Data#3 Limited (DTL) Earnings Call Transcript & Summary

Thank you for standing by, and welcome to the Data#3 Limited FY '26 Results Webinar and Investor Presentation. [Operator Instructions] I would now like to hand the conference over to Mr. Brad Colledge, CEO and MD. Please go ahead.

Thank you, and good morning, and thank you for joining us for this briefing of Data#3's FY '26 Full Year Financial Results. I am joined by Cherie O'Riordan, our CFO, who will take you through our financial performance in detail a little later in the presentation. For those of you not familiar with us, Data#3 is an ASX 200 listed IT services and solutions provider in Australia and the Pacific Islands. Our vision is to harness the power of people and technology for a better future. We have over 48 years of experience evolving our solutions and services to enable our customer success, combined with world-leading vendor technologies. We deliver the digital future for our customers through our technology solutions and life cycle services. In terms of the agenda, we will start with the FY '26 highlights, followed by key operational updates, and Cherie will provide a detailed overview of our financial performance. I will cover IT sector trends and round out with our strategy and outlook before closing with Q&A. Let's start with our FY '26 highlights. We delivered gross sales of $3.4 billion for FY '26, which represents growth of 12.7%, well ahead of Gartner's Australian IT industry growth forecast of 8.9% and a strong achievement for a company of our scale. Recurring gross sales increased to 70% of the total, up from 69% in FY '25, underpinned by multiyear customer contracts in our managed services, maintenance services and software solutions businesses and the ongoing shift by our customers to multiyear subscription and as-a-service offerings. Net profit before tax of $78.8 million was up 14% on FY '25, boosted by the solid gross sales growth and improved operating leverage achieved this financial year, and our customer satisfaction rating increased to 4.36 out of 5. FY '26 was a record year for Infrastructure Solutions. It was a record year for Software Solutions, which included the successful management of the Microsoft channel incentive changes, plus securing the 5-year renewal of the whole of Federal Government Microsoft products and services agreement with the Digital Transformation Agency. It was also a record year for Business Aspect consulting and for managed services. We advanced our solutions development across Managed Azure, Managed Security, Device as a Service and Managed Networks and progressed our operational excellence agenda through our MyD3 customer portal for purchasing management and support, plus we enhanced our internal modern data platform, security and AI functions. This next slide shows the consistency of Data#3's performance over the past 5 years. The FY '26 was a strong result in its own right. The more important message is that it's not a one-off. Across the FY '21 to FY '26 period, gross sales have grown at an 11.6% compound annual growth rate, gross profit at 9.4%, basic earnings per share at 16.3% and dividends per share at 16%. That consistency reflects the strength of our market position, the strength of our vendor and customer relationships and the recurring nature of our growing share of our business. So when we talk about consistent earnings growth, this is the evidence behind it. Strong FY '26 execution, a 5-year track record of compounding growth and increasing recurring sales base that supports the resilience and visibility. Moving on now to our key operational updates for FY '26. Looking at growth by solution area for the year. Device as a Service grew over 100%; End User Compute, 18%; Data Centre, 19%; Public Cloud Azure, 29%; Security, 21%; and AI over 100%. This is broad-based growth. Every one of our major solution areas contributed and the fastest growing AI and Device as a Service are the areas in which we've been deliberately investing. Microsoft recently reported its FY '26 full year results materially ahead of expectations, led by Azure, AI and Microsoft 365. That momentum