Dustin Group AB (publ)

Good. Thank you very much. Good morning, everyone, and a mouthful of calm. Both are existing, of course, new and potentially new shareholders to our second quarter presentation and conference call. I hope you are all well. Here on the right side of the call is myself, Thomas Ekman, and Johan Karlsson, and Sipo, and Trinic Saptaram also ahead of IR in Lume as well. So today we present our second quarter result for our fiscal year, 21-22. And to start with, I must say this has been, of course, a very special quarter, starting the quarter with more or less open markets and societies in December. We then relaxed corona restrictions to complete lockdowns in all our markets in December and January, causing a lot of challenges, of course, and then to fully open markets again in February, and then a couple of weeks later into a catastrophic phase of the Russian invasion of Ukraine. And so a lot of turmoil, but despite all this, we continue our growth journey, and this quarter with 80% reported growth and a very strong .2% of total organic growth. Margins, which we'll come into later on, were impacted by mixed effects, driven by high deliveries of low margin products and temporary cost increases due to a lot of sick leaves in the middle of the quarter, and also, of course, a higher share of LCP sales in general. And as always, I've said this before, but I'm always very proud of everyone, and that's a group for doing their utmost every day to deliver a great customer experience. And this second quarter very much puts the light on the skills and competences and engagements we have in the group, given the turmoil in the world and the effect, of course, it has on us as humans and our work. The supply chains are continuously disrupted and driving an intense work in sourcing and delivery. But despite all the challenges that we've had, we managed to have a double digit growth and capture the demand from our customers. And the second quarter, once again, shows that the availability and delivery capacity, it is the driver of the high growth and drives the generated high growth.

