Thank you for standing by, and welcome to the Aussie Broadband Limited FY 2024 Results Call. All participants are in a listen-only mode. There will be a presentation followed by a question and answer session. If you wish to ask a question, you'll need to press the star key followed by the number one on your telephone keypad. I would now like to hand the conference over to Mr. Philip Britt, Group Managing Director. Please go ahead.
Good morning, all, and welcome to the Aussie Broadband earnings call for our FY 2024 full year results. My name is Philip Britt, and I'm the Group Managing Director of Aussie Broadband. With me on the call today is Aussie Broadband's CEO, Brian Maher; Aussie Broadband Group Chief Financial Officer, Andy Giles Knopp; and Symbio CEO, Michael Omeros, known to many as Mo. A lot has happened in the last 12 months, and we're pleased to report a solid growth across our core segments and some excellent momentum that we're carrying into FY 2025. It's been an exciting year, and there's a lot to cover, so let's get started. Before we get into the results, I'd like to acknowledge the Aboriginal and Torres Strait Islanders as the first Australians for their role as the original communicators, connectors, scientists, and carers of the land and waters across Australia.
We pay our respects to elders, past and present. We commit to working respectfully to honor the ongoing cultural and spiritual connections between the traditional owners of this country and to building an inclusive Australia together. Before we dive into that, we wanted to provide a broader level view of the group and our ambitions over the coming years. On page four of our results presentation, you'll see that Aussie has forged an incredibly strong reputation in the residential broadband space, and that was strengthened throughout FY 2024. I particularly want to extend a thanks to all the incredibly hardworking staff and our customer service teams who've helped ensure Aussie Broadband was once again named Most Trusted Telco in the Roy Morgan rankings, which was an incredibly prestigious award to win multiple years in a row.
Residential remains a high-performing cornerstone of the group, but we've successfully established multiple revenue streams beyond this base. Our year-on-year revenue has grown by 27% on a statutory basis, while our gross margin percentage has improved. This is a great result considering the headwinds facing the telco industry in FY 2024. You'll hear about some of the superb wins in our enterprise and government segment, who have signed some of the Australian household names from the Big Four incumbents. The group recorded revenue growth and gross margin growth across all segments to record a strong group financial performance. The early signs from the launch of Buddy Telco are also looking very positive, but we'll provide you a deeper update on that brand later in this call.
Our voice and fiber networks continued to grow in scope and scale throughout FY 2024, with our footprint now standing at over 1,700 kilometers. Our fiber network now covers not only all the major metropolitan hubs across Adelaide, Brisbane, Melbourne, Sydney, and Perth, but it also reaches into the major growth corridors. That strategic infrastructure and our ongoing investment into our nationwide assets is a key part of Aussie's success in FY 2024, and will help power the business even more as we grow in years to come. Finally, our balance sheet is in fantastic shape. This has enabled Aussie to declare a fully franked dividend this year, the first time Aussie has been able to do so. We're incredibly excited about the growth of the business, and it means that Aussie is one of the few growth companies within the sector that can also provide a yield.
You'll hear more about our approach to cash capital management later on in the call. Moving to page five, here's a broader look across the segments that the group currently plays in. This page really showcases just how diverse the Aussie Broadband Group has become. Our fiber and voice assets are really starting to unlock the powerful advantage for our business, whether it's margin improvement, thanks to our Aussie Fibre assets, the scale and flexibility provided by our Tier 1 voice networks, or through the agility and customer service that is helping us score major enterprise and government customers of other incumbent telcos. We've broken out the gross margin and percentage of revenue for each segment here, but we'll dive deeper into detail of those segments later in the presentation. Moving to page six. When we look at Aussie's evolution over the last five years, it's quite staggering.
