Dicker Data Limited (DDR) Earnings Call Transcript & Summary

Thank you for standing by, and welcome to the Dicker Data Limited HY '22 Results and Equity Raise. [Operator Instructions] I would now like to hand the conference over to Mr. David Dicker, Chairman and CEO. Please go ahead.

Hi, and thanks, everyone, for coming on to the call. This is a results call for the H1 for this year, which, again, was another great result, especially in the rather difficult circumstances that we find ourselves in, all things considered very good and things are going really quite well. I'll now hand over to Mary to give you some detailed information on the numbers and the whole situation. Over to you, Mary.

Hi, welcome, everyone, and good afternoon, and thank you for joining us on this call. The purpose of the call is to give you an update on our half year results, which we released this morning. And also, we have announced a capital raise, which we'll be able to give you a bit more information around the use of proceeds and the further strategies around that as well. . So in terms of the half year results, a very strong revenue result for the company with revenue close to $1.5 billion, finishing at $1.5 -- $1.46 billion, up 36.5%. A part of that is made up of the acquisition that we recently did and the contribution of the revenue that the Hills and Exeed acquisitions contributed. But more pleasing was the underlying organic growth in terms of revenue with the underlying business growing close to 17%. Another highlight in terms of the numbers is the significant growth in our Software business, now representing closer to 25% of our revenue number. And Vlad will be able to give you a bit more color around the growth in our software business in the business update. Another key highlight is in respect of EBITDA result, finishing at $61.1 million, up 19.4%. And our net operating profit before tax, finalizing at $51.8 million, up 12.7%. If we look at the trends that we've -- our half year trends, one of the questions that you would look at for more information around is the margin, and particularly, the contraction of margin on the comparative period and previous half year. Now the margins have improved in the second quarter. We did provide a quarterly update where the margin for the first quarter finished at 8.6%. For the half year, we finished at 8.8%. And we are guiding that we're expecting the full year margins to come in at closer to 9%. Part of the reason behind the margin outcome in terms of the first quarter was an overweight of retail business plus some additional cost of goods, increases around freight and -- but the fact that the margins have, finished at 8.8% for the half indicates that upward trend and we'd likely see that come through in the second half as well. In terms of operating costs, it was pleasing to finalize on our overall operating costs coming slightly down as a percentage of sales compared to the previous period, finishing at 4.7% of sales, but net profit margins coming in lower, primarily attributed to increases in depreciation, amortization and interest finance costs. The depreciation costs have increased significantly with the acquisition-related contributions. There was a higher amount of identifiable intangibles of which there was amortization, which was not in the comparative period. I think that represented close to $1.6 million incremental costs. And then depreciation with more right-of-use assets reflected in the number. In terms of the financing costs, they've also increased mainly attributable to increased borrowings for the half, particularly around supporting our working capital requirements, but then we also had the introduction of the acquisition debt, which we took on August last year with the acquisition of Exeed and then the cost of -- financing costs are also up. So they are both impacting our profit before tax margins for the half year. If we look at the balance sheet side, the key takeaway for the half year is the increased amount of investment in working capital. There's definitely an elevated level of inventory that the business is holding partly attributable to the supply chain disruptions and the fact that there's a lot of [ linear deliveries ]. So despite our team's ordering in a manner that requires -- that inventory is required, the deliveries sometimes happening concurrently and the requirement to hold more inventory. We've also seen increase in receivable balances that's aligned to the business growing its revenue plus also the role of distribution to support the channel with some extended terms in a scenario where there's a supply chain disruption and orders can't be completed in full. So our investment in working capital dollars is definitely increasing. That brings us to sort of the requirement with the additional inventory that we're holding. We've reached new capacity of the new warehouse that we have built. We moved in February '21 into the new location, which already provided an increase on our previous facility. However, with the diversification of our portfolio, increased amount of inventory we're holding. We are at near-capacity utilization of that new warehouse. And hence, we are planning the expansion of the build-out into the second stage of that warehouse providing another 16,600 square meters of warehouse space, representing a 70% increase on our current capacity. That will give us the opportunity to consolidate some of our operations. With the Hills acquisition, we are still operating out of Seven Hills, which was the original Hills warehouse using about 5,000 square meters there. So the opportunity to consolidate the operations in a single location will also provide some cost savings, so we're not duplicating on costs in terms of that space. Just based on high level estimated cost of construction. We're estimating that the project will cost us some [indiscernible] $25 million to $30 million. The project being put out to a number of builders. And we expect to point [indiscernible] as it is only a construction [indiscernible] approvals and elements already being done, we expect quick. So that -- hopefully we'll be able to have that space completed within a month's time and being able to occupy that space and have the opportunity for future growth in terms of capacity, especially around the growth of businesses that we've introduced into our portfolio. Vlad will be able to give you a bit more color around the business update and current outlook and further expand on the opportunities that are available in second half and beyond.