And

that's, of course, built on our cash-generative and asset-like business model. So let's proceed in the presentation. And for your reference, we have dust in at the glass on slide two, but I think we can move directly to slide three for the financial highlights to see how we are performing and improving during this quarter. The strong organic growth at 12.2%. We have strengthened our position in the markets and our productivity and position in the value chain, of course, benefited our performance. Our beta margin was impacted by customer and product mix effects as well as temporary cost increases due to Corona lockdowns. Adjusted beta increased to 275 million sec while the beta margin came in at 4.2%. Our SMB segment performed strongly in both the growth and margins in the quarter. And our LCP segment had a very strong growth while slightly lower margins due to high share of sales of low-margin products such as PCs, Apple mobile phones, and software. The market trends that we build our strategy on, the online shift growth mobility, and cloud services demand for predictable IT costs, focused on security and integrity, and of course, sustainability. They have continued during the quarter to increase in importance. And that, of course, makes also our long-term position better. So total net sales were 6.6 billion sec, up with 80% versus last year on reported level. And the organic growth, as said, was 12.2%, for which SMB showed a positive 10.1%, LCP at a very good 17.2%, and BTC a negative 22.4%, as an effect of much less campaigning due to the overall shortages of products. Overall, good organic growth and strong, which shows not only a good underlying demand, but of course also our capability to make use of it and deliver. Gross profit was 904 million sec, compared to last year's 591. That gives us a gross margin at 13.7%, down from last year's 16.1%. The change is mainly attributable to an altered mix with higher share of sales from LCP and within LCP. And that, of course, relates to the acquisition of Central Point, together with higher organic growth also in LCP. Our adjusted EBITDA increased to 275 million sec versus last year's 201 million sec. And as said, that gave us the adjusted EBITDA margin of .2% for the quarter versus last year's 5.5. And the EBITDA margin was affected by the customer mix towards LCP, and the product mix of lower margin products within LCP, as well as the temporary costs, I don't think you've heard before here, for sickleys in December and January. Item selecting comparability was minus 13 million sec, and that consequently giving us an EBIT of 220 million sec, compared to last year's 177. And EPS earnings per share was 1.27 sec per share versus last year 1.34. Strong cash flow from operating activities at 388 million sec versus last year's 218 million sec. And our leverage at the end of the quarter was 3.3 versus 2.0 last year increase, obviously because of the acquisition of Central Point and the dividend payout during this quarter. And we are working our way down in leverage to come into our range of being between two and three times versus EBITDA. So apart from an intense quarter in general from an operational perspective, we have continued the integration work with Central Point and former venture companies in the Vendlacks. We've also come further with our Nordic integrations with for example, now Danish Exato, now fully integrated. So Johan, you can take us through the financials on our different segments. Or we can just slide forward. Yes, on slide four, we see SMB. Sales for the quarter in SMB was 1,941 million. That was an increase of .2% over last year, representing an organic growth of 10.1, as Thomas mentioned. Sales growth continued to be strong, despite the challenges in the global supply chain and with a very high underlying demand. During the quarter, we saw strong demand for hardware in general, but computers and mobile phones in particular. All customer groups in the segment performed well. However, the largest customers performed at the best. On the services side, the standardized managed services performed well while the consulting business was down from last year. This is a result of higher standardization of the service portfolio and in line with our strategy. From a geographical perspective, sales was strongest in Norway and the Netherlands. Segment result for the quarter ended at 214 million, up 26% -over-year. Segment margin was up from last year's 10.6 to 11.0, despite a negative effect from customer moves, affecting margins negatively with 0.3%. Private labor continues to contribute positively as we are increasing sales in both Nordics and the Netherlands and also using the supply chain challenges to our advantage was improving the margins. However, the quarter was also affected negatively from high share of computers and mobile phones with lower margins and by higher cost for delivery coming from the high sick leave due to COVID. The delivery cost issues was mainly affecting December and January and is now back on normal levels again. In summary, we saw the same trends in demand for IT products and services in Q2, SVD and Q1. Then move to slide five and the LCP segment. Sales in LCP was 4 billion, 533 billion in the quarter, which was an increase of .3% of which 17.2 was organic. During the quarter, we saw a very high sales increase in both public sector and large corporates. As our quarter two contains the end of the calendar year, we also have strong sales software in December. This was affecting sales positively, but margins negatively. Sales in the quarter from software was up by 300% compared to the same quarter last year. From a geography perspective, growth was strongest in Sweden, Norway and Denmark. Second margin was at 6.5, was down from 7.2 last year. As said before, product mix was affecting margins negatively as software was increasing in share of sales. Further to that, large inbound deliveries to fulfill the large rollout commitments further weakened the margins. Also higher cost of delivery as mentioned in SMB was affecting the LCP margins. However, private label product increased as we were expanding in the Nordics and launching the Banalax and this contributed to a higher margin. The customer transfers from SMB and cost reclassification added 0.7 to the segment margin compared to last year. Segment result was up from last year's 136 million to 298 million and increased by 119%. We then move to slide six and B2C segment. So B2C segment lost .5% of sales and ended with 139 million of sales. The main reason for the lower sales was the