reads through directly to Data#3. Microsoft grew Azure and cloud materially during the year, which aligns with our own software solutions growth areas for FY '26 and looking forward to FY '27. Microsoft's increase in Copilot and AI reflects directly on Data#3's strong AI growth in Copilot, Azure Foundry and associated services. Security remains central to enterprise cloud and Copilot adoption for Microsoft. Our security business grew 21% with security software, E5 and managed security a key growth pillar for Data#3. In short, Microsoft's AI and Azure momentum reinforces demand across Data#3's fastest-growing lines, Azure consumption, Copilot deployment, security and AI services. And all of this culminated in Data#3 listing software solutions gross sales 14% to $2.3 billion and being named Microsoft's Country Partner of the Year for Australia during FY '26. Our customer satisfaction improved across 3 key metrics during FY '26, overall satisfaction, ease of working with Data#3 and the quality of account representation. This is reflected in our customers' experience. Let's look at an example of Mitsubishi Motors Australia Limited. Mitsubishi faced growing IT complexity and limited internal capacity. It operates a complex national IT environment supporting its head office and dealer network of around 4,000 users across Australia. After an 8-year relationship with Data#3, the customer went back to market as part of the governance process and chose to continue with Data#3 while expanding the scope of services. This is a strong example of how Data#3 creates long-term value for customers and shareholders. The expanded engagement covers service desk, application support, software licensing management and cloud optimization. The outcomes for the customers and reduce -- the customer are reduced operational risk, better cost control and improved governance. This managed service case study shows the quality of Data#3 services business and the benefit these engagements have to our overall relationships with customers. These are sticky, trusted recurring relationships where our people are deeply embedded in the customer environment. It shows our ability to move customers from just support services into broader life cycle services across cloud support applications and managed operations. We have a large customer base, and there is a broad opportunity to replicate these types of engagements with many more customers. Our ability to continue to deliver high-quality solutions for customers is a testament to our incredible people and culture. Data#3 has again been recognized by multiple third-party organizations during FY '26 as having a leading workplace environment. This is reflected in our employee satisfaction score of 4.38 out of 5. Our vendor partners are investing heavily in advanced technology solutions and our expertise in implementing and managing those solutions is central to both our customers' success and our own. We work with over 500 vendors and growth is increasingly broad-based across our portfolio, reflecting the breadth and resilience of our partner ecosystem. FY '26 brought local, regional and global recognition across multiple partners. Highlights include the 2025 Microsoft Country Partner of the Year, the Cisco ANZ Partner of the Year and a series of global and Asia Pacific Cisco awards. These awards reaffirm our capability and that vendors and customers alike see us as a partner they can trust and a partner of choice. AI is now a core operating capability across Data#3 embedded in finance, HR, IT, cybersecurity, sales and customer experience. We run Microsoft Copilot Studio, Azure Foundry, Azure Cognitive Search and LinkedIn Sales Navigator internally, alongside our own AI embedded solutions. We use our own business as the proving ground. What we deploy internally, we take to our customers with the credibility of how run it at scale ourselves. Results are measurable. This is AI-driven operating leverage story and practice, cost avoidance and capacity enhancement that scale with growth, and we're just getting started. I'll now hand over to Cherie for a closer look at our FY '26 financial performance.