Thank you, Mary. And thank you, David. Hello, can you hear me?

Yes.

So just starting with the business update. We're still operating in a very much demand elevating supply environment, a very volatile environment. Obviously, through the unprecedented demand for the technology all around the world, manufacturing and suppliers just can't keep up with demands. It's basically as simple as that. COVID have driven that very, very strong degree of need for digital transformation, a lot of companies looking to transform and digitize their businesses, putting a lot of orders, but we just simply could not fulfill them in full. However, despite everything, we're still getting more supply this year than we were getting last year. And hence, obviously, we continue to grow. If we look at our current open order, back order book, we currently have just under $400 million in open orders, which unfortunately due to some constrained supply or incomplete supply, we can't fulfill and we can't invoice. So obviously, in this environment of constant disruption of supply, we have to hold more stock. We normally never like to hold more than 4, 4.5 weeks. But in this environment, we have to hold somewhere around 6 to 6.5 weeks in certain line items, up to 7 weeks because we know they are very demanded lines of products and customers really demand us and vendors demand us to hold more stock. Despite all these, we continually navigating this. We have many, many years of great experience how to manage and navigate those challenging environments. One of our biggest values into the channel -- into the vendors and the customers is our agility, our flexibility and the way to deal with this. And I think we're continually dealing really, really well with this. Just to finish up with supply chain challenges and how I see the next 6 months. I don't think we will see a significant improvement in the supply chain. Demand is simply too strong and demand is continuing to be off-stripping supply, and I just can't see that changing. A lot of analysts and vendors who we're dealing with and partners suggesting that we will start seeing ease up of demand and supply catching up somewhere around Q2 to Q3 next year. This is very much a guess at the moment. But we're hoping that we'll come into more predictable environment sometime during next year. Because predictable environments will assist us with not investing as much working capital, trust into logistics and supply chain. Obviously, will kind of bring us back to a normal operating environment. Now if we go to the next slide, Slide #12. We have -- as you know, we have acquired Exeed Group business, predominantly in New Zealand. We also had a small number of small business here in Australia as well. If we look at our half 1 '22 results, $192 million revenue came from the Exeed operation. And actually, tomorrow will be the day when our Exeed New Zealand operation will be fully integrated into our Dicker Data New Zealand operation. Exeed Australia operation is now fully integrated and had been integrated for the last few months. We're looking at new New Zealand offices and a new warehouse location and our teams are already integrated and they are already moved into the new locations. We're just getting all the operational integration and the system integration to be completed, like I've said, tomorrow. So really, really good news. We have a bigger warehouse. We have a bigger office. We have a very big ambitions for our New Zealand market. And this year is going to be actually very, very solid coming from New Zealand. So if we go to the next slide, #13. We've kept ourselves busy, and we've done another acquisition. It was a tremendous opportunity for us to get into a brand new market, which is access and surveillance market. Currently, Dicker Data is not playing in this market. Again, it's a very strategic acquisition, opens up extra 3,000 net new customers and partners come to our books, giving us ample of new technology and new vendors. And we have a strong belief that this physical security industry is going through a journey of digitization and IT platforms are going to be a fundamental base for their transformation. We're obviously incredibly strong in IT, in anything to do with infrastructure and solution selling. So I think bringing some access and surveillance part of that complex solution selling into the mix going to put us in a very, very strong position in the next 5 years. So a very, very exciting opportunity. It's only 1 month -- sorry, 2 months of Hills contribution in the first half. We will obviously have the full 6 months Hills contribution into the second half of Dicker Data numbers. Okay, if we go to the next slide, Slide #14. It just shows you a number of new vendors, some of the world-class vendors like Axis Communication, Dahua Technology and Power Shield and a few other ones. Really, really excited about this opportunity. Next slide, #15, I'll talk a little bit about IT market and our strategy, also I'll touch base on our market share. Year after year after year when we're delivering this presentation, I'm always incredibly excited to get to this slide because we are continually taking market share both in Australia and New Zealand. New Zealand, of course, while we were naturally taking market share with acquisition of Exeed Group in New Zealand is going to put us on a very strong #2 place. This is probably the last time when we have split out Dicker Data and Exeed as on the pie graph. Next time, it will be just Dicker Data New Zealand as we've now fully integrated, and we'll run from the same system. But ultimately, it puts us just under 30% market share in New Zealand. And obviously, 1 plus 1 is not equaling 2. We will be looking to drive a very strong accelerated growth out of this market in the next couple of years. Australia business is incredibly strong. We're growing our software business much stronger than any of our competitors. We're growing our infrastructure business. We're adding new vendors. We're taking share, very slowly we're chipping away, and we're currently at 33% market share. We actually don't have the latest, latest numbers of some of our competitors. We actually do believe that our market share probably slightly higher than this, but we went into the conservative mode. And so we're thinking it's somewhere around 30%, 33% to 35%, looking only at the corporate commercial and enterprise business. Remember, we -- in Australia, we have a very, very small insignificant consumer retail business. Everything we predominantly do is corporate and commercial. So we've obviously compared apples to apples. If we would add consumer business that Ingram Micro and Synnex does, then of course, it's slightly different picture. Let's look at next slide, Slide #16, and this is our revenue categories and splits and growth. So as you can see in the middle slide, what constitutes of $1.457 million that we delivered in the first half, $365 million out of software, absolutely remarkable 42% half-on-half. It's one of the highest growth we've ever seen our software business delivered. And this is remarkable because Exeed contribution of $192 million in first half is all pretty much hardware. It's the hardware distributor. We had a very good organic growth of our hardware business as well. And yet, our software business outperformed our hardware growth and our software business is now moved from 23% internal share at Dicker Data to 25% internal share. Our aspiration is to get software business to 40% in internal share. Look, with the growth we're currently showing and we're very much focused on delivering similar growth in the second half. I think going into next year and continue delivering and focusing on software business and delivering this growth, I think it will be just a matter of couple of years until we get ourselves to a business to those aspirational goals. If you look at the right pie chart, 48% half-on-half increase in our subscription and renewable revenue. That's doing incredibly well as well. We're putting a lot of efforts in getting that type of revenue streams going further up and increasing it, which is really good news. So hardware business, if we look at the left side, 35% increase year on year, like I said, incredibly strong result. Out of that, we've had growth in our PC market, our networking market. We have absolutely sensational growth in our AV/UC market as a new category that we've established only a couple of years ago and is showing a great result. Due to inability to fulfill infrastructure orders, Servers & Storage business is in slight decline simply because we just can't fulfill some of the orders. If I look at the open book and demand for Servers & Storage, it's increasing very, very rapidly. So we're having -- looking at the second half and giving you a little bit of a view how I think our hardware growth is going to get represented, it's probably going to change slightly. I feel the PC business is getting slightly softer demand. And therefore, we're getting a bit of a improved supply. But our