reduction in price campaigns as the supply of product was scarce and all focus on delivery was put on SMB where margins are higher. Segment margin went up to .6% from .6% last year due to the lack of price campaigns which usually affects the margins negatively. Segment result was 13 million which was down from 15 million of last year. Let's move to slide seven and a network and capital. A network and capital continues to perform well. It was negative 433 million compared to last year's negative 549 million. You can compare it to also the Q1 of this year and that network and capital in this quarter was approximately 100 million lower. But as in previous quarters, we have seen negative effect on inventory levels coming from turbulence in the supply chain. But this has been compensated by longer payment terms to suppliers and more effective payment process from customers. We look at the details of working capital. Inventory in the quarter was ,000,000 compared to 574 last year. The main reason for the increase was the inclusion of central point adding 476 and higher purchase volumes to reduce the risk of shortage of components. Accounts receivables was up ,000,000 mainly as a result of central point adding ,000,000 and higher business volume coming from the strong organic growth. Moving to accounts payables, it was ,000,000 ,000,000 higher than last year. Again, central point added the majority of that difference compared to last year. In total, we continue to see strong performance in the area of working capital where we continue to stay in or below our target range of negative 100 to 200 million. Leverage as we heard before, that is the net debt in relation to the rolling 12 month EBITDA. At the end of the quarter was 3.3 including rolling 12 month numbers for central point. And as you know, our target is to stay between two and three. The effect compared to last quarter was mainly coming from dividend and slightly higher net debt due to currency differences in the debt number. We then move to slide eight and look at the cash flow. We can see cash flow for the quarter was 15 million compared to negative 32 last year. We look at the parts, cash flow from operating activities before changing net growing capital, 208 million compared to 207 last year. And change in net growing capital was 110 compared to 10 last year. The main difference came from decreasing in receivables. Cash flow from investing activities was negative 75 compared to negative 18 last year where majority comes from Capex investments. Cash flow from financing activities was negative 298 compared to 231 last year. The main difference being in the investments, they were at 90 million compared to last year's 43. And a Capex related to IT development amounted to 40 million that was 31 million above last year. Mainly coming from IT investments in central point that we are moving the ERP platform to the cloud. Investments in tangible and intangible assets increased to 40 million from 24. And last but not least in the Capex investment in asset related to service delivery was at 9 million was basically same level as last year. All in all, 54 million out of the 90 million in Capex was affecting cash flow. The others were changes in leads or rent contracts. And with that, moving back to Thomas. Good, thank you, Johan. And then continuing over to slide number nine. And let's do a little detail in our a beta margin development. As you know, our target range long-term is between five to 6% the beta and we're not back there yet, but we are on our way. And the challenging turmoil obviously affects us as, I mean, the challenging turmoil in the markets in general obviously affect us as everybody else. And to give you some flavor to it, you can see the graph at the left-hand side of the slide showing development since Q4 as a reference. And also Q4 was the first quarter with the fully central point in it. And what has affected the margin in Q2 is as we have been into before here from Johan as well, is the customer mix with strong share of sales from LCP and within LCP. It has been a higher share of basic hardware in both segments as well as large software roll-offs within LCP. And that has the, and to that, the temporarily high cost connected to the extensive absence we have due to Corona lockdowns at approximately 15 million sec. We have also seen higher irregularities in inbound deliveries caused by the disruption in supply chains, making it slightly harder to exactly forecast the estimated time of arrivals for products. And it is somewhat of course difficult to assess the short-term effects from both lockdowns in China as well as the Russian invasion of Ukraine and what might be the effect of all that. But I can assure you that we have our eyes on the margin ball to reach our target of it being between five and 6% of the time. And it is actually, as you also heard from Johan, it is also the share between SMB and LCP. SMB has a good, continued good performance with strong margins and good performance on growth. And the higher share of LCP sort of pushes down the margin somewhat. But that is also why we're working hard to increase the share of SMB sales in our whole profile. Good, continuing then on to slide 10 to give you also an update on our value creation agenda. And during the quarter, we have continued our rebranding activities in the Vandals with now all the former venture companies rebranded to Dustin. We have also initiated the rebranding of Central Point and that will now take place in May, which is very exciting of course. We have also launched our private label product as you heard from Johan in the later part of the quarter. And that's of course very exciting given the, given as you know, private label is a good contributor to our margins. And the initial response also in the Vandalics is very positive. So that is very promising. Several group initiatives are also ongoing with now we're setting up a global procurement and vendor management team. That's being set up as well as the launch our group common cloud-based ERP platform. And that is built now from the Vandalics side and that will be integrated also to the Nordics. And this platform we aim to complete during the next fiscal year, 2022, 2023. And as previously announced, we plan to invest approximately 50 million tech to extract the estimated annuals and it is of 150 million tech. And those will be fully implemented in the year of 2023, 24. So we have a solid agenda to speed up our ability to reach our long-term target. And continuing on the long-term agenda theme, let's move to the next slide,