Thank you, Brad, and good morning, everyone. It's my pleasure to take you through our financial results for the 2026 financial year. Data#3 delivered record gross sales of $3.4 billion for FY '26, up 12.7% on FY '25, with growth across Infrastructure Solutions, Software Solutions and Services. Gross profit grew 5.3% to $305.2 million. This is a strong outcome given the Microsoft incentive program changes that took effect on 1 January 2025 and had the greatest impact on the FY '26 first half. The mitigation strategies we put in place proved successful and software gross profit finished the year ahead of our expectations with a strong second half. Earnings before interest and tax increased 16.6% to $69.8 million, and net profit before tax increased 14% to $78.8 million, growth well ahead of gross profit growth and clear evidence of the operating leverage we've been building. Basic earnings per share increased 13% to $0.3516, and the Board has declared a final fully franked dividend of $0.1825 per share, up 13% for the full year, representing a payout ratio of 90.3%. We finished the year with a strong balance sheet and no borrowings, which continues to give us the flexibility to invest in growth while delivering attractive returns to shareholders. Moving now to the results by line of business or operating segment. Infrastructure Solutions delivered a record year. Gross sales grew over 14% to $651 million, boosted by end user compute sales, which were underpinned by Windows 11 upgrades and device refresh cycles. Data centre storage and server sales grew over 19% as customers moved to hybrid cloud and prepared for AI adoption. The business expertly managed any variability in the supply chain related to global memory shortages and significant hardware price increases by leveraging its warehousing capabilities and vendor relationships to get the best outcomes for customers. Infrastructure gross profit grew 18.6% to $84.5 million, with gross margin improving to 13% from 12.5%. This was driven by improved deal margins, accelerated rebates earned off the strong sales performance and a shift in rebates from maintenance services following changes made to the Cisco incentive programs earlier this year. Management profit grew over 78% to $31.2 million in FY '26 with the step change coming from higher rebates in addition to significant cost efficiencies driven by automation and the restructuring completed during FY '25, now having a positive annualized impact. Software Solutions also delivered a record year with gross sales of $2.3 billion, up over 14% on FY '25's $2 billion. Growth was driven by ongoing demand for security products, cloud subscriptions, Adobe and Microsoft Azure. Gross profit grew 7.6% to $78.1 million as the impact of the Microsoft incentive program changes were successfully mitigated. Gross margin of 3.4% compares with 3.6% in FY '25 and FY '26 management profit grew 7.7% to $41 million. We achieved significant growth in cloud solution provider sales in the commercial mid-market sector and gained momentum with our licensing consulting and management offerings. Enterprise agreement renewals were strong, particularly in public sector. As Brad mentioned earlier, in March 2026, Data#3 was appointed by the Digital Transformation Agency as the sole provider of Microsoft products and services to the Australian government for a 5-year term with a 1-year extension option, which will ensure continuity of gross sales for this segment as well as an opportunity for the provision of services into federal government. We also delivered strong growth with non-Microsoft vendors during FY '26, in line with our diversification strategy. In summary, all of the mitigation strategies we put in place in response to the Microsoft incentive program changes have proven successful. Services gross sales of $412.3 million grew 3.6% on the prior year with different growth profiles across the services portfolio. Business Aspect Consulting had a record year with gross sales up over 22% to $37.1 million as it capitalized on the market opportunity across key accounts and practices, including transformation and governance and information and analytics. Maintenance services grew 11.5% to $192.3 million, with solid improvement in the second half as expected and a record year of Cisco Enterprise Agreement wins. Managed Services grew 9.4% to $60 million, supported by ongoing contract wins and renewals, particularly in the resources sector. Onsite Managed Services was flat for the prior year -- sorry, was flat on the prior year with some downsizing in a key account, but the pipeline is solid for both Enterprise and Onsite Managed Services. Project Services maintained solid market activity and pipeline coverage during FY '26. However, booking conversions reflected reduced business confidence, customer timing and extended procurement processes. New South Wales and ACT performed well, while Queensland, VIC and WA recorded softer sales conversion and a slower market recovery as the year progressed. As a result, Project Services gross sales of $67.4 million were down 15.3% on the prior year. FY '26 marked the start of a multiyear transition for Project Services with leadership changes, the development of new solutions and capability and an overall enhanced services growth strategy for execution commencing in FY '27. People Solutions gross sales of $55.5 million were down 8.7% in FY '26, reflecting an ongoing tight labor market and economic sentiment, which resulted in customer decisions to manage contractor numbers in some key Queensland accounts, together with some margin pressure from a more competitive market. Renewal performance