Dustin Group AB (publ) (DUST) Earnings Call Transcript & Summary

Welcome to the Dustin Q4 Presentation for 2023 and 2024. [Operator Instructions] Now I will hand the conference over to the CEO, Johan Karlsson; and CFO, Julia Lagerqvist. Please begin your meeting.

Hi, and good morning, everyone, and welcome to the Q4 presentation for Dustin Group. As said before, Julia and myself are in the room together with Fredrik from IR. But let's start with a short introduction to Dustin at the glance on Slide 2. Dustin is an IT reseller, which is based in IT hardware and software products. And as you can see in the graph up to the left-hand side, 82% of sales is IT hardware and 18% is software and services. Software and services has, in the last years, become a -- taking a larger share of the total sales and has increased in importance. Our assortment is primarily sold online. 60% of sales go through our online platform. The share in the Nordics is about 80%, and in the Benelux, the share is lower. However, as you know, we have recently launched our online sales model in the Benelux, and the aim is that we will move to a similar share in the -- as in the Nordics when it comes to online sales. We are present in 6 markets in Europe, with our main markets being Netherlands and Sweden. And I think you see our key customer focus is B2B representing 98% of our sales. That's Dustin in brief, but let's now move to Q4 and the results. So as in the last 5 quarters, sales was affected by a weak market with continued general cautiousness by the customers in many of our customer groups. Sales in the quarter was SEK 4.988 billion or 2% below last year. In SMB, organic growth was negative 9.6%, while LCP grew by 4%. In LCP, the growth came from winning new tenders in the public sector. Gross profit at SEK 644 million was down SEK 101 million or 16%, while gross margin ended at 12.9%, down from last year's 14.6%. The new contract in LCP has a negative effect on gross margin, while gross margins in SMB remained stable. Adjusted EBITA at SEK 28 million compared to last year's SEK 142 million, with an EBITA margin down from last year's 2.8% to 0.6%, mainly as a result of the lower gross margin in LCP and lower volumes in SMB. Items affecting comparability was SEK 7 million compared to last year's SEK 20 million. EBIT was at negative SEK 25 million compared to last year's SEK 75 million. Cash flow from operating activities ended at negative SEK 355 million compared to last year's SEK 23 million, mainly coming from a seasonal high working capital. Leverage ended at 4.0 compared to last year's 5.0, the main effect being the repayment of debt after the rights issue. Some other highlights from the quarter was the announcement of the new organization for strengthening customer focus and increased efficiency. And we will come back to that later in the presentation. Let's dive into the numbers now in some more detail. Julia?