networking, servers, storage, power, cooling categories currently experiencing extraordinary demand. Most of our order book, most of those $300 million-plus open books is currently consists of the products on this segment. So we will probably see a much stronger growth in the second half from those segments. So overall, growth probably will remain the same. But the construct of this growth is probably going to change slightly. Okay, so if we go to the next slide. We always show -- Slide #17, we show this graph at every presentation. We continue to drive our long-term vendor diversification strategy. And we're currently getting into top 5 vendors, representing 50% of our business. As you can see, we have mitigating that risk, making sure that we're not reliant on a single vendor. Very similar situation happening actually with our top customers. We have no significant reliance on any of one top customer. Our sweet spot for Dicker Data always were and always will be servicing our mid-market and SMB community. Our number of customers we're servicing went up 30% year-on-year. So it's helping us to continue to diversify the vendor concentration, which is really, really good. Very positive slide. So next is Slide #18, just a couple of new vendor additions that's coming on board. A big win with NVIDIA Mellanox business, a very, very strong addition to our lineup. In the last couple of months, we have won exclusivity -- exclusive distribution contract with Veritas and Autodesk. We always had those agencies, but we always were competing against other distributors. By putting more focus and more investments into driving unique sets of services into the market, those software vendors I felt that investing with Dicker Data will give them a much better return and we'll continue to drive their growth into the market. We're now becoming a very, very strong powerhouse for all software vendors. So that's why you see a lot of software vendors is coming on board. And when you see new vendors coming on board, I'm focusing a lot on driving that software pace of the portfolio. So going to the next slide is #19. This is just our ANZ vendor portfolio. Very, very strong lineup between hardware and software vendors, penetrating every segment of our market, very strong additions to some of our AV and UC vendor lineup. So very, very pleased with this vendor portfolio. Slide #20, we always show this slide just to show that it's just us who is very pleased with our performance, but it's the industry who is acknowledging a great job that Dicker Data does there in the market. Lots are collated from industry bodies like ARN winning Hardware Distributor of the Year. We also are incredibly proud winning Diversity and Inclusion second year in a row, it's incredibly prestigious award. Over 40% of our workforce at Dicker Data are females. We have people speaking in 28 different languages. Our culture is a very, very big part of our success. The next slide is strategy and outlook. I will touch base on a couple of things that I think is very relevant and driving the digital transformation and why I think even in a slowing down economic environment, a tech industry is doing exceptionally well. In fact, there were a couple of studies done with a Fortune 500 companies and more than half of them said they're going to increase their tax spend in the next 12 months. So we are in a very, very good position to take advantage of this continued demand for the technology. Security is probably one of the biggest conversational topics. Obviously, given the war in Ukraine, given all the other situations all around the world, we're seeing increased number of hacking and cybersecurity attacks. Security becomes a very, very big topical conversation. Software, again, a very big focus for us, as you could see, over 40% growth. We're going to continue to drive that growth. Device has always been a big strong part of our of our mix. And I think -- with the hybrid working is staying with us, I think it's going to continue to be a big part of our business. Cloud, we're very focused on driving more hybrid cloud environments and assisting all our partners and managed service providers to navigate this cloud conversation. When people coming back into the office environment, they're looking to come back to a smart office where they can collaborate and drive more innovation. So a big demand for digital displays and various audio/video technologies, all on the IT platforms. And that's exactly what we're helping in assisting our partners to navigate through. Data center infrastructure is currently experiencing the biggest demand I have ever seen in my career life. So very, very exciting for us because we are in an absolute fantastic position representing all the key Tier 1 and Tier 2 data center infrastructure vendors that is available. 5G is going to continue to drive its need for a better networking, better connectivity. It will drive more data. And more data, it means more storage. More storage, it means more security, more data analytics, more backups and more navigating different cloud platforms. Retail market is a small new addition for us. We're very, very happy with our work in the retail market. It's definitely a huge opportunity for us, which we -- as soon as we build our new warehouse, we will potentially look into -- if we are to enter this market. At this stage, we're seeing a huge deal of opportunity in the corporate and commercial markets. So we're probably just going to sort of get focused there. And market convergence, of course, I've been talking about it for many, many years. Hence, obviously, our acquisition of Hills and driving the DAS business, fantastic opportunity, converting IT security market into the -- sorry, security markets into the IT-based market. Are we -- we're seeing AV already moved into the IT platforms. Operational technology market is now converting as well. So we're in a really, really good space there. Now just a little bit -- just very, very quickly, Slide #23. I'll go quickly and in specifics. Access control and surveillance, it's in the office, it's outside of the office. It's traffic lighting. It's a huge industry. We have purchased Hills business at its lowest. I mean Hills at the peak time used to be a $1 billion organization. When we purchased it, it was under $100 million. There's -- it's a very, very exciting market for us. We had Hills now for about 6 -- 7 months and we've done a lot of really good learnings from that. The more we learn about the market, the more excited we get. So a huge opportunity for us. Access control and surveillance is going to be one of the growth engines for Dicker Data in Australia in 2023. And that's how we're looking at this, and that's how we're gearing up. Software and SaaS, like I've mentioned before, a big focus. We're not going to stop. Those sort of 40% to 45% growth numbers is going to continue to drive into this half and the next year. So huge opportunity for us. With emerging software businesses, we're talking to a lot of new vendors in this segment, so just watch out this space. It's very exciting for us. 5G, I've mentioned before and look at our lineup of vendors who is supporting the 5G rollout and refresh. Cisco, Juniper Networks, Extreme Networks, Veritas, Hewlett-Packard Enterprise with their very, very strong Aruba portfolio. We have basically 90% of the top selling enterprise networking brands under one roof. No other distributor can offer that one-stop shop opportunity, not only get the product but actually get an expertise where we're very, very -- what we're doing is really different to some of our competition is offering that unparalleled service and technical capabilities, driving this conversation and closing up very big projects. So 5G is going to be very exciting. Unified Communication and audio visual, you've seen 89% growth year-on-year. I think we're just crushing the surface there. This is our biggest and the fastest-growing category. Off the small base, but the explosion of -- and demand for a large format digital displays, headsets, call centers, all that technology is doing really, really well, and I think we'll see a big growth in the upcoming years. And Slide #25, work from home. COVID-driven hybrid work environments, and that's going to stay with us. Before COVID, 25% of workforce in Australia and New Zealand were hybrids. During the COVID, 72% of the workforce were in hybrids. All the studies and analysis showing that after COVID, we will retain 45% of the workforce continue to stay hybrid. Opens up a tremendous opportunity for all. So many different vendors within Dicker Data are there in the portfolio. PCs, peripherals, networking, security because now all the IT managers need to think how to secure their employee and user experience, not only in the office but also at home, in the car, on the road, everywhere they go, everyone's staying connected. Everyone needs to be secured. So we see as a tremendous opportunity for us as well. Okay. Now I'm going to pass back to Mary, and she is going to talk in more details about equity raising.

