Good morning, everyone, and welcome to Dicker Data's first half FY26 results webinar. My name's Sam Wells from NWR, and joining me from the company today is Executive Director and Chief Operating Officer, Vlad Mitnovetski, as well as Executive Director and Chief Financial Officer, Mary Stojcevski.

Following a brief summary of the results released to the ASX this morning, we will have some time for Q&A with the management team. There'll be a choice of two options.

First, covering research analysts can raise their hands via Teams should they wish to ask a verbal question, and all remaining participants are encouraged to submit a written question via the Q&A function at the bottom of your screen throughout today's presentation. We will endeavor to get to the majority of questions asked, in some cases combining questions on the same or similar topic.

I'd kindly ask that the research analysts also please limit yourself to no more than two questions live on today's session. With that, I'll pass it over to you, Vlad and Mary.

Hi, and good morning, everyone. Thank you for joining us on our half-year results presentation and update.

We are going to go through the results, the business updates, a relook at our strategy, and the outlook for the rest of the year. To kick it off, just a summary of where we've landed for the half year.

It's been an amazing result as a result of significant work by all our teams. We've seen gross revenue increase by 14.2% to $2.1 billion, which was driven by refresh cycles around endpoints, the data center, and a significant contribution from growth in our software business.

You can see our recurring revenues from software have increased by 600—increased to $600 million, representing a 20.7% increase. It was approximately $100 million gross sales added in our software division, and Vlad's going to go into more details in our segment splits when we provide a further update around the operational aspects of the business.

Significant improvement in our EBITDA, increasing by 37.3% and a very, very pleasing result on net operating profit before tax, finishing just over 50% growth on the prior year. Earnings per share finalizing at 33.5 cents per share, up 53.5%.

If we have a closer look at the breakdown and our trends over the years, there's an outstanding result for this half driven by opportunities around inventory purchasing that we were able to take advantage of during the first half of the year, driving some margin improvements, and as you can see the half-year result margin expansion from the prior year, also resulting in significant uplift in PBT margin, whilst there was the sales growth contributing to that margin expansion, but also pleasingly, we're able to have operating leverage and cost control as well driving that outcome. If we look at the group results, the gross profit margin expanded to 9.8%, benefiting from some strategic stock purchases that we were able to have the opportunity to buy.

We invested heavily in working capital. We did outline that with our full-year results at the start of the year that we were investing additionally ahead of price rises and supply constraints, and that strategy has paid off with that contributing margin increasing.

Equally, we've been able to control the costs, and overall expenses as a percentage of our gross revenue has declined, showing the operating leverage coming through in that PBT margin. If we take it down a little bit in more detail across our regions, we've had some mixed results between Australia and New Zealand.

Very strong results in Australia driven by the elevated endpoint refresh, software growth, and our data center refresh demand. The Australian business reflecting very strong gross margins with a lot of investment in inventory made and strategic purchasing decisions, probably starting late last year, and we're seeing the benefit of that coming through, with operating profit before tax in the Australian business increasing by 55.9%, being a significant uplift and very strong PBT margins as a result.

Alternatively, in our New Zealand business, we're still pleased with the results in a very difficult market. Unfortunately, there were a lot more supply constraints experienced in our New Zealand business across our hardware vendors, particularly around portfolios like HP and Apple, where the opportunity to bring in inventory was limited, which then impacted top line.

Even despite that, there was some growth recorded across our gross revenue delivered, with gross margins coming off slightly, particularly driven by presses—pressures within our consumer business. We were able to maintain expenses in line with prior year, but unfortunately, the result was a softer result.

When converted in AUD, the NZD results were impacted by the NZD impacts and the translation FX coming through on the consolidated basis. However, we have seen some of the supply constraints ease coming into July and August, and access to inventory, we are seeing that turning around in terms of growth on the top line, and we will continue driving portfolio diversification in New Zealand to limit the impact of supply constraints and other issues with specific vendors, which Australia has a much more diversified portfolio, we are able to leverage anything that is impacts a particular vendor, whereas New Zealand's got a slightly more concentrated vendor portfolio, and that's continual work, and I'm sure Vlad will expand on that in his business update.

From a balance sheet perspective, we feel there's been a lot of work and contribute—work around managing our working capital despite significant investments in increasing inventory. Inventory increased by over $100 million, and that was very strategic buying ahead of price rises.

We've seen elevated levels of receivables as well, driven by a strong June finish. However, pleasingly, we're able to still manage the working capital only slightly elevated in total dollars, and at the same time, reduce some gross debt, particularly around slight changes to our dividend policy and more participation in our DRP, allowing some repayment of debt for that period.

We'll continue investing in our working capital as required and ahead of changes, that market changes. That debt position can vary over time, but having the outcome for the half year come down by about $10 million was a great result.

Also wanted to point out a change in accounting policy that we put in place at 30 June this year. We have the valuation of the building done, a formal valuation, and we feel that that this change in accounting policy reflecting the current asset—the fixed asset of the building at valuation as opposed to cost is better information for our investors.

Therefore, adopted the change in account—accounting policy reflecting the building at that valuation, resulting in an uplift of non-current assets of over $107 million, and that's been reflected accordingly, and obviously flows through to the ratios that are that are balance sheet ratios represented across our debt and equity pieces. The company continues to pay quarterly dividends.

We did announce a slight change to our dividend policy and moving away from the 100% payout to a number that's going to be determined at at each dividend declaration period, but at least at 80%. We also introduced a DRP discount, and we've seen an increased participation in in that, therefore, at the cash flow impact of that and the resulting in some equity contribution that we were able to utilize against debt.