Thank you, Johan. Yes. And I wanted to start on Page 4 by looking at what is driving this performance development in Q4 compared to last year. Last year, we had an EBITA of SEK 142 million. And as Johan said, SMB has still been affected by cautious market and lower volumes, and this impacted the results by roughly SEK 34 million compared to last year. In addition, we've done a harmonization of our internal cost calculations or the standard cost calculations for services, and this has led to an additional cost of SEK 13 million affecting Q4, also coming in SMB. But the biggest impact comes from the LCP segment, SEK 47 million, where the main driver is the lower margin on new public framework agreements, and there was a bit of a negative mix between countries. We also saw a shortage of SEK 21 million due to an adjustment to a previous insurance case also affecting LCP. Overall, the SG&A was stable. These were the main drivers of why we landed at a low EBITA of SEK 28 million in this quarter. If we move to the overview of the SMB segment on Page 5, you see that sales landed at SEK 1.3 billion or 12.4% below last year. The organic growth was 10%. As Johan mentioned, the continuous economic uncertainty still affecting the demand in all our markets and most of our customer groups. And as in previous quarters, we saw low demand for computers and mobile phones, while the share of software and services sales increased somewhat to just above 15% due to a positive trend for contracted recurring services in the Nordics combined then with the weak hardware sales. As in previous quarter, we saw some clearance of supply stocks ahead of the launch of AI-adapted PCs, which put some pressure on the gross margin. This has partly been offset by better mix and continued price discipline. In addition, we had the SEK 13 million of costs related to harmonization of our COGS calculations for service offering, as I just mentioned. But excluding this, the gross margin was stable in SMB compared to last year. Our cost saving programs have had a positive impact but has been offset with cost inflation. So the lower volumes, combined with a larger fixed cost base short term, has led to negative operational leverage and hence the lower segment, the result and margin. All in all, the segment margin ended at a low 0.7% compared to 4.4% last year, and the total segment result was SEK 9 million compared to last year's SEK 64 million. Going on to Page 6. We look at the LCP segment. The sales in LCP was at SEK 3.7 billion in the quarter, up 2.2% year-on-year, and the organic growth was 4%. The public sector was an important driver of this improvement coming from several new framework agreements, while the performance in large corporate was slower. From a geographical perspective, the sales performance was positive in Sweden, Denmark and Netherlands. Gross margin declined in the quarter, as I said, mainly due to the high share of new framework agreements with initially lower margins and overall high share of public agreements. Margin was also impacted by a country mix. In addition, the result was burdened by this SEK 21 million linked to the adjustment of the previous insurance case. We continue to see an increase in take-back, which is positive and had a positive impact on both margin and EBITA. Johan will come back to this shortly later in the presentation. But overall, the margin declined, and costs were fairly stable, leading to a segment result of SEK 54 million versus SEK 104 million last year, and the margin ended at 1.4% compared to 2.9% last year. Coming to Page 7, we look at the net working capital development. Net working capital landed at SEK 170 million, which was higher than both last year at SEK 30 million and a clear increase versus the previous quarter that was at minus SEK 205 million. The increase versus the previous quarter is mainly driven by seasonality. Inventory landed at a low SEK 826 million, which was linked to large sellout volumes at the end of the quarter. We do expect inventory to increase somewhat in the coming quarter. But in general, it's now at a balanced and normalized level where we target to stay with some minor movements up and down, still able to deliver on our service levels. Both accounts receivables and payables increased versus last year, mainly related then to the high sales at the end of the quarter, where receivables had a slightly even higher effect. In addition, we saw some increase in other debts mainly linked to tax and VAT liabilities and also liabilities related to personnel costs. But overall, the high net working capital is driven to a large extent by seasonal and timing effects, and we do expect it to come down in the coming quarters. As I said before, we always have some timing effects in individual quarters, but our long-term target for net working capital remains to be around minus SEK 100 million. Moving on to cash flow and CapEx on Slide 8 and summarizing what we have covered in the previous slides. We see that the cash flow for the period was minus SEK 470 million, coming down from a quarter with a high positive cash flow. If we look at the details, we see that cash flow from operating activities before change in working capital was SEK 24 million compared to last year's SEK 164 million. The difference is mainly linked to the lower operational result. Cash flow from change in net working capital was minus SEK 379 million compared to last year's minus SEK 141 million, and again, mainly linked to the change in sales timing as previously described. Overall, the operating cash flow was SEK 355 million in the quarter. Cash flow from investing activities was minus SEK 51 million compared to minus SEK 68 million last year. More on this in just a few seconds. And the cash flow from financing activities was negative SEK 64 million compared to minus SEK 71 million last year. If we move to CapEx, the total investment in the quarter was SEK 84 million, of which SEK 51 million was linked to -- was affecting cash flow. The majority of the SEK 51 million was CapEx related to IT development, mainly then the new common IT platform, which is key for our future operational efficiency. Investments in tangible and intangible assets was SEK 19 million this year, of which only SEK 9 million affected the cash flow. The noncash items are mainly lease contracts and cars. And investments related to services was SEK 23 million compared to SEK 11 million last year, mainly attributed to the harmonization of data centers, none of this affecting cash flow. And with this, I hand back the word to Johan.