We listed on the ASX in October 2020, and have seen consistent and sustained growth year-on-year across all key metrics. We've met or exceeded EBITDA guidance every year since listing and exceeded our prospectus forecasts. Turning to page eight, FY 2024 has been a good year for Aussie, with the business recording solid growth and results across all core segments, despite some notable challenges and industry headwinds. Our EBITDA in FY 2024 delivered at the top end of the guidance on a statutory basis at AUD 120 million, with a better-than-expected contribution from Symbio since the acquisition was completed in February. The group continued to execute its diversification strategy across multiple segments, and our investments in our homegrown Aussie Fibre and Tier 1 voice networks have continued to unlock additional scale, margin, and competitive advantage.
Symbio contributed AUD 12 million in EBITDA in FY 2024, representing the four months of post-acquisition trading. The result included a modest 600K of synergies, but we've now formulated a clearer view on long-term synergies, and I'm happy to advise that we've now identified synergies in the range of AUD 8-12 million by the end of FY 2026. We believe that there is a great story to tell within the existing and planned platforms of Symbio, and the positive contribution we expect from Symbio in FY 2025. But we'll cover more of that later in the call. Lastly, I'm proud to announce that on the strength of the group's balance sheet, this has allowed us to declare a fully franked dividend of AUD 0.04. This is the first time Aussie has been able to provide a yield to shareholders.
With our strategic assets, growth, and multiple segments, Symbio's strengths, and the flexibility of our balance sheet, we believe the business is well-positioned with the necessary resilience and infrastructure to continue growing into - for years to come. Turning to page nine, you'll see the Aussie Broadband Group at a glance. Aussie is still growing its share in the NBN residential broadband market, with 7.4% market share, excluding Satellite and Origin. Our total broadband connections across the group now totals more than 700,000, which excludes Origin. You can also see the strength of our voice networks, with 7.5 million numbers hosted on our Symbio and NetSIP platforms, and 8.6 million call minutes carried across both networks.
Our fiber network now has over five hundred buildings connected, with another two thousand ready to connect across the metropolitan cities and some of the city's biggest growth corridors. Our mobile services grew, too, with almost a hundred and eighty-seven thousand mobile services across the group. Finally, we just wanted to call out that we've retained the title of Australia's Most Trusted Telco, as rated by Roy Morgan. Roy Morgan also evaluated Aussie Broadband to be the thirty-fourth most trusted brand in Australia, ranking us alongside some of the true household names and titans of Australian business. It is a symbol of just how far the business has come, and a validation of our ability and beliefs to continue disrupting the telco space. I'm now going to hand over to Andy, to cover off the group's financial results.
Thanks, Phil, and thanks, everyone, for joining the call today. I'm proud to have joined Aussie Broadband as the group's CFO, and I'm excited to talk through the financial performance for the group for the first time. So turning to page 11. FY 2024 has been another strong year for the Aussie Broadband group across all the key financial metrics. Our revenue on a statutory basis grew by 27% to almost AUD 1 billion. That's an incredible achievement for the group, considering our humble, humble beginnings, but and it demonstrates the group's ability to successfully deliver on a strategy to diversify, particularly over the last couple of years. Our gross margin grew by nought point seven percentage points to 36.1%, and as highlighted on page five, with strong gross margin percentages across all our customer segments.
Our underlying EBITDA, which includes share-based payments, came in at AUD 120.5 million, which was at the top end of our guidance range. Another strong result, highlighting positive operating performances for both Aussie Broadband and Symbio. The EBITDA grew by 34.5% from FY 2023. Our cash flow and balance sheet net debt position are highlighted on page 12. Our operating cash flow before interest and tax was AUD 128.2 million, up 54.1% from 2023, when you normalize FY 2023 for the change in NBN billing that took place. The group delivered an ongoing, consistent and strong cash conversion at 106.5% up on FY 2023. Our net debt position of AUD 138 million was up 7.1%.