The quarterly dividends are continuing to be paid, and the last—the second interim dividend for FY26 was declared in August at 11.5 cents to be paid on the 1st of September. I'll hand it over now to Vlad, who'll give you a little bit more detailed business update and strategy and outlook view for the rest of the year.

Excellent. Thank you.

Thank you, Mary. 2026, I've called it out at the end of 2025, it would be a a year of data center infrastructure modernization, refresh, and AI.

This is exactly what we're experiencing through 2026. Later on, I'll have a look at the overall pie, of where the growth came from, and you would see that the biggest growth came from our software division and from our advanced solution division.

Advanced solution is all to do with modernizing the data centers, enterprise networking, enterprise server, and enterprise storage components, all backed up with the software solutions. This is where the main growth coming from, and this is where, if we look at the second half of 2026, this is where the main growth is going to continue to come for us.

Obviously, with that big focus on areas like power and cooling, server and storage, networking, and all AI-enabled software solutions. We have launched a a solution ConnectX partner-to-partner marketplace.

At the moment, we operating in a industry and environment where no single vendor or no single partner can deliver an outcome-based result. Some of them can deliver a good technology or perhaps even some solutions, but no one can have an a comprehensive outcome-based conversation with CEO or CFO purely on its own.

This is where Dicker Data plays such an important role of a glue of a platform bringing the entire ecosystem together and driving those conversations. This is where we have a lot of wins because a lot of partners and vendors relying on us to bring it all together.

We have launched our AI Accelerate program, initiative internally, again, just driving that AI enablement and AI acceleration. We have transacted just over $50 million of AI-related revenues in 2025.

We have exceeded $50 million transaction of AI-related revenues in the first half of 2026, and we are expecting to do at least $50 million, perhaps more, in the second half of 2026. We're very, very happy with the acceleration of the AI-related revenues.

The pipeline is also very, very strong, and also our backorders and open orders that will be fulfilled in the second half of '26 is also very, very strong. We're putting a lot of efforts in that AI Accelerate initiative.

We do strongly believe that this is going to empower growth for the organization. The good thing with the whole AI play for us, it's not just a single-faced an event.

It's the software, it's the hardware, it's it's it's networking, it's our relationship with Equinix. We're offering to the market various alternative solutions, very strong partnership with Microsoft, offering them an AI, experimental AI platforms on the Azure platform.

We also sell a lot of Copilot, which is AI-related software solutions. We offer to the market ResetData sovereign, private GPU as a service offering for a lot of companies who doesn't want perhaps go to the hyperscaler, but want to have more more localized, sovereign experience and drive and build their models locally.

On the other hand, we're offering them the on-prem, AI at the edge, where we give a lot of, we're offering a lot of on-prem solutions with AI factories for the whole organizations or for the departments within this organization and then move them up the stack. A lot of our technology vendors on the bottom of that slide is supporting that drive.

It's an incredibly powerful and strong story, and we positioning ourselves as absolute echo—ecosystem champions when it comes to bringing it all together and drive these solutions solutions together. Now, let's have a look through a segments, what actually works.

If we look at the software and advanced solution segments, it's now over 50% of our business. Over 50% of our business is growing at a very good double-digit growth, and we do anticipate a very similar growth in not only in the second half of this year, but also all the way into 2027.

The advanced solution piece with the software stack, it's a long term. It's the It's It's starting now, and it's going to go through many, many years of evolution because of the AI phenomenon.

We investing a lot, we bringing expertise, we're driving the ecosystem, we're bringing all the partners together, and we're experiencing a fantastic growth out of these two two segments. If I look at the endpoint solutions, endpoint solutions is basically our transactional business.

This is where we supply a lot to our SMB community, mid-market community. That transactional business go through the cycles, and it's very it's much driven by the changes in the economic conditions.

Last year, we had a lot of tailwinds with the Windows 10 refresh opportunity. We still have Windows 10 refresh opportunity into this year.

We actually have now a lot of opportunities with the Windows 11 refresh opportunities. That's going to continue.

However, because majority of the business, that end-client computing business, is going into our SMB market, the price increases really started to affect our SMB spending. It's actually very simple here.

The price is going up everywhere. The prices on enterprise networking, on leading on advanced solutions, on our software business, and on our PCs all going up, but the budgets are not going up.

Even though we are moving, we we're kind of moving away our conversation from the budgets, it's easy to move away the conversation away from the budget when you talk to the mid-size and enterprise customers because that's a very outcome-based conversation. It's not that easy to have that conversation with a small partner, small customer.

Small partners and small customers, they all about their IT budget, their spend, and they choosing where to spend. When it comes for them to choose where to spend, a lot of them now spending in, again, modernizing their data centers, modernizing, because they want to drive some AI activities.

They need to buy more software, cybersecurity, and other things. Sometimes it's just what they have budget for, and personal computing sometimes is getting put aside, and we will can sweat those assets and we'll do it later.

What I'm trying to say, that the price increases in endpoint solutions, it's starting to effect number of units we transacting, and it is slowly, slowly coming down. However, because of the price increases, we're still delivering the growth.

I would I would probably see that the growth in endpoint solutions, which is about 28% of our overall business, is going to continue to decline. We're still going to continue to growth, but probably not at double-digit rate, whereas software and advanced solutions is going to continue doing really well.

Our consumer and retail business had a phenomenal half. We're adding new vendors, both Australia and New Zealand, and we're going to continue to grow maybe even a little bit more than 7.9%.

Audiovisual segment is very, very strong. It's going to be well over $200 million for us this year.

It's growing nicely. We're putting a lot more focus there.

Again, the price is going up and customers choosing where to invest. Even with that breadth of portfolio and significant investment and expertise driving the growth in this in this segment.