Thank you, Julia, and let's continue because since we announced the profit update a couple of weeks ago, we have done some -- a lot of activities inside Dustin, and one of them is the actual rollout of the new IT platform in the Benelux. And as you saw this morning, that has given us the opportunity to announce a new organization for strengthening of customer focus and increased efficiency. By that, we are really prepared to take the next step in our organizational development and efficiency work within the company. The purpose of the changes are to better support the strategic direction around the offering. That means that we sell more services, as we've talked about before. It's to increase the focus on our 2 sales channel, that is, online and relation sales and, by that, creating growth and to increase the overall efficiency in the company. The new structure is estimated to save in combination with efficiency gains from the IT platform, SEK 150 million to SEK 200 million yearly as from '25, '26. The total cost of implementation is estimated to around SEK 70 million to SEK 100 million. The group management team will, after the change, be structured around the value chain with positions for offering, commercial, customer delivery and customer support. Added to that will be 2 enabling departments, finance and people and communication. The team will continue to have 7 members, and Cecilia Ridal will be a new member of the leadership team, taking the role as COO. As a result of the change, Rebecca Tallmark has decided to leave Dustin. And for the position of EVP Relation, the search process has been initiated. Overall, the changes in organization and the new IT platform give us new possibilities to increase efficiency in Dustin. Moving to the next slide on take-back. So our offering of circularity continues to develop well. Our take-back centers in Sweden and Netherlands operate with better and better efficiency as the volumes are increasing. We see strong demand from customers, and the offering give us advantages in public tenders. The high volumes have also resulted in better efficiency and, by that, better and better margins for the offering. Next steps will be to sell refurbished products to our local customers in the Nordic and Benelux. Here, we see most progress from the LCP customers, and the intention is that the interest will spread also to the smaller customers in SMB. On a yearly basis, we are now taking back approximately 1.1 million units per year and increase by almost 50% in a year. And by that, let's move to the summary on Slide 11. In summary, Q4 was a challenging quarter where continuous weak demand and new contracts affected sales and profitability. In cautious market sales growth was flat organically, supported by new contracts in LCP segment. Gross margin was down from 14.6% to 12.9%, mainly due to a high share of new framework agreement and high share of LCP sales compared to SMB. EBITA margin of 0.6% was down from last year's 2.6%, mainly as a result of low gross margin and the weak sales development in SMB. The result was also affected by SEK 34 million of costs specific to the quarter. In regards to dividend, the Board proposed that there will be no dividend paid for the financial year. Despite the tough market, currently, we continue to believe that we will see improvements gradually coming during the next couple of quarters as a result of AI PCs, the move to Windows 11 and the replacement cycle of current PC fleets in the market. And increased action in the quarters to come was initially by the change in the organization as a result of the implementation of the new IT platform in the Benelux and the need to find more efficiency. I think this is the most important thing for the future. This will give us a result in the coming quarters as we implement the actions in the program. And as communicated before, we believe that the effect of that will be SEK 150 million to SEK 200 million that will be executed during the coming 4 quarters. And we will see the full effect of that in Q1 '25, '26. And with that, we conclude the formal presentation of the results, and we'll move to Q&A.

[Operator Instructions] The next question comes from Thomas Nilsson from Nordea.

Can you talk a bit about what level of interest you're seeing for AI-enabled PCs and at what kind of price point these units are coming in relative to previous products? And also, what you see in terms of the replacement cycle, we're hoping for driven by Windows 11 and replacement of equipment purchase during the pandemic?

Yes, let's start with the AI PC, where I think the market has developed in the recent 3 months. So what we see there is new PCs being launched, you could say, Phase 1 of AI PC. Price point is about 10% higher than previous versions. And the usage are I would say, to specific roles in the company. So there are a few customers that would buy the high-spec PC to all their employees, but rather to certain personas in a company that would need the higher performance of the PC to use the AI capabilities. And that's where we can see demand. That is still on a pretty low level if you look at the total market, but we can see signs happening there. And the other one was the aging of the fleet, was it?

Yes, Windows 11 replacement and replace the equipment, purchase pandemic, yes.

I think on the demand for, let's say, coming from the Windows 11 change, we start to see some activities in the larger corporates and some of the public institutions. And this is expected, I would say, because they would be the ones starting because they have a better planning process and a better -- they are -- they look further ahead, let's say. It's -- what we're trying to do together with Microsoft and the hardware vendors is to inform the smaller companies about the fact that they have to change. Otherwise, they have a security issue basically a year from now. And the risk is that if you change too late, there will be a shortage of PCs as you come closer to October, November next year. So we are running basically starting to initiate information and campaigns on that subject as we speak.

The next question comes from Daniel Thorsson from ABG Sundal Collier.