The net debt position includes borrowings of AUD 298 million plus total lease liabilities of AUD 54 million, offset by a healthy cash and cash equivalent balance of AUD 213 million. The strong balance sheet position provides the group the financial flexibility to continue to invest in our operational CapEx, including in our strategic Aussie Fibre network, and to deploy on organic and M&A opportunities that maximize our shareholder returns as they arise. As in previous years, I wanted to highlight our business-as-usual capital expenditure, which is set out on page 13. Excluding the AUD 6.7 million of CapEx for Symbio, the total CapEx for FY 2024 was AUD 40.7 million, at the lower end of the reduced guidance range of between AUD 40 million and AUD 45 million.
The group has a disciplined approach to CapEx investment in core platforms, lifecycle replacement, and growth opportunities. For FY 2024, the CapEx was deployed in building out our strategic Aussie Fibre network, investments to support the core and customer growth, as well as in uplifting capability across both Aussie Broadband and Symbio. We are reaffirming our CapEx guidance for FY 2025 at between AUD 55 million and AUD 60 million, inclusive of Symbio for the full year. This range is AUD 8 million lower than the comparable FY 2024, as we manage our excess network capacity during FY 2025, as a result of the Origin customers migrating off the network. Having such a strong balance sheet, we felt it was important to set out our capital management approach to provide clarity through FY 2025 and beyond, which is outlined on page 14.
Our overall objectives are to maximize shareholder value, maintain financial flexibility, and to support and enable business growth. To deliver on those objectives, we set out five main principles: First, we are committed to maintaining a balance sheet setting consistent with a leverage ratio of between 1.75 and 2.5 times. Second, we will use capital to fund our business-as-usual CapEx.... Third, we will look to use capital to grow the business, both organically and through M&A opportunities as they arise. Fourth, we will then consider a return to shareholders through a dividend. And fifth, after these options, and where we forecast the group will have excess capacity for between 12 and 18 months ahead, we will also consider further opportunities to return the excess capital to shareholders. Overall, the group delivered strong results in FY 2024.
To understand how this performance was delivered through our segments, let us start with Symbio, and I'm gonna hand you over to Mo.
Thanks, Andy, and thanks everyone for joining the call today. Symbio had a solid FY 2024, with growth across the network. The business only became part of the Aussie Broadband group at the end of February, and has already surpassed expectations over that short period, contributing AUD 12 million in EBITDA for the four months. Some key metrics can be found on page 17. Numbers on the Symbio network grew by 10% year-on-year. Mobile services in operation grew to 110,000 by June 30. Gross margin increased by 4% year-on-year as well. Since Symbio is relatively new to the Aussie Broadband group investors, I wanted to briefly take everyone through what Symbio offers and some of the markets where we have a competitive advantage. The details are on page 18.
Trusted by the world's largest cloud communication providers, our strength is in disrupting legacy telecom networks. We offer a true cloud-ready alternative that empowers customers with accessible APIs and no to low-code alternatives for local hosting, calling, porting, provisioning, and service management. Our worldwide network has more than 220 partners across the globe, and we have all the necessary in-house expertise to help manage clients' international traffic and needs. Symbio is Australia's largest mobile virtual network enabler, and our Telco as a Service offering provides a marketplace delivering a best-in-class telecommunications product catalog to support the growing Australian challenger service provider market. Growth is a major focus for Symbio in financial year 2025, starting with the expansion of our Telecommunications as a Service platform and our domestic networks.
We'll be looking to grow numbers, minutes, SIOs, and partners across both, and expect a lot of momentum in market with the launch of our new age enablement platform in the latter part of FY 25. We'll also be further investing in automation and self-service functionalities for our customers, and we'll continue to invest wisely in Singapore and Malaysia, two key regional markets for our business. Symbio will also look to explore other inorganic voice opportunities for growth. We will also deliver positive cash flow returns for the business. Symbio will deliver earnings growth to the group in FY 2025. As you can see from the bridge, Symbio is expected to deliver approximately 30% greater EBITDA in FY 2025 when compared to the pro forma FY 2024 EBITDA. Even when we normalize out the synergy benefits in each year, the business is delivering approximately 20% EBITDA growth year-on-year.
