Release Date: February 27, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Dicker Data Ltd (ASX:DDR) achieved a 2.9% increase in gross sales, reaching $3.4 billion, despite challenging market conditions.
• The company maintained its gross profit margins, with improvements in New Zealand business growth margins.
• Recurring revenue from software sales increased by 7.5%, now comprising 29% of total sales.
• Dicker Data Ltd (ASX:DDR) successfully added new vendors, including Adobe and BMC, enhancing its product portfolio.
• The company is well-positioned to capitalize on the upcoming Windows 10 refresh cycle, with strong inventory levels and strategic vendor partnerships.

Negative Points

• Profit before tax (PBT) decreased by 2.8%, primarily due to increased finance costs and interest rates.
• The Australian business experienced a decline in gross margin, attributed to a shift towards lower-margin enterprise customers.
• There was an increase in bad debt provisioning and write-offs, impacting overall profitability.
• The company faces challenges in the small and medium business segment, with reduced spending impacting revenue.
• Dicker Data Ltd (ASX:DDR) anticipates continued pressure on gross margins due to elevated inventory levels and competitive market conditions.

Q & A Highlights

• Warning! GuruFocus has detected 5 Warning Signs with ASX:DDR.

Q: With Q4 sales up 10% year-on-year and a strong start to January and February, is a 10% sales growth rate a reasonable expectation for calendar year 2025? A: The market shows strong early signs of growth, but achieving a 10% growth on $3.4 billion is challenging. It depends on market recovery and small business spending. While aiming for good growth, hitting 10% will depend on various factors, including AI deals and new vendor additions. (Unidentified_3)

Q: How should we think about gross margins for calendar 2025, considering the positive comments on SME sector recovery, New Zealand PBT margins, and high-margin new retail vendors? A: Maintaining enterprise sales levels and SME recovery will positively impact margins. The goal is to maintain a 9.5% to 10% margin profile. With increased demand and SME recovery, margins are expected to stay around 9.8% to 9.9%. (Unidentified_3)

Q: What is the outlook for OpEx reinvestment in 2025 and 2026? A: OpEx was impacted by higher bad debt write-offs, but other categories remained similar. Costs are expected to remain relatively stable as a percentage of sales. (Unidentified_2)

Q: Can you elaborate on the potential international or offshore opportunities? A: Dicker Data has established entities in Singapore and the Philippines, exploring growth opportunities outside Australia and New Zealand. While still in early stages, there have been positive discussions with vendors. (Unidentified_2)

Q: How do you see Microsoft's incentive plan changes impacting your SMB segment? A: The changes are expected to benefit Dicker Data, as Microsoft is empowering mid-market and small businesses. The company is now a leader in Microsoft CSP, Azure, and modern workforce across Australia and New Zealand, opening more opportunities. (Unidentified_3)

For the complete transcript of the earnings call, please refer to the full earnings call transcript.