Yes. I have a question on the SEK 34 million negative specific item effect here in the quarter. Why have you not adjusted for that one in adjusted EBITA? Is it because you expect to see similar effects in the coming quarters? Or could we think that the underlying adjusted EBITA is rather SEK 62 million than SEK 28 million?

It's Julia. No, we do not expect them to come back in the coming quarters. It's more of it's an adjustment compared to previous periods, and that's why it's not placed in -- put as an adjusted point in this quarter specifically. But we do not expect to see them in the future.

Okay. So if we think of an EBITA base here in Q4 going into the next quarters, it's better to think of SEK 62 million than SEK 28 million, for example?

Yes, I would say so.

Okay. And then regarding the new organization, is the timing of this change, has it anything to do with the tough market, the weak momentum recently? Or was this already planned earlier? And also the relation to the financial targets. Is this something that you already foresee a year ago to reach the margin targets a few years out? Or is this something we should see as an upside to your financial targets 2, 3 years out?

Really good question. I think it's a combination of that because we have, of course, worked with the IT platform for the Benelux and the coming ones for the Nordics for a couple of years. So we knew that, that was coming. And we know that we need to adjust in order to get the efficiency gains from that investment. That's clear. What I think puts pressure on the activity right now is, of course, the weak market. So we need to combine these 2 to create action short term to win success long term. And that -- I would say, that has helped us to keep really focused on delivering on that now in the coming quarters.

Okay. So this was something that you thought already 1.5 years ago that you needed to do at some point in time and the weak market now was the trigger for it?

Yes. You can say the IT platform was in the thinking of how we develop future, but we have kind of taken it forward a little bit or taken it more action now rather than in the future.

Yes. I see. And then a follow-up on that one. How have you calculated the cost for these changes, the SEK 70 million to SEK 100 million? Is it layoffs, other costs? For me, it looks quite costly to do a reorganization.

Well, I would say it's 2 things. It's either -- and you can say both of them has to do with breaking contracts. So you either reduce your office fleet and other fixed assets that you have that you don't need anymore or you lay off people. And both of these, you will have to pay some sort of a penalty when you break the contracts. And part of it is for sure people, so a layoff of people, and others will be, again, closing offices when we are fewer people.

Okay, I see. Okay. But you have not specified that because here, you just say that reorganization will cost around SEK 70 million to SEK 100 million. But you don't say that you target less employees, 1 year out or anything like that. But that is what we will see, I guess.

It's what we will see. We will be less people in Dustin a year from now, for sure. We are doing that detailing work now, given the fact that we need to announce it and then start working on it. And the hard part of this is always to estimate how many will be natural leavers and how much is layoffs. So that's what we're trying to figure out now in the next couple of weeks.

Yes, I see. And then my final question on the annual savings there on SEK 150 million to SEK 200 million, is that only related to lower OpEx? Or is it related to the -- because you're talking about being more efficient here to the customers. So has this something to do with the increasing sales, reducing COGS or OpEx? Or how should we think about that?

It's -- majority would be OpEx. Part could be a reduction, let's say, in less complexity in COGS or the relationship on COGS. So that's a better margin, you could say. But the majority would be OpEx. .

The next question comes from Daniel Djurberg from Handelsbanken.

Yes, I will continue on that topic, if you could give any more on the timing of the implementation, i.e., when we should expect this SEK 70 million to SEK 100 million to be visible in the numbers and also a little bit on if this will impact the services organization in terms of -- and also then the top line, if we should expect that you will need to downsize the service organization when taking out employees here or reducing the number of employees, I should say.

Yes. Yes, the saving will come from a combination of less complexity and more efficient organization and more automation through the ERP implementation. It's a combination of the 3. The complexity reduction could affect sales to some extent. We don't believe that, that is material to the total sales number, but it will have some small effects on sales being -- taking away some of the really complex stuff that we do that is not up to our standards when it comes to profitability.

Perfect. And then a question on -- you mentioned that frame agreements come with initially lower margins. Can you just help us understand this initially? Is it due to cost for setting up stuff that goes away? Or is it more volume that supports the margin going forward? Or otherwise, I guess, frame agreements is quite sticky in...

