Aussie Broadband (ASX:ABB) Q4 2026 Earnings Call

0:00 Thank you for standing by, and welcome to the Aussie Broadband Limited FY 'twenty six Results Call. All participants are in listen only mode. There will be a presentation followed by a question and answer session. If you wish to ask a question via the phone, you will need to press the star key followed by the number one on your telephone keypad. If you wish to ask a question via webcast, please enter it into the ask a question box and click submit.

0:25 I would now like to hand the conference over to mister Brian CEO. Please go ahead. Thank you. Good morning, everyone, and welcome to Aussie Broadband's FY twenty six results briefing. My name is Brian Maher, and I am the group chief executive officer of Aussie Broadband. I'd like to start off today by acknowledging the Aboriginal and Torres Strait Islanders as the first Australians and for their role as the original communicators, connectors, scientists, carers of the land reporters across Australia. We pay our respects to elders, past and present, and to all First Nations peoples around the world who have nurtured and sustained their lands, cultures, languages, and communities for countless generations. We honor their deep knowledge systems, resilience, and ongoing contributions to the well-being of our planet.

1:14 I'm joined on the call today by Darren Rollins, our group chief financial officer, who joined us in February. Today is his first results and actions for us, us, and you will hear from him shortly. On page three of our deck, you can see today's agenda. We'll start by going through a quick overview of the year before diving into financials and the performance of our three segments. We will then have a look at our summary and outlook for FY twenty seven before we head into q and a. Before we go to the results in more detail, I just wanted to touch on some of the awards that we've won, which are allowing us to validate how we're tracking towards our ambition to become the telco people love. Let's turn to page four of the deck. Aussie Broadband's reputation is underpinned by the trust that our customers and partners continue to have in us. We've never taken that trust for granted, and our people continue to work hard to ensure we retain it every day.

2:08 This shows in the recognition we've received from third parties. Among our many award wins that you can see, Royal Morgan once again named Aussie Broadband Australia's most trusted telco. This is the fifth year in a row we've held this honor, and we're looking forward to the impending announcement for 2026 and hopefully retaining that title. A first time award for us this year was m Perth's best broadband performance award, which evaluates factors such as download and upload speeds, latency, and streaming experience. Other awards include the Fortinet Australian Partner of the Year, Hotel Care Partner of the Year, and a range of others. The next section on page five has a snapshot of the group. As I mentioned, customer trust and service quality continue to be the bedrock of our business business across the entire group.

2:59 Our customers know the value of our locally based residential service and the premium experience they receive. Owning and operating our own assets like our two tier one voice networks, our expansive Aussie fiber network, and wholesale platforms like carbon and nitrogen give us the added differentiator in the market. Something that you'll hear a lot about from Darren and I today are the best of our diversified go to market approach, enhanced by our strategic transactions over f y twenty six. This means we can place a diverse customer cohorts with a range of offerings to suit different customer needs and having growth opportunities across the Australian communications landscape. And importantly, as you can see at the bottom of the page, all of this is brought to life by our dedicated team of game changers.

3:50 Finally, on the right, there are three key segments that have each played a role in delivering across these areas. We still maintain a challenging mindset in the residential space, combining our growing scale with the same customer focus that has always set Aussie apart. That spirit is also thriving in our business sector. Our reputation in the segment grows every year with our teams winning more clients and expanding our relationship with our existing customers. Same is true for wholesale, where our platforms and product accessibility enable the growth of other challenger brands.

4:25 On page six, we can see the progression of revenue, gross margin, EBITDA, and EBITDA margin. Since 2021, revenue has grown by a compound growth rate of 30% and EBITDA at a rate of 54%. Gross margin has steadily improved over those years, most markedly in FY 2020, following our investments in our fiber infrastructure. Since then, we've held gross margin reasonably well, but the competitive environment is fierce, and this margin is mostly in f y twenty six.

5:00 Over recent years, however, we've seen operating leverage emerge. And despite those gross margin pressures, we increased our EBITDA margin by 1.2 percentage points in the last financial year. This is a trend we are looking to continue. On the right page, you can see our revenue and gross profit by segments and products. Residential continues to be the engine room of the business with 59% of total revenue and 50% of our total gross profit. Our ambition is to continue to grow our market share in residential while growing fast in the other areas to maintain our revenue diversification. The relatively higher GP contribution of voice is also evidenced here. Let's start with an overview of f of FY '26, Rosie, starting with the highlights for the year on paycheck.

5:52 Aussie has had another strong organic year in FY '26 while also executing major strategic strategic transactions and laying solid foundations that will materially benefit our future growth in f y twenty seven and beyond. Our premium token offering continued to attract customers and partners, delivering organic connections growth, strategic customer wins, and strong financial performance despite a competitive market backdrop. We grew revenue while expanding operating leverage, resulting in EBITDA margin expansion and accelerated earnings growth. Importantly, we also completed a number of strategic transactions that materially strengthen our growth platform. The migration of more in tandem and connections and the acquisitions of AGL Telco and NextGen have increased our scale, broadened our customer base, and enhanced our ability to meet the evolving needs of customers across all segments.

6:45 We are part of the way through a step change in scale, which when completed, will have increased our on net connections by over 60% in less than twelve months. We've completed a significant transaction in each of our three segments, providing them with the impetus to drive future organic growth. When I spoke to you this time last year, Aussie's NBN market share was 9.4% excluding satellite. At 30 for June, our combined residential business, enterprise and government, and wholesale connections makes up 12.1% of the NBN market and is still growing, with market share now passing 13% in the last month. This growth has been supplemented by increasing momentum in our mobile services.