Hi, all. Thank you, Vlad. So just to provide an update in terms of the new announcement we made this morning in respect of the $50 million placement. So we're looking to raise $50 million in an underwritten institutional placement and also offer a share purchase plan looking to raise up to $10 million via the SPP. The proceeds from the placement, we are looking to deploy to build the warehouse extension which will be providing about 70% extra capacity. And as we have detailed today this afternoon, there's definitely been an increase in our working capital requirements, especially in the environment we're in. So the balance of the proceeds to go towards balance sheet and working capital flexibility. We're estimating about $30 million of the proceeds will go towards the construction and the balance of the amount, including the SPP towards working capital. However, in the first instance, as we work through the project and by the time we get to appoint the builder and start, the actual requirement for cash for the construction. We have the opportunity to put the full value of those proceeds against our working capital debt. So you should definitely see some debt reduction as we apply the balances against our working capital facility and should see an improvement in our net debt-to-EBITDA ratio and our debt-to-equity ratio with the application of those funds against debt. Obviously, we're going to have to draw on that. And we anticipate that the construction will take about 6 months and see about half of those funds being utilized possibly this year with the balance of $30 million, so another $15 million in the second half of the year towards that project. All right. Just a little bit more further detail on the placement. The placement price has been set at $10.30 at a discount of 10.3% of last close, but providing a very small dilution to the overall existing shareholding. We see that the size and quantum of the raise to be sufficient for what we require right now and it sets us up really well for our medium term goals in respect of creating more capacity and having more flexibility around working capital. So we're happy to take questions. Now I want to hand over to the operator.