This is very satisfying, given we are also investing in business development capability for future years' growth. On page 19, we've outlined expected synergies, such as the removal of board and ASX listing costs. We've already executed on some other synergies ahead of schedule. In FY 2024, we completed the realignment of our senior leadership team to better fit our future go-to-market strategy, and FY 2025 will see the rest of the team being aligned under our new approach. We'll also work towards executing additional synergies by consolidating some of Symbio's operational and network systems. To date, we're expecting total synergies will be within the region of AUD 8 million-AUD 12 million by the end of financial year 2026, and we will continue to update you all in future calls as to how that's going.
I'll now hand over to Brian to take you through the Aussie Broadband segment.
Thanks, Mo. I'm delighted to talk to you for the first time as CEO of Aussie Broadband, and I'll kick off a walk through our segments with residential. As you can see from the charts on page 21, the group recorded growth across revenue, total connections, and gross margin. Revenue grew by 14%, while connections grew by 13%, despite the increasingly competitive industry environment. Our residential growth is particularly impressive in an era of structural change in the wholesale pricing regime, following the finalization of the prolonged NBN SAU consultation process. The new SAU saw price changes across the spectrum of speeds and resulted in higher costs for consumers in the slower speed tiers, where CVC charges remain in place until 2026. However, the elimination of CVC on 100-speed products and above enabled price reductions for higher speed broadband plans, a traditional strength for Aussie Broadband.
The impact of the changes was a net positive for Aussie, as can be seen in the improved gross margin percentage in the second half of the financial year. Our NBN customer churn rates remained within our expectations. Anticipated higher churn rates were experienced following the November and June price increase announcements, but an equally anticipated return to norm following the increases was also experienced. We have also retained our preeminent position in the industry with respect to satisfaction, and we are the most trusted telco in Australia. Growing our presence in the mobile space as an MVNO provider will be one of our continued focuses for FY 2025, both as a direct offering and via multi-product offers. We will also continue to invest heavily in high-speed tiers, particularly targeting fiber-enabled customers who highly value speed, quality, and the customer experience.
We expect NBN's most recent consultation period to introduce even more high-speed broadband tiers to the residential market, and we believe Aussie is very well positioned to capture a high proportion of these new high-speed users. We have further enhanced our higher speed offering with our new semisymmetrical Pro product range. In addition, we'll be looking to accelerate growth in FY 2025 through Buddy Telco, which will help us increase our market share in those areas that Aussie Broadband has traditionally underperformed in. I'll delve a little deeper into Buddy Telco and refer you to page 22, our new sub-brand in the fixed broadband space. The creation of Buddy was something we've thought about internally for a couple of years, but it wasn't until now that we had developed our talent, skills, and automation to the point where we could completely execute this in-house.
So far, the numbers have looked very promising. Almost 2,200 customers on active services with Buddy within the first six weeks of operation. But what's been impressive is the customer satisfaction levels around the digital-only experience with our Buddy bot and the Perth-based live chat team. Out of thousands of interactions to date, the satisfaction rating with our live chat team has been a stellar 95%, and the satisfaction rating with our automated Buddy bot is just under 90%. On top of that, just over half of all customer interactions have been resolved successfully without requiring human input, which is a testament to our ability to design and scale out a digital-only service model successfully without sacrificing on quality. We believe we can improve this further with an observe and learn approach to evolving the Buddy experience.
We are enormously excited by what Buddy brings to Aussie, and we've already developed a deep affection for the Buddy character. Turning now to our business segment on page 23. The segment grew by 9% in FY 2024, thanks to a 19% year-on-year growth in connection numbers. Gross margins for business also grew by 5% year-on-year. The impact of the NBN SAU wholesale agreement was somewhat negative for business due to two aspects. Firstly, business services over-indexed to higher speed plans, which saw price reductions, and secondly, the removal of CVC pooling was detrimental to business, which previously benefited from the residential peak time usage. The new agreement has also enshrined more changes that will come into force in FY 2025, which we anticipate will continue to be beneficial for Aussie Broadband and business customers.