and activity levels remain strong. However, conversions reflected customer decisions, cash rate pressures and a tight market for specialist candidates. Services gross profit of $142.3 million and gross margin of 34.5% reflects the mix in services growth by business unit, in addition to the shift in Cisco rebates from maintenance services into the Infrastructure Solutions segment following the Cisco 360 program changes, a reallocation within the group rather than a loss of value. Total rebates generated across all vendors in all segments in FY '26 increased over 20% on the prior year. This next slide presents a summarized view of our FY '26 statement of comprehensive income. Statutory revenue and other income grew over 6% to $907 million. Statutory revenue includes adjustments to present our software licensing and vendor delivered maintenance support sales on a net revenue basis. However, internally, we continue to measure performance in terms of gross sales. Gross profit grew 5.3% to $305.2 million, an increase of $15.5 million. First half gross profit was most impacted by the Microsoft incentive program changes, while the second half saw a return to growth. Operating expenses, including staff costs of $228.8 million increased just 2.4% in FY '26. Staff costs increased just over 2% on the prior year, supported by our disciplined focus on cost management, ongoing alignment of our cost base to market demand and improved operating leverage. Lower billable services headcount aligned to customer demand was offset by targeted investment in specialist sales roles across all 3 segments to support future growth. Wage inflation was modest during FY '26. Operating costs benefited from a first half lease accounting adjustment of $0.9 million, offset by increased IT projects, software licensing and other costs. The result is EBITDA of $76.4 million, up 15.1% or $10 million, with the EBITDA margin improving 0.6 percentage points to 8.4%. Gross profit growth of 5.3% converting to EBITDA growth of 15.1% clearly demonstrates the operating leverage we've built. Depreciation and amortization was steady at $6.6 million and interest income of $10.1 million was in line with FY '25, earned off a strong average cash position and a sustained high cash rate. Net profit before tax for the period grew 14% to $78.8 million, reflecting significant growth in infrastructure and software solutions management profit and tight cost control that substantially offsets the impact of the Microsoft incentive program changes on FY '26. Turning now to the balance sheet as at 30 June '26. Cash of $326 million compares with $356.7 million at 30 June '25. As is usual for us, the May and June sales peak drives a strong closing cash position off the back of high-value invoicing and collections activity. Other current assets of $720.7 million are up on $547.2 million with trade debtors higher in June with the end of financial year sales peak. Importantly, average day sales outstanding was maintained at 25 days. Trade creditors are correspondingly higher with current liabilities of $975.9 million. One balance worth highlighting is inventory, which closed at $73.4 million, up from $18.4 million at 30 June '25. This reflects some larger hardware orders procured and held in advance of customers' requirements, deliberately positioned to get ahead of expected hardware price increases and potential supply constraints associated with global memory shortages in addition to higher goods in transit from partially delivered vendor shipments. All inventory is committed to customer orders and holding costs are charged where inventory is retained beyond standard holding periods. The increase in noncurrent assets predominantly reflects newly recognized right-of-use assets and property, plant and equipment related to our new Melbourne, Canberra and Sydney office leases. Net assets grew to $95.2 million from $84.2 million. The current ratio maintained at 1.1, and the company continues to operate with no borrowings. On to the cash flow. FY '26 cash flows from operating activities were $23.3 million compared with $126.3 million in FY '25. This movement reflects the timing of receipt of customer payments net of supplier invoices during the peak months of June rather than any change in collection performance. Investing activities of $5 million relate predominantly to new office fit-outs, internal computer equipment and software assets. Financing activities of $48 million include dividends paid of $44.2 million compared with $40.3 million in FY '25 at a payout ratio of approximately 90%. Our average daily cash balance for the year was $276 million, up from $267 million in FY '25. Pulling the working capital pitch together, we had closing cash of $326 million, average daily cash of $276 million, which is up over 3%, interest income of $10.1 million and an average day sales outstanding held at 25 days. This final slide in the financial overview covers our internal cost ratio, internal expenses divided by gross profit, which is our key internal measure of operating leverage and which has improved steadily over time. FY '26 ICR improved to 77.5% from 79.7% in FY '25, supported by the restructuring of the Infrastructure Solutions business in the first half of FY '25, company-wide automation initiatives, system improvements and effective cost management. Staff costs increased just over 2% on the prior year, as outlined earlier, and the increase in operating expenses was also modest. This 2.2 percentage point improvement in ICR is what elevates our 5.3% gross profit growth to 14% net profit growth. Thank you for your time this morning. I'll now pass back to Brad.