I agree. How the frame agreement works in IT is that you make a price for a certain product at the time of the starting of the frame agreement. And over time, the development of products is so rapid that quite soon after the initiation of the contract, you will change the product to something launched in the market, a new product. And at that time, you were able to change the price to some extent, which means you get better margin. So the initial of the contract is that you have to sell the product that you actually offered in the first -- in the frame agreement in the tender of the frame agreement, which means in these first deliveries, you have a relatively low margin. As development of the products continues throughout the period of the contract, you will be able to capture more and more margin from the new launched products. That's kind of how the contracts work. So that is the reason why margins are improving over time.

Okay. And looking at this specific coming down from 14.6% to 12.9%, and this is partly from frame agreements. Can you give any ballpark on how much we should expect later on improvement from this? Is it 100 basis points or any guess on -- more guess, but yes, ballpark guestimate.

I would say that Q4 is a special quarter seasonality-wise. So with the high share of LCP and a high share of public. So that affects the gross margin. We don't see any reason over time, that gross margins will weaken in the business we're doing. So LCP will remain at the same gross margin as SMB, if anything, would improve, that's what we're trying to achieve. So I think that's how we look at it going forward. We don't have a specific forecast for certain quarters. But if you would take a stance on 4 quarters from now, I don't see -- there is no reason to believe that margins are coming down rather the opposite as we are adding services to the general offering.

Perfect. And may I ask you also [Technical Difficulty] Can you hear me? Can you hear me? Yes, I think I lost connection for a while. Yes, I was thinking about cash flow, and it was primarily -- is soft on back of reduced accounts payables. And my question is, do you see this -- the reason here is it -- do you see any change in payment terms on the back of selling more cloud, online or with Microsoft or Dell, HP, Cisco et cetera? Or is it something else that we should know about when thinking about cash flow going forward?

We don't see any general trends and change in payment terms. Of course, we always work to get the best payment terms for us, but there's no general change that we see now.

I would say the SaaS delivery model, let's say, on Microsoft and things like that, they are too small to affect us in any significant way. For us, the distributors -- the payment of the distributors are by far the most important thing. And there, we don't see any structural change. If anything, slight improvements in the terms that we get from them.

Okay. Good. And then finally, a little bit on LCP, software and services and also SMB in Benelux. That was quite sharp, both fell with 40%, I think, reported numbers. Is this only about headwind from volumes? Or is it also coming from market share losses or negative pricing or...

Well, it comes from -- I would say the standardized services are doing well. What is happening is that, what we talked about before, we are moving away from complexity in terms of highly customized service offerings. And that does affect sales volume. It should not affect profit because we're getting rid of costs at the same time, but it does affect sales a little bit on a specific market or a specific number. But over time, it should have no significant effect on sales, let's say.

And my final question would be on your high ambition within ESG and the CO2 emission, a 25% reduction over the next 3 years per SEK 1 million revenue and also 2030 goal of becoming fully climate neutral. So obviously, in tougher times, it's often it's easy to forget a bit about these important things. But your view right now can you still stay behind these quite aggressive targets?

There are really good signs, I would say, in that work. First, the fact that we are doing the, let's say, circularity offerings are so successful. So we are taking back more and more of the products we sell. The other one is that the services are doing well. The standardized services are doing well. So that's a more efficient way of doing it. In parallel, we are working with the main hardware suppliers to get, let's say, an efficient way of transforming information, CO2 information on all the products we sell because that is, in the end, where we have to influence our customers to buy more CO2-friendly variants of the products. And that work continues, and I think we are making good progress there together with the vendors because this is something that they have to give to us in order for us to give to -- and help the customers to choose the right products.

The next question comes from Mikael Laséen from Carnegie Investment Bank.

A follow-up questions here. First of all, can you explain more in detail the restructuring and the new organization in more detail? What do you specifically do? How much is impacting the LCP segment and the SMB segment? And how much is the central function that you are addressing here?