Our DAS business, access and surveillance, have shown a phenomenal 22.9% growth in the first half, and we're expecting a very similar growth rates in the second half of 2026. We've added some really strong vendors in 2025: Hikvision doing really well, Ajax, Milestone, and a few other very, very fundamental, strong physical security vendors that's starting to to do well.

We're also starting to take some good market share in this in this segment. As you can see, most of the segments is performing really well, and when that happens, obviously, then a very strong result is is getting getting delivered.

We're obviously very, very pleased with that. We continue adding new vendors.

ADATA is the memory vendor. We all know there is a there is shortages and supply constraint on the memory chips, adding ADATA into the portfolio of our memories is actually helping us to to to get more memories into our customers.

We've added Sharp as our new audiovisual vendor, very, very big signing. We've signed Sophos and Huntress as our cybersecurity providers, strengthening that cybersecurity play.

I've mentioned about ResetData and a GPU as a service, offering all our partners and customers an alternative to build their AI models on. We've added Switch Connect and Symbio as part of our unified communication and and telco division.

We're putting a lot of effort to drive that that division within within within Dicker Data. I think, okay, we always put this slide because it's really good to compare how where is the market expected to perform and where is Dicker Data is performing.

We're very pleased with how we tracking against the Gartner prediction and forecast. Gartner saying that in Australia the spend is going to be majority main growth is going to come from the data center systems, and that's exactly where Dicker Data is is feeling the growth and continue growing.

We have every single technology vendor under this roof. We have very, very strong lineup of software vendors in in into Dicker Data group, combining it together, make it a very powerful and a very strong solution and outcome-based kind of offering to our partners.

If you look at the devices, Gartner forecasting 6.6% increase. That's exactly where we feel we're going to finish the year at.

That's This is where we we think we're going to end up, which is still a growth, but that sort of a mid mid to single-digit growth, very much in line with the Gartner forecast. Software, again, in line with the forecast, double-digit growth.

We don't do a lot of a lot of services as as you guys know, but when it comes to a data center infrastructure solutions, when it comes to our software marketplace and devices, I think we're very much in line with the with the with the Gartner forecast. No surprise here, four major drivers and what four major pillars of of focus.

Data center refresh, I think I've said enough. That's going to be our strongest performing segment, together with software, driving that driving that that growth.

If I look at our current open orders, or backorders, as you see, we have at the moment over $400 million in backorders in the system right now, waiting for the stock to be fulfilled, and a lot of that in a data center space. That momentum is ongoing.

Our new orders are coming in. The backorders have getting fulfilled, and we're going through that motion.

If I look at July numbers and August numbers, that momentum is continuing. That data center piece is very, very solid and very strong.

Artificial intelligence, I think I've said enough. I see that as the biggest growth opportunity for our company, not only now and this year, we are expected to do well over $100 million of actual invoicing, but amount of effort we're putting in there, we are expecting a much, much stronger growth in a 2027 and 2028 and beyond.

Windows refresh is still an opportunity. I just mentioned before that there is a Windows 11 refresh opportunity already.

We have more than half a million devices that need to be refreshed. Windows 10 is still an opportunity, and our transactional PC business is an ongoing run-rate business as well, it's always going to be going to be there.

I cannot mention I cannot not mention cybersecurity. Cybersecurity, it's the gift keeps giving.

AI accelerating the threat. AI is accelerating the attacks.

It's become more intelligent. It's become more less resilient, for the companies to block it.

The cybersecurity is a very, very big and important area where, even with the limited budgets, people will continue to drive their their protective mechanisms. We, you've seen we've added two new cybersecurity vendors, both Australia and New Zealand, we're going to continue to double down on on our practice.

The level of offering we have in the cybersecurity space, expertise and experience, is unparalleled and not matched with any other distributor in this region. We're very, very proud of what we're doing in this area.

Now, looking at the outlook, I think I've been mentioning through the conversation how we see the the the 2026. We have a very, very strong momentum right now.

The industry is buoyant, especially in that data center space, AI space, and software space. We're going to continue to drive a very, very strong growth and results in this area.

I do believe that our end-client computing units is going to decline and going to continue to drop simply because the price rises hit that hit that rate of the increase where it's it's getting really hard for our SMB partners to participate in this. However, the mid-market and enterprise opportunities are still going to be there.

We're still going to ship thousands and and and tens of thousands of computers. Where it's going to land us in terms of growth, like I've said, it's probably going to be single-digit, low-single to mid-single-digit growth, and we're going to see and and understand how is the price increases going to continue in 2027 and how that dynamic is going to change.

If the pricing going to continue like starting to come down a little bit, we're hoping our SMB customer is going to pick up, the unit is going to pick up, and we're going to balance that. If I look at our July and August results, they continue the momentum, they continue what we've experienced in the H1, so that gives, obviously, us a a good confidence to give give a give the guidance.

The guidance for the second for the whole year results is somewhere between $4.3 and $4.4 billion, which is somewhere in around 11 to 14% growth, much higher than we expected. When we started 2026, there was a massive degree of uncertainty: supply chain, price increases, how is SMB going to going to drive it.

We knew that AI going to accelerate, but how much acceleration we were going to see? Is that going to be a big deals at low margin, or it's going to be start medium sort of size deals at a at a reasonable margin?

There was a lot of uncertainty. We've lived through that six months.

We as an organization adapted really well. We've got we've we took the risk, we got the inventory.

We're obviously benefiting from that, but also, if I look at the margin composition within the business, margin increased in every single segment. Yes, there was an increase in margin in PCs, especially in taking advantage of the of the of the inventory that we've got, but we also had a good margin increase in our software business.