7:29 The completion of the largest NBN migration to date adds significant scale and earnings uplift from FY twenty six seven, with approximately 269,000 more in Tangerine services added to our network by June 30. I would like to acknowledge Andy Branson and the team at Moore who have been amazing collaborators in achieving this outcome. The combination of these achievements meant that we reimagine the future for the group and upgraded our Look to '28 ambitions only eight months into the strategic horizon. And our ambition will not stop there as we focus on how we deliver more profitable long term growth beyond FY '28. Turning to page nine for the last year's operational metrics. Looking at our operational metrics, as I mentioned, our market share of all net MBA connections has climbed by 3.7 points to 12.1%, with group broadband connections growing by 323,000 to see us reach over 1,100,000 total broadband connections at the June 30.

8:32 We've had a strong organic start for the new financial year with 11,000 new broadband connections added, excluding connections from AGL or in Tangerine. The ongoing migration of AGL services, which commenced on schedule in July, have supplemented these volumes and we've also seen Aussie Broadband become the third largest NBN provider. This is a milestone we only we originally expected to reach by the end of FY twenty eight, and I'm extremely proud that we've achieved it well ahead of schedule. It's important that I call out our teams for their tireless work in helping us reach this milestone, and I wanna thank them all for helping to grow Aussie Broadband from a regional provider to one of Australia's most trusted telecommunications providers.

9:17 Mobile has had a strong year for Aussie, and mobile services across the group growing by 48,000 to 263,000, up 22%. We successfully launched international mobile roaming and eSIMs recently to our residential and business elite and enterprise and government customers, and both have seen great take up from customers in the last few months. These new features speak to the maturation of our mobile offering as an MVNO, and we expect this momentum to carry forward into FY '27. At June 30, we have the 8,300,000 numbers across our senior and next tier one voice networks with 8,800,000,000 call minutes across domestic networks for the year. Our Aussie fiber network spans 2,058 kilometers and has 1.31 connections per building. As we advised in February, our focus has switched to winning customers within buildings already served by our network, allowing us to allocate capital through higher return initiatives.

10:11 Next, we'll look a little deeper at our strategic growth initiatives launched during the year. Aussie Broadband announced three key growth opportunities in FY twenty six. The acquisition of AGL's telco business, a wholesale services agreement with law, and the acquisition of NextGen. Our AGL migration kicked off at the start of f y twenty seven when the portfolio had 350,000 services across broadband and mobile. This acquisition, when combined with our long term partnership with AGL, provides Aussie with the growth growth potential of access to AGL's 4,200,000 energy customers. We see an earnings upside we see an earnings upside through net service growth and operating leverage over time and have a five year target of 500,000 services.

10:57 I've already discussed completion of the Moore and Tangerine customer migration under our exclusive wholesale services agreement, which added approximately 269,000 services. The partnership provides us with indirect access to the banking sector through the Moore brand as well as the growth potential for Tangerine. Finally, our NextGen acquisition was completed in the second half of f y twenty six. The combination of the businesses has already started to bear fruit with NextGen offering new telephonic capability to our kit bag and enabling improved lead conversion in an encouraging start to FY '27. We also expect to deliver cost synergies over time and earnings growth and margin expansion. These initiatives are also a core part of realizing our look to '28 ambitions, and they will play a play a crucial role in creating further opportunities for adding scale and continuing to expand our brand leverage.

11:49 Together, these three initiatives will create value through a diversified growth model, which broadens our customer reach and product offering and deepens customer exposure across our segments. I'll now hand you over to Darren, who will take you through the key financial figures for the year.

12:06 Thank you, Brian. I just wanted to start by thanking you and the team for the very warm welcome into the business. Also, wanted to give a special shout out to the teams involved in pulling together the reporting suite for today, many of whom I know are listening in on the call. It's a significant effort to pull together the results, and I think they've done an amazing job. If we turn to page 12, you can see here that FY twenty six was another fantastic year for the business, which you can see from the highlights on this page with strong organic momentum across all key financial metrics. While the execution of a number of these strategic transactions kept us very busy operationally,

12:45 their contribution to the FY twenty six earnings was minimal. We will see those financial impacts flow through into FY twenty seven. FY twenty six demonstrates the quality of the growth that we are delivering. Organic growth across all three operating segments translated into 25.8% growth in both underlying NPAT a and EPSA, materially outpacing the revenue growth. Importantly, those earnings are converting into cash. Operating cash flow increased 42.5% to 167,000,000, strengthening our financial flexibility and supporting investment in growth, shareholder returns and future strategic opportunities. Will turn now to the group's underlying p and l on page 13.

13:33 So the underlying p and l removed some of the noise caused by the strategic transactions and the associated one off p and l impacts. But as you can see, the underlying business performed extremely well with organic revenue growth translating into a 42% uplift in underlying profit after tax and a 26% increase in earnings per share. As Brian mentioned, the competitive environment and significant promotional activity in the residential and business markets have had an impact on our gross margin percentage year on year, but this has been

14:05 more than offset by cost control and the emerging operating leverage, which has resulted in a 1.2 percentage point increase in our EBITDA margin to 12.8%. On page 14, we'll take a look at what's driving the underlying EBITDA growth.