Thank you, Cherie. And let's now take a few minutes to review IT sector trends and then our strategy and outlook. In calendar year 2026, Gartner expects Australian technology industry spending to increase 8.9% to exceed $172 billion, growth well ahead of the broader economy and driven in large part by spending related to generative AI adoption. Software is the largest IT spending category in Australia in 2026, having overtaken IT services. Devices continue to grow, supported by AI-capable PCs. Investment in AI-related infrastructure continues to accelerate and is driving strong data centre growth. While much of that investment sits with the hyperscalers, we are also seeing sustained customer interest in hybrid cloud as organizations determine the optimum environment for both their AI and their non-AI workloads. Overall, this is a growing market, and Data#3 has been exceeding industry growth. It's worth stepping back to see where it sits in the longer arc. The industry has moved through the enterprise era, the cloud era, the digital experience era and now firmly in the AI era. Data#3 has navigated each of these transitions successfully and each one has expanded the value we deliver to our customers. The AI era is the largest of them, and we enter it with capability already built and running. Let's explore a summary of our strategy before reviewing the outlook. Four strategic priorities drive our strategy; solutions, developing solutions and services that deliver customer success; customer experience, differentiating Data#3 through the experiences we deliver to our customers; operational excellence, connecting and simplifying Data#3 to deliver an agile and efficient business; and people and community, connecting Data#3 with the people and the communities in which we operate. Our solution technologies are delivered across the full life cycle, advise, procure, deploy, adopt and operate. It's our ability to integrate these solutions and manage them throughout that life cycle that is one of our competitive advantages. Our Data#3 business units map to that life cycle. Business Aspect advisers, infrastructure and software solutions help customers to procure the right technology solution, project services deploys and customer success teams drive adoption and managed services operate the technology. Each stage is a genuine capability and together they create recurring revenue and multiyear customer relationships. We deliver those solutions with deep industry relevance across energy, water and utilities, mining and resources, construction and venues, defense and national security, education and the public sector. The customers showed improvement in activity levels this year, supported by the progression of digital strategies, cybersecurity requirements and modernization programs. AI touches every part of our solutions portfolio. In our AI solutions practice, we deliver AI-specific solutions such as Copilot and Azure Foundry. In cybersecurity, we provide defense against AI-based attacks using AI-based tools. In applications and automation, we increase the efficiency of applications and utilize AI tools for automation and integration. In collaboration, we have AI-enabled software and hardware with Microsoft Teams, Cisco Webex and in-room equipment. In end user computing, AI PCs enable faster local processing and reduced latency. In hybrid cloud, we are seeing increases in server, storage and public cloud AI solutions. And in networking, enterprise networks are being embedded with AI for better manageability and insights. AI is a significant opportunity for Data#3 across software, infrastructure and services alike. We supplement our life cycle services with our enterprise AI life cycle services to drive real business outcomes. The Data#3 AI factory is how we turn that opportunity into repeatable delivery, moving customers from envision through transform to operate. It gives customers a defined path from proof of concept to production and gives us a scalable, outcome-led AI go-to-market. Our key initiatives for the year ahead are the artificial intelligence solutions practice, a 24/7 Sovereign Security Operations Centre, expanded Microsoft services and public sector, managed Azure acceleration, enhanced development of our unified endpoint management offering and an upgraded ServiceNow environment within our managed services, which will provide AI capability to help us to be more efficient and scale more readily. Two of those initiatives warrant more attention. The first is a deliberate high-priority investment in establishing a dedicated artificial intelligence solution practice in FY '27, positioning the business at the forefront of next-generation value creation. Alongside it, we are building customer-facing AI delivery pods, enabling a more consistent, scalable and outcome-led AI go-to-market. The second is a strategic investment in the 24/7 Sovereign Security Operations Centre in FY '27, supplementing our existing hybrid stock in Brisbane and strengthening our leadership in trusted locally governed cybersecurity services. Cybersecurity remains one of our highest priorities for our customers, particularly in government, regulated industries and critical infrastructure. This capability is designed to meet customer requirements for data residency, locally operated services and to provide regulatory alignment and it strengthens our broader managed security and life cycle services offerings. We are taking deliberate action to accelerate the growth of our profit -- and profitability of our services business. The services plan includes enhanced capability, solutions and strategy on which to commence executing