We're having a pretty stable and slow increase in our margin composition within our our advanced solution business because we're driving a lot more complex solutions. That kind of giving us a a good a good confidence to see that we will be also upgrading our guidance, our initial initial guidance, on our NPBT margin, and we and we're guiding the market that we're going to finish somewhere around $162 to $165 million, which represents around 3.8% NPBT margin percentage.

This is where the board is very, very confident on, and now we open for questions.

Great, thanks very much, Vlad and Mary. As a reminder, research analysts can raise their hand via Teams and ask a verb—a verbal question of the management team, while the rest of the audience is encouraged to submit written questions via the Q&A function.

For those asking live questions, I'd just kindly ask that you please limit yourself to no more than two questions. First question comes from James Wilson at Macquarie.

James, please unmute your line and go ahead, please.

Morning, guys, and thanks for taking my questions. I'll keep it just to two today, as you asked.

First off, just on New Zealand, appreciate it was a bit weak in the first half given the supply constraints. Can you just talk to us about the underlying level of demand you see there when supply comes back, and also what's giving you confidence that supply will actually come back in the second half?

I think you said August looking a little better.

Okay. I'll I'll I'll answer.

I think these are two or three questions, James, but so I'll just quickly unpack it. [laughter] Um, okay, our New Zealand business is a lot more concentrated around Apple and HP.

Uh it is a weakness, and we're working very, very hard to diversify the portfolio and scale other vendors. We're bringing more vendors, and it's in progress.

It is a little bit harder to do in New Zealand because New Zealand on its own is much smaller market. A lot of vendors are only having one or two distributors, and the significance—I'm sorry to say that, but significance of the New Zealand business to the overall global portfolio is very, very small.

Vendors and partners, they don't change as much. They don't they don't drive that change.

Um so that's one one reason. If HP and Apple don't supply stock, immediately affects our business, and that's what happened in the first half.

Now, when the supply comes in, it's immediately bounced the other way around, which we've kind of noticed through the July and August. It's kind of the time in momentum.

It's not It's not very good for our New Zealand business. We're totally realizing that, and we're doing everything to kind of really diversify that that portfolio.

Confidence: um in the beginning of the year, supply was very constrained. New Zealand did not get the right allocation.

Australia never experienced it. When I spoke to my New Zealand guys, and they and they're not getting their stock, and then I look at my Australian business, we were continually getting that stock.

Obviously, the global suppliers were referencing Australian market because it's much bigger market. Also, New Zealand economy is definitely not at the level of the Australian economy.

Even to drive penetrating and building a business with other vendors was quite problematic because the SMB New Zealand is is softer than SMB in Australia. The enterprise business in New Zealand are also a little bit slower to lock in the deals than Australian business.

There is a number of factors that kind of getting that.

There's a lot of enterprise buying is done by government as well, and there's an election coming up,

we've

seen a lot of impact as a result of that.

That's actually very, very good point. When I I just came back from New Zealand earlier this week, and a lot When I talked to a lot of partners, they're saying, "We do feel slight softness because of the election."

We're hoping that straight after the election, we're going to have a little bit of a uplift. A bounce,

yeah.

Great. Thanks, guys.

Just one second question, if possible. Just on data center refresh and AI-related revenues, can you quantify for us how those sit on a sort of gross profit and PBT margin hierarchy relative to the rest of the business, if possible?

Sure,

sure. AI deals at the moment at the lower margin spectrum.

If overall business reports somewhere around 9.8% gross margin, AI deals normally low-single-digit margin deals. A couple of large AI deals that can come in can actually drive that gross margin slightly under.

If I look at the normal data center piece of enterprise networking, normal server refresh, storage refresh, then it holds higher single-digit margins. That's kind of in line with And this is where a lot of growth is is is coming is coming coming um for So, when you look at the guidance, we kind of tempered our 9.8% gross margin from H1 slightly tempered it down in the second half because we do believe there are two things going to continue happening.

One, if we land one or two larger AI deals, that could be slightly lower in a gross margin perspective metrics, but also a continued decline in our SMB unit numbers in our PC division also going to result in slightly uh in slightly tempering that margin. However, the data center refresh and software will continue to drive with a very good margin expectation.

That's why um we thinking it's probably not going to be somewhere at 9.8, but it's not going to be definitely below nine. Yeah.

Somewhere

Somewhere

in between. Yeah.

Thanks for the responses, guys. Cheers.

Thank you.

Great. Thanks, James.

Uh next question comes from Lindsay Bettiol at Goldman Sachs. Lindsay, please unmute your line and go ahead.

Thanks.

Hey, guys. Hopefully, you can hear me.

Hi, Lindsay. We can hear you, yeah.

Very good. Um just looking at software, um which was obviously like the strongest sub-segment.

Could you just help us understand like if I unpick that, um I'm just trying to work out how much of the 18% was like, let's say, volume versus price and upsell versus new vendors coming in, cuz it just it just feels a little bit stronger than some of your peers. I'm wondering like, in particular, how much of a tailwind the new vendors were versus like what we should treat as an organic kind of growth rate in software?

So 80% organic growth. Every single software vendor: cybersecurity, data management, virtualization, Adobe, VMware, Microsoft, Cisco software.

Some of the AI is in that software too because it's fast data as well.

Correct. There There is There is a few a few new software vendors that we brought brought on board, but if you look at overall growth and the margin composition, it's actually like a like a nice organic organic growth.

Look, Microsoft leading the way. There's no We We had We had an incredible year um so far, an incredible year with Microsoft.

We we we are super excited about our future with Microsoft not only to the end of this year, but but uh but into next into '27 and beyond.