14:23 As you can see on the bridge on the right, the earnings uplift for FY '26 was largely an organic story with 9% increase in broadband connections and a 22% increase in mobile services contributing to a 19.6% increase in underlying EBITDA. As I mentioned earlier, there was minimal net earnings contribution from our strategic transactions in FY twenty six with positive contribution from NextGen and more, offset by divestments of Digital Sense and Buddy Telco. There was also some one off network cost to expand network capacity in advance of the More and AGL migrations. Overwhelmingly, though, FY twenty six was a story of organic growth with a significant uplift in EBITDA attributable to revenue growth from new and existing customers and gains in productivity and operating leverage.

15:17 If we just turn to page 15 now for a look at the CapEx investment. Capital expenditures for the year totaled 59,000,000, which was at the top end of our guidance range consistent with the update we put out in June Due to the timing of spending and some pricing pressures around network equipment, we finished at the upper end of the range. During the year, we announced the shift in our farther strategy to focus on maximizing on net connections and winning customers in buildings that are already on our network. This shift was made to improve return on capital already invested in our fiber network, but also to allocate capital towards the modernization and simplification of our core technology system, which have been shaped by multiple acquisitions over many years.

16:03 This includes the replacement of life cycle legacy systems and hardware, as you can see in some of the capital allocation on the chart on the right.

16:14 During FY '26, we continue to invest in the enablement platforms that are supporting our scaled and multichannel growth. These platforms are helping us expand existing customer volumes and onboarding new volumes across broadband and mobile services.

16:29 We also invested in our people experience with new office spaces in Regional Victoria and Perth reinforcing our commitment to our team so that they can continue to provide the high quality service that our customers have become accustomed to. We'll now move to our cash flow and balance sheet on the next page. As I mentioned earlier, the increase in operating cash flow is driven by organic growth and margin expansion. The increased EBITDA is translating into a strong improvement in our operating cash flow, which has increased 42.5 to 167,000,000. The strong cash generation underpins capital management flexibility and strategic optionality. Our debt facility was renegotiated during the year, maintaining the current facility size, but with improving margins, tenor and turns.

17:20 We'd like to thank our banking partners, Bernard, CBA, ANZ and Westpac for their commitment to our business and support of our Look to 28 strategy. Our net leverage ratio of 0.9 times provides flexibility to execute with capacity for future growth. Let's go over the page, and we'll take a bit more of a look at capital management.

17:45 The disciplined approach to capital management continued in FY twenty six with no material changes to our capital management strategy. One small change we'd like to note is we've changed our leverage ratio tolerance to be up to 2.5 x, dropping the bottom end of the range. This is just to provide clarity about where we expect to operate going forward.

18:09 The increase in NPATA and operating cash flow enabled the acquisition of NextGen to be funded predominantly from operating cash flow. We were also able to increase our returns to shareholders with a 50% increase in our ordinary dividend, which is fully franked, as well as announcing today an on market share buyback of up to $115,000,000, which reflects the confidence we have in Aussie's outlook and balance sheet strength. I'll now hand back to Brian. He's gonna go into the performance of our segments in a little bit more detail. Thanks, Darren. We're now on page 19. Residential continues to be the volume and revenue driver for our business, and f y twenty six was another strong year of organic growth with a 12.4% increase in revenue to $760,000,000.

18:57 Broadband connections were the primary driver of that result, which saw a 6% uptick in subscribers. We've also seen some revenue expansion as more customers begin to adopt the new high speed plans that were introduced under NBN's Accelerate Credit program.

19:11 Residential broadband business is ably supported by mobile multiproduct strategy, which is starting to scale. We now have 95,800 total mobile services in operation in residential, up from 72,000 months 100 prior year, a 33% increase. Our expanded partnership with Optus has really enabled Aussie to start delivering a true premium type service, backed by our recent launch of the international mobile roaming and ASINs for residential for business users.

19:39 Our gross margin grew by 10.2% to 234,700,000, although our gross margin percentage declined in part due to our July 2025 pricing strategy ahead of accelerate growth and as our residential customer mix has shifted more towards the highly competitive high speed tiers. The low gross margin would match in productivity gains that contributed to the delivery of improved group EBITDA margin. Our customer retention over the year has also been strong with our year on year relative churn rates remaining stable despite intense market competition.

20:14 On the next page, we look at business enterprise and government. Revenue in this segment grew by 12.4% to $237,800,000. That growth reflects the reputation of bills as trusted telco partners in medium and large organizations across Australia, and the confidence customers are increasingly placing Aussie Broadband to support more complex and critical communication needs.

20:38 We continue to win new customers while also growing with existing customers as their requirements expand across connectivity, networks, voice, and managed network. At the same time, we're seeing continued demand from small businesses for high speed broadband and bundled services. For us, the opportunity is clear. Earn the trust to win, deliver the experience to stay, and build the capability to grow with our customers over time. On page 21, we look at our wholesale segment. This segment saw a 9.4% increase in revenue to $297,300,000, backed by growth in data and mobile. A key milestone from the year was the migration of more of Sandra and customer connections, which we completed in June through our nitrogen enablement platform.

21:24 We expect to see a full year contribution from that migration in FY '27.

21:29 Mobile also had a strong year with 18,000 net additions through strong retention of our existing customers and some new wins. We also maintained our position in the voice market despite some intense market competition.

21:43 On page 22, we'll talk about some of the outlook for the road ahead. And it's '23. Well, I've covered most of what is on this slide previously. Think it's important to reiterate what we're working towards beyond FY twenty six now that we've executed our strategic transactions and upgraded our look to ensure ambitions. At a high level, our overarching ambition remains to change the game and be the self care people love. In February, just eight months into the strategic period, we upgraded our ambitions as per the slide as it became apparent we would achieve our original ambitions early. We are focused on strengthening our market position, expanding scale, and delivering accelerating returns. As I've said, FY twenty six was a big year. We positioned ourselves strongly to grow to accelerate growth, continue our organic growth story, and conclude significant transactions to create growth platforms across all three segments.