For FY 2025, along with the smooth implementation of the next round of SAU changes, a major focus will be on improving the customer experience for business users. A lot of work has already been done identifying the different needs of business customers and their customer journey, and we will continue to build upon that research and insights into FY 2025. Moving to page 24. Our enterprise and government team maintained good momentum in the year, securing new logos, retaining some strategic partnerships, and focusing on re-signing existing clients. That work has delivered over AUD 1 million in monthly recurring revenue in FY 2024. Some of the excellent wins for the division include signing a deal with Bunnings Warehouse, a contract previously held by the incumbent Big Four telco.
ABB will supply connectivity to over 350 Bunnings sites across Australia, which demonstrate our increasing ability to win in the sector. We expect the first connection to be active in the next fortnight. Some other key clients for the team include wins with Mercy Health and Austin Health, where Aussie is delivering communication systems, as well as streamlining the network operations for Hitachi Construction Machinery. The key part of some of these contracts was the automation offered through our proprietary Carbon platform and the backbone supplied to our homegrown Aussie Fibre. Our agility and superior customer service was also a key factor in us winning or retaining some of these key contracts, and that's something we will continue to utilize in E&G as one of our competitive strengths.
Despite the great work by our growth teams, the E&G market is tough, as has been commented on by other market players. So we have experienced some pressure on pricing and margins as we recontract. We think we are through the worst of this and look forward to further growth. The team was also recognized by Fortinet and NetApp recently, with both companies awarding Aussie Broadband major partner awards for our successes in FY 2024. Looking ahead to FY 2025, the team will further leverage the benefits and margins provided by our growing Aussie Fibre infrastructure. We'll also be looking to drive further brand awareness, as well as investing further in digital platforms to extend our automation across the E&G segment. On page 25, you can see a collection of just some of the 400 new clients our E&G team have signed through FY 2024.
We've spoken about Bunnings, but there are also some major brands with a presence across the country. We're supplying 379 of United Petroleum's sites with NBN services, 4G backup, and Fortinet products, and United was impressed with Aussie for the ease of its ease of use of our automated Carbon portal, the mix of technology we could offer, and our actual Aussie Way approach to doing business. We're now providing a range of services to companies like Burbank, Campbell Page, Decjuba, Jetts, Knight Frank, Lorna Jane, and many, many more. The team also re-signed major clients, including Eagers Automotive and National Storage. Another area where our strategic investments have paid off is in wholesale, so on page 26, you can see a 59% increase in revenue compared to FY 2023.
Some of that growth in revenue and gross margin was thanks to the contribution of Aussie Broadband's Tier 1 voice network. We've already covered Symbio's numbers and performance earlier in this call, so just note that the figures you're seeing here are only reflective of Aussie Broadband's wholesale revenue. NetSIP's excellent automation and customer experiences continue to gain favor in the market, with a near doubling of units for the NetSIP network from FY 2022 to FY 2024. The team onboarded another 171 managed service providers, including Pennytel, Origin Net, Devoli, ECN, and Smile IT. This brings the total number of partners in our MSP program to 1,118. The figures you're seeing on this page also include revenue from the Origin contract. Offboarding of those customers only began in FY 2025, and we expect that process to conclude in October.
As of FY 2025, more broadly, our wholesale team will continue to focus on growing the MSP program, expanding the capabilities of our Carbon and NetSIP platforms in line with the needs of our partners and improving operational efficiencies. We continue to progress new white label and resell opportunities. I thought it'd be helpful to give some insights as to the scale of our fiber network. We've continued investing in the size, scale, and redundancy of Aussie Fibre. We've grew its footprint into some of the highest growth corridors of the major metropolitan cities. On page 28, you'll see our fiber coverage across Melbourne and Sydney, and more of that footprint is showcased on the following page. The network grew by 288 km this year, including the deep water Middle Harbour cable in Sydney, which was no small feat.
