested in our services, not less interested. So we don't see that AI is going to come along and solve everything for them. If anything, it's going to create more and more security risks for them. As people tend to run things like ChatGPT and they start to use more AI within their business, they're going to need a very robust and secure IT environment. So we're finding that this is creating great opportunities for us. Now from our perspective, we're looking to use AI and some of the core operational systems within our secure managed IT solutions business to improve our service delivery for our customers. So just as businesses are looking at what they can do with AI and other advanced technologies, we ourselves are starting to look at how we can -- and we're already implementing how we can deliver a better service for our customers. But that core essence of I'm a mid-market corporate, small business mid-market corporate, how do I make sure that I'm secure is a key thematic for us within the growth that we're seeing in that market. They can't just rely on their IT teams and some of them actually want to run relatively small IT teams. So they need a provider who can help them with that. And that's where our Security Essentials product is really good. It helps -- we deliver a managed security solution, not just I'll get the latest virus checker because a lot of businesses don't know whether that's going to work or not. And they don't know what product to buy anyhow. It's a holistic approach across the whole environment, but there is a strong thematic they're using -- moving to more and more cloud applications. We are interestingly seeing private cloud raise its head again. And we're seeing a lot of businesses want to put quite a lot of information to private cloud. We're a big private cloud provider. So that's an important thing as well. But if anything, we're seeing good growth within that business, and you would have seen our margins continue to be very healthy as well.

Next question. Would you consider selling the Global segment?

Look, whether we would sell or not sell, it's not something we could go into at this stage. I mean, obviously, if someone came along and made us a good offer, it's something we might consider. But we do think that, that is a really good business. It's got some unique characteristics. It's taking us quite a long period to get to where we are. You can't easily get licenses, particularly in that region, and we've developed a really strong sense of as a great provider to a number of big carriers globally. And it's not just that we're in those markets. We're very personalized service. We run 24/7. They know if there's an issue, we're going to fix it, et cetera, et cetera. And we deal with all of these carriers across the region in the current time zone. If you're a U.S. or European carrier, you can't do that. The people you need to speak to don't work at nighttime in Asia. They work during the day, so we can tap into them. So there's lots of aspects of our global that are really positive. But ultimately, we're here to maximize value for shareholders. So we would consider things as they come along.

What percentage of the $450,000 MRR in the global pipeline would you expect to convert based on historical pipeline conversion rates?

Yes. So of that figure, quite a bit of that is close to being -- so there's 2 aspects. There's the amount that's already contracted and to be provisioned. We tend to provision services very quickly. That government deal that we provisioned, we had that up and running within 2 to 4 weeks into a key Asian country as a significant chunky deal. So there's the aspect of the deals that are already there in work in progress as we call it. So we would expect those to be delivered pretty rapidly. We have that one large deal that's circa maybe $150,000 a month or thereabouts, maybe a little bit more. We're hoping that, that can be delivered very shortly. And then the deals within -- that have contracted but not ready to be signed off, if you like, at this point, are probably going to take within the next 6 months to be delivered, I would say, 3 to 6 months.

On inorganic opportunities, is there a particular segment within the business that could benefit most from accelerated scale or increased capabilities?

Yes. Look, we do like to manage secured managed IT solutions. So any opportunities there would be good. We have quite good scale there, but we'd like to increase the capabilities there. So that would -- or the size of that business. And keep in mind, we're very much a managed service provider with contracts and recurring revenue. So we really like that business. We would look for other kind of business telco opportunities as well. We can get scale from that also. Global, at this stage, global, if the right type of thing came along, we'd say, wow, that would be a great business to buy, but we're a little bit more cautious, particularly in the Asia Pacific region. So I think at this stage, our M&A mainly focused around domestic, but within those both those telco services and managed IT services area.

Do contracts typically include CPI-linked reviews each year?

It depends on the type of contract. Some contracts do. But in general, it's not something that we've put a lot of that in, but we have been considering how we could do that moving forward. And a lot of other industries do that today, and we probably need to learn something from that. But telco in general, has been a little bit tardy with some of that in the past. But it is something that we've considered looking at and doing. As I think things like the NBN and the like tend to -- the pricing there tends to stabilize, it's probably an area that we could explore at some point. But at this stage, we don't have a lot of CPI-linked price increases in our contracts.

Okay. That's all the questions that we have. I'd like to thank Peter and Matthew for the presentation today and thank you for attending.

Thank you, everyone, for attending.