22:38 With the foundation for f y twenty six firmly in place, the focus for f y twenty seven now shifts from executing transactions to realizing their benefits as we leverage increasing scale, broaden customer acquisition channels, and strengthen capabilities to drive continued organic growth. The aim is to be delivering a full year effect of all these early initiatives earlier initiatives in FY twenty eight, with scale driving further efficiencies, the realization of the opportunities presented by the recent transactions, seeing those improved margins from productivity initiatives and ultimately delivering on our ambition. As Aussie has grown, our technology has grown with us, and we touch on this on page 24. In FY '26, we started to lay the foundation for simplifying our technology stack for the years to come.

23:25 This is a program that will span across the next few years. We've already laid the road map, defined our future state, and established a government framework to get there. And we've already begun modernizing our operational support systems or OSS, which will improve the operation of our network, inventory management, and network orchestration.

23:43 By the end of FY twenty seven, we will establish that network orchestration and inventory capability. We will have completed a detailed design architecture for our future business support systems, while our new OSS systems will have undergone testing and operational readiness. The spending for this body of work is already factored into our forecast guidance range.

24:03 By FY twenty eight, we are delivering our new business support systems or BSS, which will modernize our customer product sales and support platforms. This will allow us to simplify our sales, support, product, and customer journeys, giving us the ability to launch and manage products at even greater scale and pace. For FY '29, that foundational work will provide even greater returns. Our staff will have less manual work by removing some of the complexity from our legacy platforms. Having a simple product and support journeys will allow Aussie to provide an even better customer experience while launching products faster than before. And the business will also have the flexibility to enable future growth and acquisitions because of the disciplined platform that we've built.

24:46 We also want to stress that our margin ambitions for our look to '28 strategy are not dependent on this modernization program, but the true benefits of this work to be delivered from FY '29 onwards. One piece of that platform will be AI. Let's turn to page '29 for what that looks like at Aussie.

25:05 There is a lot of excitement in hyper end AI and automation. At Aussie, we've used automation very successfully over a number of years across our networks and customer journeys. So we're excited to implement AI while managing the operational and brand risks. In the short term, our priorities are to organize our data and to grow our AI capabilities across the business through broad based literacy and specialist experience. We will also continue to leverage existing pilot programs to firm up target use cases that have clear customer, operational, and financial benefits. As we have on our Investor Day last year, our aim is to evolve our digital tools and the digital experience to be equal partners to our in person customer experience. As part of that, we've embarked on some pilots across the business to find better ways in which we can empower our people, systems, and services through different applications of AI.

25:55 In our customer call center, we've been able to improve engagement with our customers by leveraging AI to improve the performance of our customer facing service tech. It's early days, but we are excited about the opportunities. We've also embedded some AI capabilities into our observability stack, which allows us to better identify early warning signs for issues with network performance or consistency. Addition, our developers have been able to accelerate the delivery of core products for our AGL project through the use of AI assisted development. We want to continue improving the quality and productivity of our service, the efficiency of our business, productivity, insights in our operations with our with AI. But only when it makes sense and whether the whether it's clear human oversight and accountability.

26:40 This will be an ongoing body of work that will apply across our business. AI is part of our journey to delivering leverage, which we consider further on page 26. In FY '26, we surpassed our original look to '28 ambitions with 12.5% EBITDA margin by achieving 12.8. As this slide shows, initially, the new AGL acquisition has a dilutive effect on EBITDA margin represented here on a full year pro form a basis for FY '26. We see opportunities to improve the performance of the AGL portfolio itself through reduced churn and improved cross sell, as well as business wide productivity initiatives and a lower unit cost to serve from our network scale. Beyond AGL and following the execution of all of our strategic transactions, we've laid the foundations to grow our operating leverage and achieve our operating ambition for FY '28 of 13.5% EBITDA margin with potential further gains beyond that time frame.

27:40 Let's now take a look at our guidance for the year ahead and the work we've already completed in FY '27. Underlying momentum across all our major metrics for FY '27 is positive. The business is on track for an underlying EBITDA range of 205 to 215,000,000, representing growth of 24% to 30% on the prior year. You can see from the bridge on the right that next year's growth is a mix of continued organic growth and the impact of the strategic transactions completed in FY twenty six, which include a full year for more Tangerine and and NexGen and a part year impact for HL, and net of the impact of the divestment of Buddy and the DualSense. We've already added around 11,000 net broadband connections since 07/01/2026, with more than 7,000 of those coming from our residential segment, excluding AGL telco.

28:32 We anticipate the AGL telco migration will be fully complete in the second quarter of FY twenty seven. Today, we have a 116,000 AGL broadband connections on our network, and the completion of that migration and our continued organic growth means we expect to have more than 1,300,000 connections on our network in q two FY twenty seven. Our mobile product continues to evolve as well, and we expect continued growth from mobile throughout 2027. On to page 28. And in summary, FY twenty six was a year a year of portfolio reshaping with strategic transactions delivered that are core to realizing our upgraded look to structure ambitions and represent a significant step in the evolution of the group.