[Operator Instructions] Your first question comes from Bob Chen from JP Morgan.

Vlad and Mary, just a few questions for me. Just in terms of the cadence of growth. I think you mentioned earlier that you sort of expect the second half to be broadly similar. Is the best way to read that like that underlying growth of 17%, like that's sort of the expectation going into the second half?

Yes. We -- yes, we expect a very similar growth that we've experienced in the first half. Obviously, we didn't had -- we only had 2 months of Hills contribution in the first half. So we will have a full 6-month contribution in the second half. We're expecting a similar type of growth in the software. We're probably -- in the software division, we will probably see a slight softness in our growth in our PC business. We're starting to feel that. We started to see that. It's still going to be growth, but it's not going to be as strong as in the first half. However, we will see a lot stronger growth from our infrastructure vendors. The only question mark is upon supply and invoicing terms. Everything stays the same, and there is no big changes in supply, like for example, everything just stops. Yes, our expectation is to have a similar growth in the second half.

Great. Now that's good to hear. And just a comment earlier around the open orders of $393 million. Like what do you mean by open orders? Is that sort of the -- sort of order book that you're just waiting for inventory on? Or could that get reallocated by some of your customers to other suppliers?

The interesting thing is, yes, correct, it is an order book. And a lot of stock is already in our warehouse. We just can't invoice them because our customers require a full delivery of a full solution. And we can hold millions and millions of inventory back-to-back to this order, but we could be waiting for a couple of more products to come in or a couple of more OEM components to arrive until we actually invoice it. So it's a lot already in stock. It's a lot we're waiting for. But yes, $393 million is basically our order book, correct.

Okay. And then just given the business is running on a pretty elevated sort of inventory balance at the moment and you're sort of [ draining ] that working capital as well. Can you talk a little bit about the mix of the inventory that you currently have? And like is there any risk that some of this inventory doesn't get moved along and we might even see some write-downs across that inventory base? Like how should we think about that risk?