The extent and scale of the network has reached a level that will allow us to better compete with incumbents in the space. We also want to call out just how significant an advantage our fiber ownership is. If we didn't own our own fiber, we would have to rent it or buy it on the open market. Owning that fiber adds an estimated AUD 20 million in margins to our operations, and we continue to highlight the value of that infrastructure in a more direct way. I would like to give a massive shout-out to all of the staff at Aussie. I never get bored of the feedback we get on the quality of the service we provide to customers, and that is down to the 1,300 or so Aussies that spend each and every day with a mission of delighting our customers.
Thanks for your time, and I'll hand back over to Phil.
Thanks very much, Brian, and moving you all to page 31. We have five main pillars for FY 2025, and the first part of that will be the continued investment in our key infrastructure assets, including Aussie Fibre, our Tier 1 voice networks, and software platforms. Our approach with fiber will be a land and expand strategy, and we'll also explore more ways to exploit the vantage advantage we have from owning our own fiber network. Mo's already mentioned that Symbio is building out a new-age enablement platform that we think will be really appealing to the white label and wholesale markets, and this new platform will help us further increase the margins on these products. Our multi-brand strategy will accelerate into FY 2025, with Aussie, Symbio, NetSIP, and Buddy focusing on increased market share.
All of our segments will benefit from our deepened focus on automation, AI, and innovation, with Buddy Telco, especially providing a great proving ground for technologies and ideas that can be leveraged across the rest of the group. We'll also be launching new residential products under the Aussie Broadband label in FY 2025, including the recently launched Pro offering, which went live in the market only a fortnight ago. We'll continue to invest in our people and the award-winning customer service they provide to our customers every day. As Brian said, our people are the reason that Aussie Broadband has been able to grow to the company that it is today, and part of our mission in FY 2025 is to continue to maintain that culture that helps us attract and retain the talent that helps deliver exceptional customer experiences for our customers.
We'll continue to find efficiencies across the business throughout FY 2025. We're also expecting the industry to consolidate more rapidly throughout FY 2025. Thanks to our strong financials and sound management, the company is well positioned to take advantage of the strategic opportunities that may arise. Page 32 provides a quick update on our M&A activity and some clarity around our shareholding in SLC. While we remain focused on organic growth, we continue to evaluate accretive M&A opportunities as they arrive. As some of you will remember, earlier this year, we sold 37 million shares in SLC at $1.31 a share, and realized a profit on that sale of $13.5 million before tax and transaction fees.
We still hold 11.99% today in the company, and our shareholding that, as at the 23rd of August, was valued at AUD 108.2 million. Our gain on the remaining stake is AUD 46 million. We continue to monitor the SLC opportunity. I'll now hand back to Andy, and he'll take you through our FY 2025 guidance.
Thanks, Phil. As you can see on page 33, our underlying EBITDA guidance for FY 2025 is in the range of AUD 135 million-AUD 145 million. After our 10 million investment in Buddy Telco is factored in, the EBITDA guidance for FY 2025 is in the range of AUD 125 million-AUD 135 million. As mentioned before, our CapEx guidance is between 55 and 60 million dollars. With the positive momentum across all our segments and the net broadband additions across Aussie Broadband and Buddy Telco over 13,000 for the first 8 weeks of the year, the business is in a strong and healthy position. Having highlighted the EBITDA guidance, I wanted to talk you through the bridge between FY 2024 and FY 2025 EBITDA guidance, as shown on page 34.
Mo spoke a little earlier on the Symbio FY 2024 pro forma EBITDA. So starting at the group FY 2024 pro forma EBITDA of AUD 137 million, there are really three key messages. The first message, the impact of Origin. In FY 2025, the contribution being the gross margin less the direct customer service costs, is AUD 6 million, which covers the migration period through to October 2024. This is a reduction of AUD 21 million year-on-year. Also, in FY 2024, there were approximately AUD 12 million of additional costs allocated to Origin customer base across the group. In FY 2025, we plan to remove four of the AUD 12 million. We have begun the work of making our organization structure more efficient to meet the times and have commenced a consultation process with our teams on what the new structure looks like.