29:18 Underlying momentum remains positive across all of our three segments with continuing organic growth in residential and momentum building in mobile. AGL telco, once migrated, will also provide us platform for future residential growth. The business, enterprise, and government, we had a strong year. Key enterprise wins have grown our customer base, and existing customer relationships have been expanded. We have an encouraging opportunity pipeline as we continue to build our reputation as a trusted connectivity partner. On the wholesale front, our enablement platforms like NICEGEN allows to scale growth across products, enabling existing and new clients in the space and further building on our portfolio diversification. FY twenty seven will be underpinned by delivering continued organic growth, completing the migration of AG of Telco, and realizing the opportunities from our strategic transactions.

30:10 It's an exciting year ahead, and we're starting very well. I'd like to close by once again thanking our amazing team. Completing four material transactions in six months while simultaneously executing the largest migration of connections on the NBN network to date is simply exceptional. The credit, as always, belongs entirely to our amazing people here at Aussie. Thank you for your time, and thank you for our shareholders for your continued support, and we're now available to take your questions. Thank you. If you wish to ask a question via the phone, you will need to press the star key followed by the number one on your telephone keypad. If you wish to ask a question via the webcast, please type your question into the ask a question box. In the interest of time, we do ask that you please limit your questions to two and rejoin the queue if you have any further questions.

31:02 Your first telephone question comes from Jonathan Higgins with United Capital Partners. Hi, guys. Thanks for taking the time today. Great set of results here by '26. My first one, just in regards to the year to date trading, just I mean, it sort of looks like it's it's, you know, you started the year, obviously, well there on year to date trading. Was wondering if can just provide some context there. I mean, is that something that you think you can continue to to deliver? Is it been a bit patchy sort of around the price rises? It sort of looks like it's been pretty rational around that period. Just any overarching thoughts that you have there, firstly. Thanks, Jono. Yeah. So I think we you'd be able to see some of the the June the June quarter was pretty tough with the price rises going through, and obviously, that intense market competition.

31:52 The when we compare our churn experience year on year, we we've actually increased more prices this year than last year, but but the the churn rate is is very relatively consistent with last year. So so that that was encouraging. The we started the year well. We've we've we've had a look at sort of mix of our marketing spend, if you like, looking at you know, we've done well over the last years in building our brand. You know, we've got very, very high brand recognition now. So we've we've sort of reconfiguring some of that marketing expenses to sort of ease off on the brand spend a bit. It will be what we what we turn performance marketing, which we're seeing good results in so far this year. So, you know, we we remain active in the market, keep monitoring the market, keep doing what we can to continue our growth.

32:41 Understand. I mean, the second question is around the FY twenty eight target. So you presented sort of a consolidated earnings number with the acquisitions and movements you've done on the wholesale front and sort of various moving parts that you've had with a few things there. Sort of implies efficiencies or price and margins, what's all such to get there. I mean, I'm certain none of those targets here. I think most of the market isn't. Can you just sort of talk towards the leaders that you you are looking to pull and maybe perhaps your confidence on those 28 targets at the any level? Yes. You know, with the strategic ambitions, by by their nature, We we're still very optimistic that we think we can get there. We we can see avenues for for organic growth. We can see opportunities in the wholesale business space that, you know, potentially can add add some revenue and and and margin.

33:33 We think we've got a way to go on our leverage journey as well. We've got a number of projects in trying to to to focus on productivity and efficiency in our business, and and and part of that journey will be with how AI helps us along the way as well. So so we we see, you know, it's a combination of top line and cost management and and and and continuing the journey we're already on. I think we've shown good progress, and we, you know, we we remain optimistic about our ambition. Thanks for that. Your next question comes from Andrew Rakowski with E and P. Hi, Brian. Hi, Darren. Andrew. So my third question is also I mean, it's sort of related to near term trading.

34:20 But more specifically, you've put through price increases of the one hundred and five hundred plans whereas a lot of other operators haven't so can you perhaps talk us through the rationale for that increase and where do you think this will impact your stocks, like, near term? Or in fact, given you said, churn is stabilizing. Do think that's something that the market can absorb quite easily? I've got another one to back out what I've suggested this one. Sure. Sure. I mean, the the the trial center is just that the rest of the price increases in the end for their prices up and the the the the the cost involved there that's you know, with all the industry have to wear and and we we decide to pass some of that on through through price increases. More broadly, in terms of the market itself, we we we, you know, we as said, churn didn't we we churn rate was pretty similar to prior year. So, you know, yes, churn is always elevated during that period.

35:20 But it was not more elevated than than than previous years. And we started the we started the year strongly. So, you know, we ultimately, we we we've got to either either well, both of these. Exactly. We we really gotta get our pricing right and or drive cost out of and become more productive over time. And our aim is that we can grow revenue faster than we can grow our OpEx line. So and and even and even faster again than than any squeeze on gross margin over time. So, you know, I think when you look at some of the pricing in the market, it's it's essentially a wholesale process that that makes life very, difficult for everybody. Okay. Got it. That's that's good color. And I've got a question around the rationale behind the buyback announcement.

36:09 So whether we should really input that there's less focus on acquisition activity and greater focus on capital returns. I wonder if it simply means I I think we would like to update it to leverage comfort range. And as part of that answer, I know in the past you said that you looked at 28 ambitions to start factoring any further acquisitions, if you can confirm that that's still the case. Thank you. Hi, Andrew. It's Darren here. I might jump in on this one. So I'll answer the last part first, which is yes. The upgraded ambitions don't factor in any further acquisitions. But following on from that, it's not to say that we wanna look at further acquisitions. We will, but that would be incremental.