Yes, sure. We -- okay, so the market itself right now, it's a very stock-driven market, it's not a price-driven market. Every single piece of inventory that we hold, we believe, is a very, very good and important inventory. If situation changes and supply will become readily available on all lines of businesses, then it will be vendors who will be funding liquidation of the stock. So we've been in this situation many, many times before. I don't think -- I personally don't think it will happen anytime soon. I think we will be in this kind of situation and operating in this environment for at least another 2 to 3 quarters. And normally, it happens gradually. So what happens is as demand started to slowly soften up, supply catches up and our inventory levels are going to lower. And this is a gradual process, which will happen through the 2 or 3 different quarters. And that's how I foresee this is happening. We don't see inventory as a risk at all. We have a very strong provisions allocated towards our aged inventory. But in reality, we never had to use those or write-offs. It's always a vendor and ourselves come into helping and supporting each other to move the inventory out. So it's not a concern at all.

Your next question comes from Ed Woodgate from CCZ.

Can you just talk through what the revenue backlog looked like in the third quarter? And has that increased throughout the quarter? If you call out a specific number, that would be great. But otherwise, if you could talk to it qualitatively, that would be helpful.

It's -- we've had this backlog for over 1.5 years now, and it's about the same. As soon as we've sold out all our inventory through the COVID rush, we started building our backlog book and it's staying exactly the same. It's not reducing, it's not increasing too much. The construct of that backlog has changed. A year ago, 80% of that backlog and order book was PCs. Now it's the infrastructure products. That's changed.

And to clarify that, this is just in this environment of we're seeing increased size back order book in the last year or a half. Prior to that, the actual order book was significantly lower. So hence, calling it out in -- and quantifying the amount.

Yes. Understood. Okay, that helps. And then maybe just on Hills. So I appreciate that you've got a very bullish view on the long-term opportunity there. And correct me if I'm wrong. We understand that the business maybe didn't hit the ground running as quickly as it could not just because of the difficulty in migrating workforces and vendors. Can you talk about the trends so far in this quarter with Hills and what levers you can pull to make it a better contribution in the second half?

The true reality is we're dealing with 2 acquisitions at the same time. And obviously, if it wasn't a great opportunity, a strategic opportunity, we wouldn't have done it. Normally, it's just one at a time, and we're working through it, we're making it operational, profitable, growing business, and then we will look at something different. And hence, obviously, a slight delay with both, to be honest. We should have integrated Exeed New Zealand some time ago. We should have made -- if we're just focusing there. So we are a little bit stretched, but we are progressing really well. We have -- like I've said, Exeed New Zealand is pretty much done and we'll be operating as one single entity past this month. Hills is a small business, it's a great opportunity business. But it's also a very complex business, and that's why we love it. It operates in multiple locations. It's driving a lot of solution type-based environment. We offer a very different sets of services to our customers than we have ever in IT. For example, with the core Dicker Data business, we don't offer post-sales technical support. But with Hills, we do. And hence, obviously, driving a very, very strong additional margin through offering these services, which potentially we could always consider to drive it through the core IT business. We just need to stabilize that part of the business first. The revenue of Hills business already started to grow. The market share with certain vendors within that business is starting to grow. We have done significant improvements in certain operational levers of that business. But for us to get it completely right and get it in a very strong, profitable situation and position, we'll probably need another few months. So it's definitely looking much, much better for the second half, but like I've said before, I'm treating this opportunity as my growth engine for 2023.

Okay. Great. Awesome. Got a bunch more questions, but I don't want to hog the line and we're speaking soon. So thanks very much for your time.

Thank you.

Your next question comes from Hayden Liu from Evans & Partners.

Maybe just on the backlog or the open order value of that $393 million. Are you able to give a sense of what historically that has been? Just trying to get a sense of the, I guess, the incremental addition to that number currently.

Yes. Historically, the open orders were always fluctuating somewhere around $130 million to $150 million. However, don't forget that we had a very strong organic growth. So organically, I think the backlog probably would have been now somewhere around $160 million, $180 million. So if you look at overall, it's well over 2x of what we really should have had in a normalized environment. .

Great. No, that's helpful. And sort of when do you think the orders will be fulfilled, that $393 million? And is it all committed and sort of noncancelable, that backlog?

Look, theoretically speaking -- okay, so some of that noncancelable, some of that is cancelable theoretically. Practically, we haven't seen any cancellation. I haven't seen a single cancellation on anything because if they can't get it from us, they can't get it from anywhere else. And anything to do with the infrastructure project, it's very, very difficult to substitute. Those projects are very long life cycle. They've been working with a technical and engineered staff for many, many months until the project is locked in. So when it's done and locked in, there is no alternative. They have to wait for the stock.