slide

11. And let me just give you some quarter highlights connected to our 2030 commitments. During the quarter we have launched our in-house take back service also in the Nordics to increase circularity. We have a production facility south of Sweden to cover for the Nordics and we also have the facility in south of Netherlands to cover for the Vandalics. Our circular share in relation to net sales now amounts to 19.7%. And we have since launched in the middle of the quarter sold also refurbished products for around 5 million tech, which may not sound so much, but with 5 million tech, but it's a very important milestone to start off this in the way we do. And we can already now see that the margin contribution possibilities this will give us going forward. And we have also finalized our solar cell facility and which enabled us a greener warehouse and lower electricity costs. And all in all, we work hard to fulfill our 2030 commitments and we are on a good way there. So before going into Q&A, let me just sum up our second quarter results on slide 12. Net sales grew with 80% on report 11 to 6.6 billion tech where organic growth for the group was 12.2. With SMB at a strong 10.7, LCP at an equally strong 17.2, and BTC at a minus of 22.4%. Gross profit at 904 million tech versus 591 million tech and gross margin came in at .7% versus last year 16.1. And change in sales mix as we've been into with higher share of LCP sales and higher share of, or vast deliveries actually of basic hardware and software is behind the change in gross margin. And adjusted EBITDA came in at 275 million tech, giving us an EBITDA margin for the quarter at .2% due to the flow through of the reasons for the drop in gross margin and the extra cost due to the temporary cost of restrictions. EBITDA at 220 million tech, an increase from last year's 177 million tech and EPS at 1.27, sector share versus last year's 1.34. On the other sheet, or a strong operating cash flow at 388 million tech and leverage ended in the quarter at 3.3, actually with EBITDA. So solid growth in the quarter with the mixed effects negatively impacting the margin right now. The pandemic is still present in the world, teaching us a lot and not the least new way of working. The escalation of the war in Ukraine and the Russian invasion of Ukraine also puts pressure. And of course, we sincerely hope for an end to that. The market trends continue to accelerate with the distinct changes in customer behavior. The IT service demand is there, and there is an increased demand for instant availability online as well as security, mobility, and remote management. Security

and

knowledge around cybersecurity is obviously a big topic at the moment and will continue to be given the overall uncertainty in the world. We have extensive experience and knowledge in that, and we can serve our customers in

all our markets in those areas. And for us, I must say the last year has meant that our position is clearly strengthened and shows that our asset life is very robust. So in short, we are well positioned.

And with that, I think we can conclude our presentation and are happy to take any questions you might have. So operator.

Thank you. If you wish to ask a question, please dial 01 on your telephone keypad now to enter the queue. Once your name has been announced, you can ask your question. If you find your question is answered before it's your turn to speak, you can dial 02 to cancel. Our first question comes from the line of Daniel Torson of APG. Please go ahead, your line is open.

Yes, thank you very much. I start off with a question related to software. You say that software sales are up 4x in the quarter, but that is not affecting the margin that much. It's actually diluting the margin. How should we think about that in the future and what type of software is it? Is it like Microsoft licenses or anything else?

Yes, when we talk about it in this perspective, it is large deals with, in this case, mainly Microsoft licenses,

yes. Okay, and they bear margin more or less in line with the basic hardware sales, I guess. Lower, much lower than basic hardware. Okay, thank you very much. And then secondly on the, yeah, go ahead. No, I think you can split

software into groups. These are these larger, say, one-off deals with low margins and then you have other types of software which actually is relatively good margins. But it's

not all software that is diluting margin at all. No, exactly, exactly, I imagine that. Can you give an example of a high margin software deal?

Well, that you can do Office 365 is much better than let's say these big roll-offs for large customers. If you do it to small customers, that's more in line with hardware sales.

Okay, okay. And then secondly on the COVID effects here in the quarter, what part of the organization caused the 15 million negative effects from CICLIS? Is it mainly the logistics centers and is that fully behind us now, as of Q3?

Yeah,

yes, it is,

you're correct in both. It is the logistics center and it was, as we remember, we have hardly nearly forgot this, but it was in January and December when we had quite strict quarantine rules so people were sent home. And then we had to have extra personnel in and that was causing the cost in the warehouses primarily.

But that is sort of behind us now. Okay, so you could still deliver the products, but it cost you more money. It was not a lot of sales.

No,

no, it was not. So we had to bring in a lot of extra people to the warehouses. I see, that's good. So that was the cost. Yeah, I see. Okay, that's clear. And then finally, how should we think about your service organization as a margin driver? As you have now decided to trim that a bit post the pandemic, sales from services are declining year over year. Is that still an important contributor to reach the margin target or should we expect that to come back? When should we expect that to come back?