Brilliant. Um and then second question from me, just like an update maybe on memory supply.

Like I think at the full-year result, uh you weren't seeing any supply issues, you were confident that would continue, same kind of at the AGM. Um but like we're starting like depending on which of your peers or vendors you look at, like you're starting to hear some rumblings that supply is tightening up.

Like it's still probably okay through the end of the year, but um yeah, starting to get a little bit tighter. Maybe just an update on memory supply um as well, please.

I think what

I think the actual degree of of um supply hasn't changed, but I think we more used to work with that. Um also, a lot of vendors is now increasing uh validity of their quoting.

What it means, it means when the vendor provides a quote for for a particular um device or infrastructure or memory itself, um because they couldn't they couldn't get the the right levels of supply and predictability, they're shortening that quoting cycle. What we're starting to see now, the quoting cycle getting longer, what it means, it means vendors are securing more supply and giving them a little bit more predictability, they can pass that predictability to us.

That's a positive. That's a positive uh sign.

Um what I what I can comment on, amount of um interest in data center infrastructure products that we received did not did not match with the ability to deliver. There's no question it's still a problem.

It's still a challenge. Um and my I mean my my backorder order at the moment is is the biggest that company ever had.

You could see that we we continually getting a lot of great momentum, but we can't quite deliver. It's 2 to 3 months lag, sometimes it's up to 5 to 6 months lag.

The good news is that I don't see any cancellation because any cancellation in these orders will result in much higher pricing, new quotes. I just like to comment again, the price increases are not over yet.

I have a very solid visibility in the 1st of September price list from all our vendors, and all prices going up. What I also though have is a visibility of a next price increase.

That's going to take a couple of months, maybe 2 to 3 months to increase price again. We we've never had this visibility in the beginning of the year.

In the beginning of the year, it was a it was a situation of every 2 to 3 weeks prices were increasing and we didn't know like how how long is going to continue, how much the price is going to keep increasing. Now, it's a lot more predictable.

It gives us again better confidence to forecast, to see how we're going to land, what we're going to do. We we have a better clarity on ETAs, when the stock is going to come, and when we actually going to supply all those backorders.

Okay. Thanks, guys.

I'll jump back in the queue. Cheers.

Great. Thanks, Lindsay.

Next question comes from Josh Kanarakis at Barrenjoey. Josh, please unmute your line and go ahead.

Hi, Vlad, Mary. Can you hear me okay?

Yeah.

Yeah.

Great, thank you. Um just a question.

Obviously, you provide that trading update, and looking at that, we can obviously backwork a little bit around the the last couple of months of the year. Um I know it is historically stronger in terms of margins, but it does look like a very significant step-up to sort of 4.7 in the last couple of months of the um of the half versus 3.7 for the first um 4 months.

I'm just trying to understand a little bit about the mix and how much of that was benefited from your, more aggressive buying of inventory um and does has that gone into a little bit more alignment um into this half? Or do you still think you'll be able to, given the price the consistent visible and the visibility around price increases, do you think you'll still be able to capture some of that margin?

Thanks. Uh

okay, good question. The answer is somewhere in the middle.

Uh we did produce much better margin in our PC business. Um but remember, our PC business, it's only 20 um I think it's 8% of our overall revenue.

Yes, margin were uplifted, and we don't see much of that that change throughout the second half. Um prices keep keep increasing, we keep doing strategic buy-ins, we're still negotiating, our market share is very solid, so that kind of dynamic going to continue to happen.

Um is that going to continue to happen in '27, '28? I don't think so.

I think it's a good momentum. We're taking a good advantage.

Uh but remember, it's only 28% of our business. If I look at our software business, our margin have improved, and we're going to continue to drive improvement of these margins.

It's the expertise, it's the consultative approach that we're taking selling these uh opportunities, it's the it's it's the vendors that we're bringing on board. I don't know, we just really driving those solutions into the right areas of the market where we probably would sustain those margins.

That gives me a good confidence we're going to continue to grow and nicely sustained margins. When it comes to data center infrastructure, margins are increasing, again, in that modernization and refresh cycle.

A little bit of being being able to drive some of the good purchases, but majority is back-to-back bid orders. It's not a lot of opportunities to really drive that momentum into increased margins.

Margin increasing more organically, more on the complexity of solutions. That bit going to continue to to be good.

If I look at the AI deals, now, that's going to impact it negatively. AI deals do not represent margin opportunity at the moment, and we're doing more and more and more of this AI deals.

However, it's a long-term strategy. For the 2026, we're going to do 100 100, 150 million of AI at a very low-single margin, but we're really driving that platform, and really doing that build-up getting ready for the refresh.

When the refresh going to start happening, that's where we're going to make some good margin. Also, the big focus for us is drive that AI adoption through the enterprise customers.

When we start receiving orders from enterprise customers and mid-market customers, that's where we're going to make some some margin. If anything, that piece of AI that we're working on is going to probably put pressure on our margins.

Um we only, like I've said, we already did $50 million in H1, uh so it's kind of we didn't feel that pressure as much. I think we will start feeling it a bit more pressure in the second half.

Got it, thanks, Vlad. Um just a second question, just with regard to further on the pricing versus demand environment.

When you do look at the SMB, I'm sort of implying, if you're saying mid-single digits um for for growth, that it's sort of largely, second half broadly flat-ish, maybe up a little bit on the second half of sort of '25 for those endpoint solutions. Um is that right?

Are you actually seeing though in terms of that any disconnect between the macro environment where people are, whilst I know you're saying they've got budgets, they're also seeing the pricing go up as well? Do you think there's any pull forward at all in these numbers, or is it um still still wed to budgets and budget cycles?