A little bit early to say the details there, Mikael. It's -- we are in the process of, let's say, ironing out the details. There will be effects on relation sales, both in SMB and LCP as we're putting the organizations together, reducing the manager layers, reducing the number of managers. It will also be effects from decomplexifying some of these -- part of the assortment where we don't believe we can long term become profitable, and that will take away specialists in both LCP and SMB. More on the LCP side, I would guess. . And it will also simplify the services structure, which I think will affect mainly SMB in terms of less cost. But it's hard to define at the moment, exactly what comes from where -- or to where, let's say, on the segments.

Okay. I was thinking about what you mentioned about decomplexifying or where you have complexity. Can you talk to us about that with the complex part?

Yes. It's -- one clear example, I think, is that we have acquired a number of companies, which -- some of them were producing a lot of services for their customers in a very customer-specific way. So the customer had -- could almost choose exactly how they wanted to buy the service and what kind of components that service should include. A very manual way and very, I would say, old fashioned way of delivering service primarily to small and medium-sized companies. Today, what you would do is that you standardize the service and then you would sell exactly that service to the customer, very similar to a public cloud solution that you would buy a prepackaged servers. And that's one of the complexities that we have. Another one would be that when we started with managed services, there were many -- there wasn't too many suppliers that offer the service that was suited for small and medium-size businesses. So we started to produce some of the services ourselves. Now you can see more and more suppliers able to supply that service. And then us as a reseller, which we are in our heart, we can move to become resellers rather than producers of services because producer of services is not really, I think, our main focus. We do it when there is a lack of service to provide to our customers. But if there are services to be resold, we can do that.

Okay. Got it. What type of service could that be where you can go from producing to reselling?

That could be infrastructure services on data center from data centers. So we run -- we could run our own data centers, so we can buy the same service maybe from HP or someone else.

Okay. Is this primarily the Benelux region? Or is it across all countries?

It's across all countries for sure.

Okay. All right. Moving on then to the one-off cost of SEK 70 million to SEK 100 million in cost to achieve this. I guess most of it or all of it is cash related, right?

Yes, most of it for sure. There might be a few write-offs, but not significant.

Will you take then the coming 4 quarters gradually in the same amount every quarter? Or will it be more front-end loaded more now in Q1, Q2?

I think it will follow the changes -- the implementation of changes in the organization, which I believe will happen during Q2 and Q3. And so I think that's where you will see the most effects. If it's the same number in Q2 and Q3, I don't think we are able to tell you that right now. We can...

There will be some effects already in Q1 as well.

Yes. Okay. And also curious about the ERP system and online platform, where you are there, if you can provide an update on those 2.

Happy to. We have launched the platform a couple of weeks ago. It works well, I would say. Of course, there are, as usual, a lot of issues changing ERP systems, but system works well. We're trying to get used to working in a new environment, working with new ways of working and everything has changed. So that's a bit confusing to start with, but we're making good progress with delivering products. Demand is okay. Sales is okay. So it's like it works well. The customers are onboarded to the new e-commerce portals, the larger customers, and we are starting to make progress there. That's our ambition that in the next 1 or 2 quarters to move all customers to the new portals and a new portal is basically a customer-specific website, you could say. So it's the larger corporates, they will have their own store, web store. And there, we believe that's the big -- one of the biggest benefits of the new IT platform is that, that we can sell to the larger customers in a more efficient way by using their customer-specific portals. And that work is in progress.

Okay. And how long does it take to move over fully? So this is across all countries, all products, all the customers.

Yes, that will take -- I mean we have started with Benelux, and we will move -- it's like 3 steps. We'll do Benelux now in the ERP side. There, we will do our 2 warehouses on new system support. And then we will do the Nordics upgrade on the ERP, most likely a year from now approximately. That's a continuous work.

Okay. Will you also have the same amount of CapEx related to the platform and the platform investment that you have had now for a couple of years?

What we have said before is that this year will be the same. But after that, we believe it will come down because then the main platforms of the 2 regions are exchanged.

Okay. Is this according to your original agenda and plan? Or is it 6 months or 12 months behind or...

We are -- still, we are in our original agenda, but the launches between the regions are tighter together than we have from the start. So we are a bit later on this launch in the Benelux, but we are remaining with the launch of the Nordics in the same because we can use more of the benefits from the Benelux in the Nordic region because we have coordinated the projects.