I think it is an important contributor to the margin target over time. What we see in services is the transition from let's say the old world of selling services to the new world of selling services where we come, where we are transforming, let's say, highly customized service offerings to standardized. And that means that you will basically sell less of time and material from something and you will sell more of standardized managed services. And that in the long term, that is really good for the margin and also really good for the relevance to the customer because us becoming more sticky to the customers with that offering. So I think it's really a margin contributor going forward. But of course, the transition from the old way of doing it to the new is in some cases painful.

Okay, is the market development in favor of standardized managed services at the moment or do you expect that to happen maybe in 2023 and onwards? Is that more of a bet you're taking on the future or something you see right now?

No, we see it right now. And we are doing quite good in that sector but because of the mix that's in within services, it's hard to see it on the total number. From standardized services, we are growing very well. And the more, just to compliment that, the more complex sort of the IT world becomes with the complexity and security and mobility, the more standardized solutions you tend to seek for as a company. Even the most sort of a tailor used CIO is seeking for standardized solutions right now because you need to have that in order to be safe and secure in your networks.

Okay, excellent. That's all from me. Good, thank you, Daniel.

Thank you. Currently we have one further question in the queue. So just as a reminder to participants, if you do wish to ask a question, please dial 01 on your telephone keypad now. And that next question is from the line of Michel-Yves Blassian of Carnegie. Please go ahead, your line is open.

Thank you, good morning. I was just thinking about the central functions cost. How we should sort of model that going forward if you can help us out a bit. It increased quite a lot sequentially here. Should we expect the same level in the coming quarters?

I think the level where we are at the moment with the current activity as we're doing is the level we will see for some time. As you know, I mean, we added central point and we kind of included the central cost of Inchere. That affects the numbers of course from last year. But we are also driving a more aggressive IT agenda at the moment compared to what we did before. Because we believe that that will drive the synergies and integration of central point in a better way. So we are taking costs here that are higher than before. And we'll continue for at least, I would say one to two years because of that, the time it will take to take the whole group up to the cloud-based ERP and CRM platform. So I think you can keep that number is a good number for at least for the next four quarters. Let's start with that.

Okay, all right. And the same, I guess, is relevant for the selling and admin expenses.

Yeah, I don't see that we have any special costs there except for the 16 million of delivery that was in this quarter that is on. So I think that the numbers we have minus the one of the COVID effect in this quarter, it's a pretty, it's

a number we can keep. Okay, there's no seasonality in that or it usually comes down quite a lot in the summer, for example.

Yeah, because of holiday, I think that that's maybe the reason for some of it because activity goes down a little bit during summer and therefore cost is usually a bit lower during that period. But if you take the other, that effect comes in our Q4, I would say, mainly even for an element, you would see that effect in all this problem.

Okay, but in the near term, this level is relevant and where you're operating right now, I guess, around 655 million. Yes, okay. Another question here is on the product mix dynamics. If you can talk to us about that, what is sort of the difference between a week mix in terms of the digital audience and a strong mix? So the spread there and how we should think about this mix going forward, is this something that you see continuing right now that customers are demanding these type of products or how should we model this?

If we start by looking at the variance of the mix, and if you would start by, let's say a gross margin around 16, then you would see PCs and mobile phones being a couple of percentage points below that on average. And you would see accessories and these kind of product groups would be higher in general terms. And also infrastructure is higher, for example. Then, so that would be the product category mix. Then of course, you can add to that the customer mix. So if you're a little bit below on PCs, you would be even more below, let's say, if you sell to a large frame agreement public customer compared to the SMB customers that are relatively good margin also on PCs. So that would affect your mix when it comes to customers. And then you have the third variance that you can talk about, which is the vendor mix. So meaning that if you sell vendors like Apple, you receive less margin percent than you do if you sell HP. So that would be your vendor mix. So all of these three are of course then working at the same

time and all together. So that is a little bit what we have tried to explain in this call and in the report that these are the things that has impacted the numbers for this quarter. So this is an unusually unfortunate mix at the same time in all these different segments.

Yeah, you could say that it's rare that you have all these three moving against you because sometimes, most of the times you would have compensating factors, let's say, within the system. But now this time we got everything positive on volume, but then probably all the factors that could push it margins down was actually on the low side.