Uh so,

okay, I'll answer the first question. Uh in our PC business, end-client computing, I do believe that the second half is going to be close to flat on the second half 2025, which will result in a single-digit growth for the whole year.

That's how I see it. I do see the unit numbers going to continue So, that's 28% of our business um in second half probably come closer to the flat year-on-year, which the whole thing will result in somewhere single-digit growth.

However, to offset that, I do see a faster growth in our software business. I see a faster growth in our data center business.

That'll kind of offset that that that turn down. This is where our guidance is kind of when we done our modeling, that's how we kind of feel comfortable um orchestrating, because knowing If I look at our backorder report like my open orders, my backorders, there's not a lot of PCs there.

All of that is a lot enterprise networking, server, and storage uh kind of segments. A lot of a lot of a lot of uh mid-market, tier-two um that sort of solutions vendors that are sitting in that in those backorders, which, again, quite quite at a good margin point.

Um What was the second? Yeah.

The

the pull forward, endpoints, I would say there were probably was a bit of pull forward because of the momentum of price rises that were happening. Data center refresh, software, they're on regular subscription models.

There's not pull forward in any of those numbers. It because of the diversification of the portfolio, it's not a straight answer on there's pull forward orders in the numbers that we've represented or booked to to the half.

The one segment I would say would fall in that category.

I agree.

Hence the 10% growth.

I completely agree with Mary. Just uh just to touch on that, data center refresh um is is a must.

Like you cannot not do it. It's a I guess, a sense of urgency in getting into the deal probably is there, but that would have happened anyway.

If I look at number of activities, a number of what we currently having in the marketplace in that space, through July, through August, it's not slowing down. It's continuing.

If anything, it's actually growing. If anything, and and and that's putting pressure on supply.

At the end of the year, I actually expecting uh my backorder book probably going to be even bigger than this. While we're still filling backorders, I think the new backorders is going to continue to drive good momentum.

Great. Thanks, Vlad, Mary.

Congrats on the results.

Thank you.

Right. Thanks, Josh.

Uh next question comes from Olivia Coulon at Evans & Partners. Olivia, please unmute your line and go ahead.

Thanks for taking my question. Um you commented a little bit on inventory profits.

Um is there a sense that you can give us at all on, I guess, the quantum of the benefit from inventory profits in '26 given your earlier statement that you expect um not much inventory profits into '27 from uh end-user devices? Cuz I mean it sounds like your business um certainly in software and advanced solutions is going from strength to strength, but it does seem like um you know it's probably going to be a step down in those inventory profits in a fairly major way in '27 uh if we assume that at some point those price rises stop stop happening.

Look, I I personally think it will it will come down in 2026, but yes, if we will stop seeing the increasing prices for '27, if we start seeing the price normalizing, um I definitely see that those advantages is going to go away. However, what it really means, that we will pull all our SMB customers back, and SMB customers will be able to drive the growth.

SMB as a segment is a very good high-margin segment as it is. We're thinking we're going to balance it nicely.

Um it's very hard to quantify in terms of the actual percentage.

Because, again, it's only 28% of the business that there's that opportunity on. There's the price rises across all um segments, but um it's like software almost non-discretionary spend, it's like a requirement subscription-based as it's recurring, and that's evident in the growth.

Um and advanced solutions, data center refresh is um well underway, and the budgets are the budgets from the enterprises that are spending. In terms of the endpoints, um I think we pointed out that Windows 11 devices are coming up for refresh, and with this AI phenomenon and workloads around um operating um AI models, uh there is a sense that there will be um refresh happening on endpoints um coming um for um devices that were bought, several years ago.

It's hard to quantify what the incremental profit contribution is, hence why our guidance, PBT margin and our gross margin, is slightly lower than what we've delivered at June.

Yeah. Okay.

Now, I appreciate that. On a longer-term basis, though, should we think that gross profit margin is going to base back closer towards that lower 9%?

Um it's pretty clear that I think consensus expectations for '27 for gross profit for gross sales are too light, given your guidance for the second half of '26, but but should we expect that, gross profit margin to trend back towards that low nines? Or do you think you can do a bit better than that based on the mix that you're saying?

I think the mid I think it's it will be somewhere lower than right now,

but not

but not too low as a as like 9.1. I think it's going to be somewhere in the mid-90s, maybe a little bit maybe 9.3, 9.4.

The caveat would be size of AI deals

and

lower margin. Exactly.

I was

I was about to say that, yeah. Um

but um yes, the expectation if the sort of the the uh underlying business um where there is that little opportunity of um improving the margins of where we were sort of forecasting around that nine and expectation that would be above that, obviously, we've delivered above that. Um for the next year, we expect that, like Vlad said, that mid-nines um is probably reasonable expectation.

Um uh and the caveat being size of AI deals and um the the quantum and the margin that we would do those at.

Also if you look at our physical security business, it's not it's not too big, but 22% growth in a segment that is averaging 20% gross margin, so that's drives it as well. We and we continue to expect that growth.

Every little bit helps. We're going to continue to diversify our portfolio in New Zealand, that's going to continue to drive margin up.

It's it's still too much reliance on a lower-margin Apple business. There's a lot of work that that is happening.

We know what needs to be done, it's just really driving the a strong execution.

Perfect. Now, thanks for that.

Really appreciate it.

Great. Thanks, Olivia.

Next question comes from Ari Naruse at Jarden. Please unmute your line and go ahead.

Thanks, Ari.

Hi, Mary and Vlad. Hope you're well.