36:55 The rationale for the buyback really is we we have had, obviously, a very busy period on the transaction front. There's an element of work to do to integrate those transactions into the business, and we don't have any particular additional transactions imminent at the moment. So adding to that, the significant improvement in cash generation in the business gave us the opportunity to announce the buyback without increasing leverage too much. I mean, because the buyback will be completed over the next twelve months, it will be largely funded from operating cash flow in FY '27, so the leverage ratio won't really move too much. The tweak to leverage ratio was really just to, I guess, send a signal that we don't intend to gear up just to get within the range.

37:44 The top end of the range is exactly where it was before, and we'll operate somewhere below that going forward. Okay. Got it. Thank you. So our next question comes from Suraj Ahmed with Citi. Sorry. Morning, Brian and Darren. Just just the first first question, a two part question. Just just on the four key performance, can you just touch on me? Because it's like you said, churn being stable, but ARPU has come down and and it has a slower rate. Just just keep you understand, does that just mean the back book you had to give a pricing to keep to keep those customers? Is that is that what you saw? And the second part to that, in terms of the start to the year, 11 k is down from 12 k in in the last year, but you know, Wendy is doing well. So there's the other part that's not doing as well. And I can also and I can also see that wholesales are down year to date. Can you just clarify that as well?

38:43 Thanks. Questions, but I don't think I was just checking out all of meeting. So I'll take one first. I think your numbers are are wrong. At the same time last year, we reached a 12,000 or 20,000 ads. But, importantly, that 12 that 12,000 includes 2,000 from Buddy, which we we don't have. So so the excluding Buddy, the equivalent number last year was 10,000 and this year is 11,000. Okay. With respect to wholesale, going backwards, I think what we've talked about there is that that more and more in Tangerina have faced some headwinds with migration charges and not charge. During my last year, you do get the kind of added churn. They also put prices up on 500 like us, so they pay for a small churn. But also the questions for for more intangering for them, not for us. But that's that's the impact in in in wholesale.

39:41 I didn't quite understand your first question, So could you recap that, please? Yeah. Just trying to understand that the slowdown in the ARPU decline and or ARPU gross margin sorry. Gross margin decline in the second half. Right? So are you sort of saying that market is competitive, which is a higher speed tier, so you're just sort sort of just do some discounting to keep your existing customers. Is is that what you saw in the second half? Right. So so the the the the margin on the slower speed is is slightly higher than the margin on higher speed. We got proportionally more people on higher speed that impacts on the average margin, albeit increases the dollar margin. Mhmm. And then and, yes, and and and promo activity in the front book also impacts on that margin as well. So so just to clarify, so we just assume that similar trends continue to 27 into the That's third question, but but the market remains tough.

40:37 Okay. Alright. Thanks. Thank you. Your next question comes from Liam Robertson with Jarden. Oh, thanks. Good morning. Hi, guys. Just one, firstly, on OpEx. I mean, good results for the year, only up sort of 1%, you know, if I compare that to inflation, obviously, doing a really good job. I guess over the next couple of years, sounds like you've got a number of ways that you're just probably talking to AI adoption, but then also the tech modernization, which sounds like it's an FY '29 story. But I I guess I just in the absence of that, if I look at your card, it sort of means that you'll be able to keep OpEx flat year on year or roughly flat year on year into '27.

41:24 And then I I guess I was just wondering as part of the '28 ambition, do think you can actually see OpEx decline year on year into '28 without the benefits of tech modernization? Thanks. So when you say OpEx decline, you mean in dollar terms or in percentage terms? In absolute dollar terms. On an automatic basis, obviously. Yeah. Yeah. So that that that feels stretchy to go back with the absolute dollar. You know, we've got library creatures and and those sorts of things. We we do think we can get leverage. I mean, the OpEx lines will increase at a slower rate than than than revenue. But but I don't remember the front of but I'm I'm just surprised if if going back with the absolute dollars is is general given the scale of the revenue we're adding.

42:18 If you think about the connection we're adding, we're still another 100,000 or so. AGL connections together will require servicing from from from customer service and things like that. So so so I think that that feels a stretch, but we do think we can get OpEx as a percentage of revenue down over time. Was the first part of the question I missed there, I think? No. No. That's alright. I guess my second part just can do task by even to in your notes in your 27 bridge, you're still pulling out the full 3,000,000 impact from the a triple c mortgage determination. Has there been anything you're able to do, I guess, to mitigate that? There is a market because I'm just conscious into '28 with how you previously announced you're expecting that impact to double to sort of 6 mils.

43:04 So can you just talk to some of the the mitigants that you've been able to potentially pass those? Yeah. I think if you go back to the an actual night on that, that was the that was after mitigants with the 3,000,000. So we're still holding that we have mitigated it to get to the 3,000,000. So there's there's no change to those numbers. I know. Right. Thank you. Thanks, ma'am. Your next question comes from Annie Zu with Baron Joey. Good morning, Brian and Darren. My first question is, could you talk us through what sort of spread the gross margins you're assuming in the FY '27 guidance? There's quite a few moving parts of your $15 per month during on at the moment and price increases you put during July and also continued scale with benefits. So can we assume broadly the same gross margins as in FY '26, or have you conservatively assumed a little lower than that?

43:58 I'm not we're I'm not gonna guide on individual line items or I mean, I'm paying out. We're giving you even drag ons. I'll just sort of reiterate which is market is tough. There's there's a trajectory there that you've seen over the rest of the years across the industry in terms of margins. You know, we we we we would hope that the pricing rationality returns at some point, but it it there's no no sign of it currently. Okay. Thank you. And my second question on Moore and Tangerine. So you seem pretty confident in a return to growth in the second quarter. Just wondering if this is purely based on migration, just disruption passing, or are there about specific initiatives or primaries?