in FY '27. The services plan embeds advisory capability into key accounts, grows our annuity contract base, strengthens our managed services platforms, improves services sales disciplines and aligns project services capability to high-growth solution areas. This supports a more services-led organization over time. On leadership, we thank Michael Bowser for his contribution to Data#3 and acknowledge his retirement after more than 38 years with the company. We are pleased to welcome David Gold to the services leadership role, where he will drive the next phase of our services strategy. Turning to the outlook. We see growth opportunity across all 3 segments. Infrastructure Solutions growth is expected to be supported by AI-ready infrastructure, end user computing, hybrid cloud, networking, cybersecurity and life cycle services. We will continue to focus on priority solution areas that address customer needs for productivity, resilience, compliance and secure modernization. In software, having successfully navigated Microsoft channel changes, we expect to return to normal growth with a strategic focus on winning with complementary vendors, services and packaged offerings. Microsoft's AI products and programs provide further opportunity in FY '27 and will continue to drive large Azure commitments, software advisory and Microsoft services opportunities in the public sector. The strategy will also focus on growth in the mid-market, supported by continued investment in our MyD3 customer portal that enables efficiency and scale. In services, we expect growth from expanded managed and project services offerings across AI, security, devices and cloud. Managed services is expected to continue performing well, supported by a solid pipeline. Maintenance services carries momentum in enterprise agreement wins and consulting is gaining momentum through opportunities in cybersecurity and analytics. Project Services and People Solutions are expected to build from the current market conditions in the near term as customers manage project timing and contractor numbers. The pipeline is solid, providing momentum into the second half and supporting growth for the full year as we execute on our services growth strategy. Consistent with previous practice, we're not providing specific FY '27 guidance at this stage. In line with previous years, we continue to expect a sales peak in the months of May and June and earnings skewed to the second half. While the year ahead will be shaped by global supply conditions, broader economic confidence and customer procurement cycles, we have started the year strongly. We have a growing market, excellent support from our vendor partners, momentum generated by AI and a clear strategy to continuing delivering consistent earnings growth for our shareholders in line with our long-term strategy. As a leader in the Australian IT industry, there's no better place to be. Thank you. And we'll now open for Q&A.

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

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

Thanks for the question, Nick. So I guess there's a few pieces to that. And as Brad outlined, there are a number of different key initiatives, investments that we are planning for FY '27. The majority of them are investments in people and billable headcount. There's also a little bit of sort of tooling and physical presence that we need to take out for the SOC, for example. However, for the most part, it's billable headcount. Most of those investments should have an almost immediate return once employed and once we start selling up those various investments. The 2 that will likely take a little bit more time to ramp up are the Sovereign SOC and the AI Practice, where we might need to bring in some headcount ahead of generating gross profit of that investment. So overall, we expect, depending on timing of bringing those resources into business and ramping up those investments, we expect staff costs to increase by up to 10% next year. As I said, most of those investments should be fully recoverable in the same financial period. However, with the SOC and the AI Practice, we could have up to about a $2 million impact on net profitability next year. So that all being said, I would expect the operating leverage to sort of maintain for next year while we ramp up those investments and get to generating full return in FY '28.

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

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

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

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

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

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

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

Like a first half benefit as well to '27.

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

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

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

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

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

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

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

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

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

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

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

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

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

Was that low single digit or...

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

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