Just the first one from me, um because there's a lot of moving parts, but just into 20 27, the outlook for your three key divisions, being that PC, AI, and sort of data center, and software, there's a lot of moving parts. For example, you're obviously cycling the the PC refresh from last year, but you've got price rises, you've got the data center refresh, how do we think about the sort of magnitude of growth for those three segments in the context of what you're going to be doing in 2026, which is sort of, you sort of said high-teens growth for software and advanced solutions, and mid-singles in PCs.

How do we think that happens, plays out in 2027, please?

You're asking me to give you an outlook for 2027.

[laughter] Okay,

well, I'll tell you. It is hard.

It is hard, but I kind of have that feel and momentum also where the industry is kind of looking and how all the industry analysis are kind of looking. Uh data center piece is going to go well beyond 2026.

Uh I think just sheer of work that's being done, data center build-outs, power requirement, cooling requirement, complete revamping on a networking required to support these data centers, to me, we just opening up these opportunities. Some of them are so significant and so good.

It's not a week for us where we don't form a new sense of partnership with one of our partners or vendors or collectively where we don't project a great forecast and pipeline for 2027. I'm very, very buoyant and very excited about that piece, and it's going to continue to grow.

That's our data center refresh and AI. Software: good, strong, stable.

I don't I don't foresee any, moves to changes. We're bringing new vendors.

I have another four or five in pipeline, we keep working on them. Some of them are a bit smaller, some of them are a little bit more significant.

A lot more of my larger software vendors as well, they're putting a lot of more of their direct partners into distribution because they want to take advantage of the diverse platform and MSPs. A lot of our customers is managed service providers who stack their software.

If the if the vendor delivers the solution directly to the MSPs, it just brings that discomfort on the billing cycles, they're putting it right into the marketplace and to give them that that cycle. Microsoft, we have big plans for '27.

Software: strong. Data center: strong.

AI: very, very hard to predict. It can be 150 mil, it could be $1 billion growth.

I I just don't know. It's a so such an exciting area which we're putting a lot of focus to grow.

PCs: look, end-client computing, to me, it's it's a it's like that transactional machine that works half on half on half. If there is tailwinds, we do more.

If there is headwinds, it's tempered down, we go through the cycles. I think next year is probably going to be I'd probably say flat year-on-year, could be slight decline.

We having an incredible year this year, price is going up, but it's a transactional machine. Enterprise still going to buy.

If I need a little bit more top line because my margins are very, very strong elsewhere, I can grab more top line from enterprise customers. I just don't have a need for that, nor interest.

Um mid-market doing really well. All the growth you see this year, like first half, second half, going into 2027 is really coming from our sheer, strong relationship with our mid-market partners.

Um so, if I could if I, can give you a very rough guestimate how I see 2027, it's going to be probably flat or small decline in our PC portfolio, and again, very strong growth in our data center infrastructure and software, and continue very good growth in our retail, in our physical security, and our audiovisual.

Right, thanks for that. Then second one just on the SMB part of your business.

I think before the downturn in the SMB segment, that was about 20% of your business, and maybe it's sort of much less than than that, maybe half that as a percentage of your business because enterprise has done well. How do you um like how do we think about whether that revenue opportunity is structurally gone or is that still an opportunity where you can double the SMB business, or grow it significantly, and that gives you even more upside on the gross margin to the nine and a half that you were talking about?

The question is, is it more cyclical or is it is there something that's happened that your the the dollar revenues of your SMB business isn't isn't there anymore, please?

As always, the answer is right in between. It's not one or the other.

The market has moved. There's no question.

Market has moved. The market and opportunity is within mid-market.

We moved with the market. Data center, refresh, AI, it's all conversation for mid-market and enterprise.

Enterprise, very low margin, we trying to be very selective. SMB, it's not really conversation for SMB, not yet.

Uh so, that mid-market is becoming going from 60% of our business into 70, 75. I'd probably say our mid-market rate of our business is somewhere around 75% now, very, very strong.

Enterprise business, we have a very strategic deals, strategic involvement with them. That's probably staying somewhere around, 10 to 15%.

The same thing, around 10 to 15% in our in in our SMB. SMB market is still there.

12,000 partners is still there. But 12,000 partners is just struggling to allocate their budgets into the areas where they really need it to.

If we will have more opportunities to service that market, we would love to. SMB is is very, very good, lucrative market.

We just need to find the ways of how we can serve them better. For that, we need prices to come down, we need offering to go wider, we need more accessible inventory for the SMB.

What were happening right now, and what's been happening in the last 18 months, is everything against SMB. Um we don't have anything transactional of a very good value to kind of stimulate it.

Price just keeps going up. When prices going to like continue come down, when we start doing deals, bundles, going active, we still have that 10,000 partners.

That and you know what? That's going to go get us a really good growth.

The question is when that's going to happen. We, at the moment, don't know.

Right, thanks so much, guys.

Great. Thanks, Ari.

Um next question comes from Adam Del Vedove at Blue Ocean. Adam, please unmute your line and go ahead.

Thank you.

Good afternoon, Vlad and Mary. Um I tried to ask this in chat, but Sam made me raise my hand, I don't get to be shy.

Um my sense is um your business has really repositioned, I think, over the like if we were talking about this 2 years ago hearing you talk mid-market and enterprise, like you guys are out there hustling and and really going to where the dollars are cuz it's not just the small business channel that's fighting budgets. It's everywhere.

There's this kind of data center channel you're into. I'd like to do a bit of a like like well done.

I can see you hustling. On that context, headcount I think roughly 930 to 1,000, employee costs running ahead of revenue growth.

I know there's a lot of variable comp in your employee costs, but I'm just kind of interested cuz you think you made this comment in the annual in in the report where you said, "The company has continued to review headcount to align resources to sales-generating opportunities." That sounds to me like you need more people, not less.