44:43 And does that include end of the marketing and customer acquisition that that you've previously called out? So great question for more if you're going more. But the discussions I've I've had with them is that the the the the the the most experience has been a sort of the perfect storm of migration, price increases between that 500 product and and a very competitive front book market as well. So so that's that's that's what's impacting the short term. They have I think they did last week announce a new initiative with CBA around yellow points. And so I think there's a few things in in there is happening for them that that they're they're encouraged by in terms of their future growth.

45:32 But but, ultimately, I'm not here to talk on behalf of them, and the questions for them should should be addressed to them. Okay. Thank you very much. Your next question comes from Evan Kratzis with Jefferies. Can I just take your so I take your 2H EBITDA that you've delivered, the 90.6, just annualize that? Was that sort of 181 mil? We add in ABB, 10 mil, more Tangerine, that's 12 mil. Next gen contribution probably offset by, you know, I should proceed, digital spend, take off the the two mil for one one off costs. I guess that's a bit of a sort of starting point of $2.00 5,000,000.

46:18 You you've given some targets from January 27, which looks pretty healthy. Guess the question is, is there anything I've missed there in my math or or wrong in my math that I need to be taking into account till I find '27. Hopefully, that'll make sense then. It's Darren here, mate. Broadly, that'll make sense. I'll probably have to pick up the individual math offline. I'm just trying to do that on the fly there, but, yeah, nothing really stood out there to cause us concern. Okay. Alright. So it sounds like a pretty good starting point as we get to 27. Alright. And then just second question, I might have missed this in a in a bit, but the metric the metric you guys have been speaking to was the the frontline staff to connections and the improvements you were doing there. I think it was up 14% in in the first half. Any sort of color you can run on where that is now and and just if you still see further opportunities over the next, you know, twelve, twenty four months to continue to optimize and maintain the, you know, the total growth rate should be delivered in in that. Yeah.

47:21 Not not not the best period to talk about that metric particularly because we have the preparations for AGL. So we brought some staff on that we need to train ahead of AGL coming on. So the the the metric got a bit noisy because of that, but the underlying trend is still positive. Yeah. Okay. Alright. Fair enough. Thanks. Yep. Your next question comes from William Park with UBS. Good morning, Brian and Darren, and thanks for taking my question. Just a question on AGL Pro Pro. I mean, appreciate that you've provided some color around, I guess, the EBITDA margin for for that business. Is it fair to assume with all these initiatives and operating leverage and, you know, improving, you know, unit cost to serve and so forth with this particular telco, can you just give us a feel on, I guess, the improvement trajectory that you're sort of internally factoring in for that business? Do you expect that to mirror the group level.

48:29 I just, you know, just wanted to kind of get your thoughts on how you're thinking about that that pathway improvement pathway, please. Yeah. Not not gonna probably we're still planning our business in in in detail. But I think we we I think over the half of which we made in Nashville, we talked about this. Some of the some of the initiatives, it's really incremental over time. Some of the we're gonna turn it around overnight, but some of the AGR pricing is very low in market. And and so we think the the scope was over time to gradually increment up back to a more more normal pricing level over time. So that will that will add some margin to it. We think we can probably get some improved churn metrics in that business as well, but that will help. And then and then over the other more operating model that we're running in the half the where we we're not running a separate business for AGL.

49:21 We're we're it's it's like the same service model that's being delivered across both. So whatever we do to help the whole business will will will help with the AGL business. But, ultimately, AGL will become a brand within the residential segments, and we'll and we'll we'll deal with it as a as a a a whole segment up to a brand. Thank you. And just across the industry, clearly, there's some headwinds that would affect some of the cost items that's coming through on a on a regulatory side and, obviously, credit cost surcharges and so forth. Can you just step through how you're sort of thinking about that in the context of excuse me. In the context of, I guess, the cost out or or OpEx as a percentage of revenue kind of declining and how how you're sort of thinking about absorbing those costs and and how that sort of flows through to to margins? Just just any speed you could provide will be appreciated. Thank you. Sure.

50:19 One easy one I can cover off is the credit card surcharges. We've always absorbed those. That has that has no impact on us. The in terms of regulation, yes, it's becoming more and more onerous. That's another benefit of our scale. It'll become harder for some of the smaller players, I think, in in this space. But as we're getting bigger, we're we're, you better able to to sort of absorb some of those costs. But it is difficult. There's no question. The industry as a whole, I think, is is is under some pressure. You know, we're we're relatively well placed in in that regard, but I I won't pretend it's it's gonna be any better. I'm not gonna put numbers on it. Thank you. And my apologies in advance because I'm gonna ask you a numbers based question. But business enterprise and government, obviously, half and half margins step back. You've been talking to you sort of talked to, I guess, the competition and and some of the lower margin social business mix there.

51:24 Just just, you know, comment on how you're seeing sort of the margin should get through from second half levels. Is it is it fair to say that that should be sort of a floor that we should be thinking about, an improvement from here on? Or or are there, you know, you know, additional sort of headwinds that that we should be factoring in? Thank you. Yeah. It's a complicated market, that one, because it's so diverse, and and every heel is obviously bespoke for each particular client. So it is a little bit difficult to say exactly where margins are gonna go going forward, and certainly, I'd be low to ever call a floor. But in terms of the strategy itself, you know, going in broadband led as, I guess, a way to open the door and then seeing ourselves the opportunity to on sell the additional services, that is the strategy and that may result in margins being different to what has been reported in the past.