All right. Okay. And moving on to a couple of minor things maybe. The change of internal calculation related to the service offering, what is that about?

That is an adjustment for how we do what we call the standard cost calculations for services. But it's mainly also, like I said, a bit of a correction compared to previous quarters where we had underestimated a bit costs.

Okay. So are the costs moved? Or is it added new cost or... .

No, it's more a catch-up effect, you could say, compared to previous quarters. But going forward, we would expect to have the similar level as we had in the previous -- a little bit lower than we had in this quarter, so to speak.

So this is sort of an ongoing added costs?

No, no, it's an accounting effect, you could say, of the fact that when you work with standard, you do an estimate of what you expect the services cost and the underlying costs were a little bit higher if you go back all the previous quarters in this fiscal year and then you get sort of a round-up effect at the end. We don't expect it -- this effect becomes quite big in this quarter. You will not see the same effect in the coming quarters.

It's basically from a factory accounting perspective, it's under-absorption of fixed cost in the system created by lower volumes.

Okay. I see. And my final question, if I may, on the product mix. And if you can explain and maybe repeat how you can control the product mix in your SMB and LCP segment if that is possible for you or if this is just, I mean, driven, of course, by the customer demand?

Yes. I think you have product mix in 2 dimensions. You have the product mix between, let's say, infrastructure and workplace, which is one of the mix that there, we can influence the mix by adding specialists, I would say, in our own organization and focus our competence for certain infrastructure technologies to certain brands or certain technologies, as I said, because there it's a lot about supporting customers. So if we can support customers, we can drive sales. If we can't, then it's much harder to drive sales in infrastructure products because you need more competence to sell that. . If you take more between the brands and the -- within certain product categories like PCs, for example, there, of course, in SMB, we influence assortment to a large extent by campaigns or by availability because we know that if we have products on stock that will sell better because the delivery time is shorter and the delivery accuracy is higher. So that drives sales by putting them in our warehouse. And of course, activation by campaigns are extremely important primarily to the smaller customers. So there are different ways of influencing depending on how the customer look and what they are affected by.

Okay. I was thinking about the product mix of framework agreements also. And if you can talk about that.

The framework agreements are, of course, there, it's up to us to kind of decide where we believe we can win, and therefore, say, invest in giving in tenders and try to win them. We know that we are quite cost efficient when it comes to the logistics side and delivery of standard hardware. So we -- that's where we have a great advantage to many of our competitors. But what has come lately is that we are evaluating not only on the initial delivery of a framework, but also on what kind of added services can we then deliver on that framework agreement later on. So what kind of services do the customer require in the coming years. That has had a bigger effect now on the choice of framework agreement that it had a couple of years ago. For example, take-back is an important part of our framework agreement nowadays. It could be quite a high proportion of total profit that comes from take-back. That was not the case a couple of years ago, of course, when take-back was not really existing.

Okay. Can you say something about the -- and quantify maybe the proportion of sales coming from new agreements right now?

Well, you can say that on average, the contract is 4 years. So on average, 25% of sales should come from new contracts. And this year, that share is slightly higher. And then what happened between the quarter is that if you have larger, let's say, rollouts, particularly in education, that affects the Q4 much more than the other quarters in our case. So that you will have a higher effect of that. But on a yearly basis, it's about 4 years contract, meaning 25% new. And this year, 12-month rolling, the renewal of contracts is slightly higher than the 25%.

Okay. So can you maybe help us to understand this more to be very specific and clear. How we should think about the mix effects from frame agreements in the next couple of quarters? I mean this is maybe mathematics and maybe it's possible for you to give us some help.

I think you should look at it that we put some pressure on LCP margins, but not to the extent of Q4. But new contracts will have that effect for, I would say, mainly 1 or 2 quarters. But obviously, this is kind of you layering new contracts all the time. This is not like say, one time a year when all the new contracts arrive. So it will be new contracts every quarter. It's for -- depending on the quarter and depending on the customer rollouts for that quarter, it will have slightly different impacts on the number. It's quite hard actually to predict for us because our visibility is quite low in our case.

There are no more questions at this time. So I hand the conference back to speakers for any closing comments.

Well, no more questions. Thank you very much for listening in and wish you all a really good day. Thank you.