Release Date: August 21, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Superloop Ltd (ASX:SLC, Financial) achieved a record year with 30% year-on-year revenue growth, reaching over $420 million.
- The company saw a significant increase in customer numbers, growing by almost 24% to 455,000 customers.
- Underlying EBITDA grew by 45.2% to $54.3 million, surpassing the top end of their guidance.
- Free cash flow increased by 26% to over $29 million, demonstrating strong cash generation capabilities.
- Superloop Ltd (ASX:SLC) signed milestone contracts with AGL and Origin Energy, expected to contribute materially to earnings from FY25.
Negative Points
- Despite strong revenue growth, Superloop Ltd (ASX:SLC) still reported an overall bottom-line loss.
- The business segment experienced a weaker second half due to lower project revenue and partial insourcing by a large Wi-Fi customer.
- Gross margin percentage decreased by 1.3% compared to FY23, primarily due to the increased contribution of the consumer segment.
- Operating expenses increased by 15.9%, driven largely by a 29.4% increase in marketing investment.
- The company anticipates a one-off reduction in cash conversion in the first half of FY25 due to working capital requirements from the Origin contracts.
Q & A Highlights
Q: Can you reconcile the difference between Origin's ambition to reach 600,000 broadband customers by FY26 and the growth hurdles for them to achieve the maximum of $30 million in Superloop shares at 450,000 customers?
A: There isn't a difference in those numbers. Origin's customer numbers and ambitions are their own. The maximum equity contribution is achieved if they hit 450,000 subscribers, as communicated at the time of the contract signing.
Q: Will Origin's run rate accelerate now that they are fully onto the Superloop platform?
A: We are happy with the contract structure and the win-win incentives it sets out. However, Origin's plans are their own to communicate.
Q: How do you view the growth runway for consumer broadband, given that the top four players still have 80% market share?
A: We believe there is still a long runway for challengers to take share from incumbents. The collective market share of challengers is around 18.5%, and we see potential for this to grow to 30% or more, driven by better products, value, and performance.
Q: Can you provide more details on the extra CapEx in FY25, such as timing and return profiles?
A: The CapEx profile is similar to that of Opticomm or Unity-style deals, with a mix of multi-dwelling units and Broadacre lots affecting the cost per premise.
Q: What is the direction of OpEx into FY25? Can we take second-half '24 OpEx as a baseline?
A: Second-half '24 OpEx was refined through leveraging offshore resources. Moving into FY25, there will be normal salary adjustments in September, but overall, OpEx should remain fairly stable.
Q: How has the entry of a new challenger brand affected the competitive landscape and your customer acquisition costs?
A: The megatrend of challengers taking share from incumbents continues. While competition has increased slightly, there is still plenty of space for challengers to grow.
Q: Are you looking to rebase the expectation for wholesale margins following the Origin transition?
A: We maintain our long-term target margins of 25% for consumer, 40% for business, and 60% for wholesale. While we may exceed these margins, the targets remain unchanged for now.
Q: Where do you see the tipping point for operating leverage?
A: We believe we are already showing clear operating leverage, with a focus on cost control and improved performance through automation and efficient customer onboarding.
Q: How is the migration of Origin customers to the Superloop platform progressing?
A: All new sales by Origin are now on the Superloop platform, and the migration is progressing as planned. We aim to complete the migration by October.
Q: What is your outlook for FY25?
A: We expect underlying EBITDA for FY25 to be in the range of $83 million to $88 million, an uplift of more than 50% on FY24. CapEx spend is expected to be in the range of $28 million to $30 million to support continuing growth.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