52:20 The shift though is really around a focus on return on capital in that business. So if the gross margin itself is slightly lower, but it adds incremental return on capital in a dollar's term, then certainly, those are the sorts of deals that we'll be happy to look at. Maybe other part of that that segment. Thank you. That sort of two other questions. Wanted to know A and J, which is what Darren said earlier, but small business side, which is is sort of more keen to residential in some ways and faces the same pricing and margin pressures of the residential there. So it just depends on the mix. The I mean, ultimately, like, well, if if we're growing new business business fast, then we can we can then the growth in upsell, then the margin will be slightly diluted.

53:08 If if and when that changes, we have to do and we manage to grow upsell quicker than new business, then the margin should improve. Thanks very much. Your next question comes from Ian Monroe with Ord Minute. Thanks, Brian and Darren, for taking my questions. Yeah. First one is just on that business enterprise segment. I just noted sort of momentum heading into FY '27. Perhaps just elaborate a little bit around existing customers that are, you know, gonna contribute for the full twelve months of of '27. Perhaps just trying trying to get a sense of the back book of of new customer growth that you're carrying to start start to log within.

53:56 You also noted that that that the tender opportunities that that are out there. Just trying to get a sense of, you know, whether whether any of that can contribute to to this financial year as well. Thanks. And I I don't I don't have give me any of the data on how much, you know, how much sold revenue there that hasn't been provisioned yet. I don't I have that data. I know it's really healthy. Although, we've been doing a lot of work on actually speeding up the the gap between sale and and provisioning. We still have some some ground to go there. But the the pipeline is comparatively healthy for new business. But I the little bills we're working on, we haven't won yet. That that that looks healthy compared to previous years.

54:42 But as you know, because we've talked about many times, it's it's sometimes these deals take take quite a while to land. We have we've we've had quite a good succession increasing the services on on deals we've already signed. So when when I would expand it, all the services we we provide to to Bunnings, for example, and to some of those existing so some of those deals are are sort of yielding that result of the shared, which is you go in broadband, you go out, and then you try and sell voice and you kind of and that is happening. But it's a lot of growth on the front front book is is faster, therefore, we end up with this margin pressure. Just the second question, I guess, a little bit more broader, but as a management team, okay, are you saying the, okay, diversity of of revenue and earnings across the segments?

55:31 There's kind of ready, obviously, got ideal, more more tendering. We've got business with NextGen in it now. And then, yeah, Symbio. So, you know, no one sort of segment in operation can sort of materially, you know, reducing increase the the overall trajectory of of your guidance. But just interested in how you're trying to think that diversity and also, you know, whether there's any kind of glaring gaps that you you're focused on. Thank you. Yeah. I mean, it's interesting when you when you're less diversified, but everything's going really, really well. You you're pretty happy. But when you got the portfolio, it's something doesn't quite go so well. You know it's going as well, you get to get a bounce of it. So it's it's an interesting sort of environment to be in where, you know, to to to shape up to everywhere is is is would be would be rare. But what we've done in the last year so we've given each of our segments some more interesting wholesale. So we've got more in there. We've got Adrian in Resi, and we've got NextGen in in in the they've all got and everybody comes shining their tools to play with.

56:44 But but give them really good chances to to to go further and and and diversify revenue. So we we you know, obviously, there's a deliberate strategy, so we're pretty happy we've got this diversification. Now I just try and get them all singing and dancing to the the same lights so we we can really accelerate growth into the future. Thanks a Your next question comes from Benjamin Jones with JPMorgan. Just a question, because we've seen the declines post migration in subs on more in tangerine. Just curious what you're expecting to see from the AGL book when we go through that migration process in the next couple of quarters.

57:30 Yeah. I think you see that in every migration. So I think when when Origin is migrating off, The peak we had them out was one fifty. I think it ends up being about one thirty at my grade off. So we hope to be we hope it wouldn't be as as bigger full off as that. There will be a there will be a full off. We're we're also in this period just because we've got a lot of new customers coming on board and a lot going on. We're we're we're not going with AGL. We're going super hard on sales in in this period. So that that makes it a little bit harder, but we're we're in the middle of sort of discussions with them about, you know, what happens post migration, one of the one of the campaigns we're gonna run to start to boost that growth in the future. In in many ways, the the way I think about it is, yes, we're trying to minimize short term pain as much much as we can, but this is a forever relationship we have. It's a very long term relationship, so what happens in the next few months isn't gonna define the future of this business.

58:27 Yep. And so firstly, that would've been factored in when you gave us initial guide on on AGL. We yeah. We have not we've not we've not changed. We've not indicated anything to market about different different financial expectations yet. Got And just just a a broader question of I mean, as a function of the price changes we've seen versus, like, the the oil price changes versus the market. Right. Are you expecting any change in the composition of growth ads in the booking and just like and then potentially, pure growth ads at that 500 tier, maybe more growth elsewhere? How how do you expect that would would play out? Well, we we we you know, we're having spec ads in at any speed. 500 is is is the main game, though, that it kind of it's a that's I mean, in in many instances, 50 is no longer on websites.

59:18 So it's a big gap between twenty five and five hundred. So I I believe, you know, 500 will remain the principal driver of growth. 500 and above, should I? That's very helpful. Thanks for the thanks for the call. Thanks. And that is all the time we have for questions today. I'll now hand back to mister Ma for closing remarks. Thank you. Thank you all very much for joining us today. We're very, very pleased and happy with our results for FY '26 and very, very excited about FY '27 and even more excited about our ambition for FY '28 beyond and looking forward to delivering fantastic outcomes for our shareholders. Thank you.