Okay, and your margin targets of five to six percent, what type of mix is built into that assumption?

I would say it's a mix that you would take if you take the average of a year. If you go back a year and look at the total effect of what we had for that year, that's what we have based the target on. Not on a specific quarter that can have pluses and minuses. But I think if you take a longer period, that would be the mix. We haven't assumed a change of, let's say, either brands or within the categories,

let's

say.

Yeah, excellent. And here in the near term, do you see that this mix is continuing into Q3 so far?

It's really hard to predict because of the turbulence in the supply chain. But if we get release of some of the larger deliveries, then of course there is always this effect. But on the other hand, there is relatively good margins if we look at the backlog that we have at the moment. So that will compensate positive. So I think it will be, I don't see that any obvious thing that it should continue on a very low level, no.

Okay, and my final question is on the general availability of IT products and how that has changed during 2022 and now in the short term after the invasion, if that shows any effects from that so far during March?

I mean, overall it is a turbulence, of course. And we'll see how it comes up with the effect from the invasion of Ukraine. That sort of disrupts the ways goods travel, whether they go by plane or by train or by boat. And so it creates an overall turmoil. Then what creates right now more is how actually China also will deal with the, they have, as you know, they have a zero vision for Corona and they close down and open up. And that of course affects the deliveries from China. But in general, we are, as we have been on the other quarters, we have been very much on our boat to source and find products and take them into our warehouse and use our model for that. And that has proven to work very well. So we see it as a, probably as it has been during the full pandemic, but now with the extra attention to it, of course, given the invasion. But that is, from this perspective, it's a part of the world that does not disrupt the sort of the traditional value change that much, but it of course disrupts in general. And that is

what, but in the same level as that, we have had before. Okay, can I just follow up with one final? It's on transportation logistics costs. If that is impacting your model in any way or if the distributors or OEM side is taking that?

You could say that, yes, it impacts because prices are very high. We can see it on our own private label. We have, let's say our way of operating that is of course, add that to the price of the customers. But in the times like this, it's sometimes hard to raise your prices fast enough. So there is an inherited, maybe small loss of margin from a time perspective as how fast can you cover up for the increased cost primarily on transport line. But no big impact coming from transportation on our own margin, rather on price to customer. Okay, got it.

Thank you very much.

Thank you. Thank you, Nicky.

Thank you. And we have one further person in the queue. That's Eric Elander of Handelsblanken. Please go ahead. Your line is open.

Oh

yeah,

thank

you. Good morning. So, I mean, it's pretty good though. You've been over 10% organic growth for three quarters in a row. So obviously the demand for your products and services is out there. But now we have the corona situation in China. We have the semiconductors, you know, might be issue or have an issue with the Ukraine-Russia war and you know, the freight or shipment issues that you talked about as well. I mean, how should you look at this? Can you actually continue this organic growth role that you actually are on and have been on for like six quarters or something? I mean, volume-wise, I guess it will be difficult. But on the other hand, if there's great demand, it should be compensated by prices on the same product. Or how should you look at the organic growth potentially in the coming quarters?

I think we, I mean, first, there is, as we said, there is a strong underlying demand, that it is. There is a change in customer behavior that's behind this. And there is also a need for upgrading in terms of systems when it comes to security and mobility, for example. So that we see right now is continuing. And then over to the interesting question regarding pricing and the overall inflation. Of course, as you know, our product is quite, sort of, the pricing is sort of set in the market in a way. But of course, we compensate where we can increase prices wherever we can at all times, using what we've talked about before, our dynamic pricing model. But it is also short-term, as you almost into also, it's of course affected by the share, the mix of between the segments. How much LCP roll-out we have versus how much SMB roll-out we have. So, but we still believe there is a demand. But for us, it's more going forward. I think it's more the balancing between the margin and the growth here that will be even more delicate for us to drive, to continue to find the growth, and which we can do, but also securing that we do it with the right models. So. I also think that, I mean, I think, you know, I mean, again, we haven't changed our view that 8% organic growth over a cycle is the one we are chasing. We had some difficult quarters before the pandemic, and now we've done very good in the last couple of quarters. I think it shows that our 8% on average is not such a bad number, and of course, it will not stay at double digit forever. Okay. So it's a strong period now, and you know, it will, I think, naturally, go a bit up and down in the quarters. But we stick to the 8% growth and 5% to 6% of the data margin.