I'm just trying to put all that all together with revenue growth, sales growth, variable comp, and then what you need to kind of meet the market.

Okay. Uh so you've hit the nail on the head.

There is a lot of variable comp, and there was obviously very strong results for for um and we've always said um we're never going to get full leverage from our salary line. Um the growth in terms of um headcount has been allocated to um our business units that are adding vendors, investments in those categories.

Um and equally, with the volumes um leaving our warehouse, we've probably seen increase in logistics um as well. Um so, it it's a it's a constant um uh dilemma as well, because as a business, we're also looking how to innovate and use AI within our own business, we're not having to increase headcount overall or or have our people be more productive um in other areas and see where we can automate some of the um more transactional operational parts of our business, to be able to um uh moderate the amount of um headcount growth that would be required um in the future.

There's definitely projects underway, operationally, within our business um to address that as well. Uh

just to add to this, Adam, as well, um we're very conscious, obviously, uh as any business should be, uh on our cost. Um but also, we we we're very, very hands-on in terms of understanding where the market moves.

Like you've said before, where's the money, where's the competitive edge, where's the value we can add, how can we stay relevant? Those sort of questions are very, very important.

What's more important is how do we stay ahead of the curve. How do we utilize our agility and being a local player to be always a couple of steps ahead.

With that, we clearly see that market moves towards consultative selling, towards value that our people bring to the small and medium-sized partners who cannot further grow without our expertise. That's where the margins are.

That's what really drives that even in the first half, that's what driven that margin upside, whether it's software or or or um data center infrastructure segment. PCs, obviously, we don't need that many people there.

If I look at our cost and people who is operating our transactional business, it's actually haven't changed for a long, long time. We just have a really good people who's making the right buying decisions, because that's what makes money in our transactional PC business.

When it comes to the rest of our business, which is now 70%, that's consultative expertise really driving that margin. Yep, we're fighting for great people, we're fighting for people with a deep relationship, deep expertise.

We're we're constantly in that battle to drive a better feed internally that can deliver growth in both top line, but more importantly, in bottom line.

Great, thank you. I'll probably butcher this question, but in terms of like the hyperscalers have done all the construction or a lot of the construction now, and as we move into these sort of independent people who are standing up or or we've got neos who are putting hardware into other people's buildings, right, I've I've noticed the sales motion from the vendors quite often includes a financing and a maintenance kind of um component.

I'm just sort of keen to get your take on, do you go to market with the with the hardware vendors in and do you pitch into that maintenance piece? Cuz it feels like it there's a fair bit of kind of service opportunity there and also a nice hook when you look for that replenish cycle.

I'll comment on main business, and I'll probably get Mary to comment on how we deal with the neo-cloud providers. It's It's a little bit different.

Now, with a normal business, with with um bigger like, say, for example, data center opportunity, we do the quote, quote comes at $2.5 million, customer saying, "Okay, we're good to go," we go to the vendor, vendor says, "Oops, unfortunately, it's a $4 million now, it's not $2.5," customer is not happy, customer saying, "We don't have the budget for $4 million," that's where we go with finance. That's where we're saying, "Look, I know $4 million is not $2.5, but if you wait for another 6 months, it's going to be more.

How can we help to reduce that burden? How can we drive some finance mechanisms to actually, we have finance mechanisms from vendors, we have Dicker Data Financial Services, we can other things.

What is the critical component of that deal? Let's just drive that and maybe add-ons a little bit later."

We have these conversations. When it comes to a large-scale neo-cloud provider,

yeah, I'll just let Mary. It's it's something we're navigating ourselves um to be honest.

Um there's been um a lot of discussions around quoting around deals and deal sizes, and the question always comes back to how it's going to be funded. Um to date, the transactions we've um had have generally been funded through, like you said, Adam, um the vendors um supporting that through their financial services businesses, um hence why the credit risk and um the ability to transact um has been able to happen.

Um with some of the deal sizes that we've been looking at in terms of quotes, um that's still uh work in progress on who takes the risk overall for this equipment investment and um how uh these transac- transactions will be funded. We are looking at various options there.

Right.

Maintenance is just not going to be in your wheelhouse?

That's services, isn't it? Uh

you mean like actual services for the equipment and stuff? No.

No.

That's uh we that that

that is the bit for our partners, our partners doing a lot of that. Now, what we do do, we sell our vendor services, our vendor maintenance.

A lot of our partners who don't have a solution or service offering themselves, they complement our vendor services. Uh and that's that's a very successful part of of the business.

All our maintenance packs, services, and vendor services are all part of our software number.

Oh, that that's great insight. Thank you.

Great. Thanks very much, Adam.

Um I think that's all the time we have for questions today. If you do have any follow-ups, um please feel free to send them through, and we'll endeavor to get back to you.

Maybe with uh without, Vlad and Mary, I'll just pass it back to you if there's any closing comments. Um

okay. Thank you so much for everyone who joined.

Um I know we have a lot of one-on-ones as well, uh so we more than happy to answer any follow-up questions. Um as the board of of of Dicker Data, as the as the management of Dicker Data, we're very, very pleased with our H1 results.

Um we're very optimistic about our second half as well. The outlook looks uh looks very uh very positive, very good.

Um all all I can say from us, from myself and Mary, we incredibly committed uh to continue to drive the best outcome to all our shareholders. Thank you so much for your support and for joining.

Thank you for joining.

Great. Thank you very much for joining today's Dicker Data first half FY26 results call.

Enjoy the rest of your day. Thank you, and goodbye.

Thank you.