Yeah. Yeah, because the thing here is that I was just wondering that, I mean, this is my very amateurish, you know, conclusion, but you know, when a lot of people want the product, and the product is not available, the prices on the product should go up. Why say this? It's because, I mean, electronics industry has been on the price decline for a long period of time, but now, since there are more things than ever that need to be done within this industry, and the people realize that, okay, it's not as easy as it was before to get the product due to the corona situation, due to the shipment issues and so on. The same products should go up in prices. That's my conclusion, at least, or what's wrong with that kind of argument?

And that's a good conclusion. If you look at the SMB market, where we are kind of setting the price in the market, and where we are also having better margins than in a long time. So it does affect, actually, our margins in SMB positively, but on the other side, you have the public tenders, and there, unfortunately, supply and demand doesn't affect that much. So there, you don't see the same thing. So under the, and there was the contracts are set, and that has been, of course, challenging with that, the long delivery time. So the contracts are set for the prices, and then we deliver sort of on those prices that were under contract were set, and we still, we don't have any negative effect of the cost for the products, but it's still based on the pricing that we set at the time. So it is more than the old pricing that's

required. Yeah, because somewhat, that's really weird to me. I mean, the public sector can buy like 2000 computers, and you have to buy 2000 computers or somewhere else in the global market in order to get that kind of volume, but then the customer doesn't pay for it. So it means basically that you have negative margins down on these framework agreements, or? No,

no,

no.

In most of the contracts, or basically all contracts where we have a price commitment, that price commitment, we have a -to-back agreement with the manufacturer, or with the brand.

We are

not squeezed.

Okay. Okay. Nice. Then I also have the other question related to your friend or your enemy, or however you like to say it, in Norway. They have been much more severely impacted by the supply chain issues over the past two years than you have been because they sell a lot more servers, for instance, than their clients. What I also saw was that Dustin was one of the providers now for a Swedish framework agreement for selling just servers. How much of your sales is clients versus servers, for instance, and also are you expanding into servers?

To start with, infrastructure, including servers, are a relatively small part of our sales. I mean, clients and associated products to clients are probably five times as big or six times as big, which is, as you rightly say, it's the opposite, probably for or not, but a very different split in our friends in Norway. So that is the difference. That is clear. We are, I would say, not increasing that much in that area. We are increasing a little bit because we are adding functionality to our own platform so it's possible to sell these kind of products, but not rapidly increasing. We are increasing, however, on the, let's say, sauce products of infrastructure because they fit our sales model much better. So we rather sell infrastructure on tap through a sauce arrangement rather than selling the server itself, basically. So we have changed. We are using sauce as a delivery model or cloud as a delivery model rather than selling hardware in that sense.

I like that you call them friends and not enemies. I think that you're a promising sign for humanity, Johan. Thank you. Yeah. Just a last question. I mean, Q2 is actually a kind of high-margin quarter generally for Dustin. And now you've been at 4.2 this quarter. Should we expect you that you could go down below 4 in the coming quarters, given that Q3 and Q4 are generally much weaker than Q1 and Q2? Or how should you look at that?

I think you're right in systematicality. Q2 is normally a strong quarter, and you could see that last year was probably the highest number we've ever posted, a bit affected by the cost reductions coming from COVID. But I think you should normalize this quarter and then look at the future, which means we will come to weaker quarters seasonality-wise, but they will become better from all these mixed issues that we talked about now.

So

I don't see any reason why we should now use this quarter to extrapolate seasonality and end up with a very low number. I don't see that coming.

Okay. Excellent. Thank you very much and have a good day.

Thank you. Thank you, Erik. Thank you. If there are no further questions in the queue at this time, I'll hand back to our speakers through the closing comments.

Very good. Thank you very much, everyone, for listening in. And just reach out if there are any further questions to us, and we will have to respond to that. Apart from that, have a great day and stay safe out there. Thank you.