This still leaves AUD 8 million of costs remaining within the business, and through the year, we will develop plans to further remove these costs from FY 2026. The second message is our growth. Our growth across Aussie Broadband and the Symbio segments continues to be strong. Growth will be between 13% and 21% to achieve the underlying guidance range of between AUD 135 million and AUD 145 million. This growth does include the synergies delivered by Symbio, and it represents strong underlying growth across all of the customer segments. The third message is Buddy Telco. With the exciting launch of Buddy in July, we are reconfirming the planned investment and impact to EBITDA, which is in the range of AUD 10 million for FY 2025.
This investment will set the foundations to deliver on our goal of a hundred thousand connections over the next three years. I'll just pass you back to Phil, who can cover off the key takeaways.
Thanks very much, Andy and team. We're just about to head into our Q&A, but before we do, I wanted to leave you with these five key points. Aussie's core business is strong, with a solid pathway for growth and profitability into FY 2025 through our core brands and Symbio's offerings, and the initial success of Buddy Telco. We are well positioned to leverage our diversified product offering to drive further growth. Our balance sheet and cash flow are very strong. With a focus on maximizing return to shareholders, maintaining financial strength and flexibility, we look to deploy cash for continued growth and diversification. The business is well positioned to monetize its fiber and voice infrastructure, and we will continue to invest in both. Lastly, Aussie continues to be the country's most trusted telco. That concludes our investor presentation. We'll now open up to questions.
Thank you. If you do wish to ask a question, please press star then one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star two, and if you are on a speakerphone, please pick up your handset before asking your question. First question today comes from Jonathon Higgins at Unified Capital Partners. Please go ahead.
Thanks, guys. I appreciate the time and a great set of results, in particular on the cash flow front there. So just a couple from me. Firstly, maybe one, I think, for Mo, just on the Symbio margins. Like, we've sort of started to see them grow half on half. We've got the upgraded synergies target as well. I was wondering if you can just give us some thoughts on, you know, where you see margins in that business starting to move, and potentially just weave in the, the Over the Wire ABB voice business with, with that as well, please.
Thanks, Johno. So just with regard to the margins, as you said, you can sort of see that half-on-half growth in 2024. When we look out to 2025, we do sort of see that steadily increasing a little bit. Two main areas. One is sort of mix on where we're sort of seeing our growth coming from. And then secondly, is just sort of some of the, you know, the efficiencies we're building both within the organization on the margin side, but then our ability to, you know, buy in terms of some of those COGS components. With regard to the weaving in of the Aussie NetSIP piece, as we've sort of said, we are keeping the businesses separate at the moment.
So there's no specific weaving in. Although, what we are doing, of course, is both organizations have their own buying power, and we are looking at how we bring those together to sort of get the larger benefit overall. Excuse me.
Thanks, and appreciate the context. A couple more from me. Just on, just Buddy, whoever's best to answer this today. You've given an ambition that within six months, you're sort of looking towards that 100,000 run rate. Just wondering if you can just sort of expand on what's happening there, and my math sort of says that's sort of 8,000 a quarter type thing. But also just if you are seeing, just your expectations on cannibalization and stuff with ABB is something I think people are focused on.
Thanks, Johno. I'll pick that one up. We're very encouraged by the start. It's been really pleasing to see how the market's taken to the Buddy brand. We still think we've got a way to go there. Obviously, it's a relatively unknown brand in the market, so we think there's still traction we can get down the track in building the brand, getting it out there and having a greater presence in the market. Yes, we've got a target of 36 months for 100K. The run rate we've got at the moment is encouraging, and we think we can grow that over time.
Our goal remains in place at 100,000 for 36 months. We definitely pursue that. In terms of the cannibalization risk, Buddy serves a couple of purposes. One is to be a new brand in the market that can go out there and attract customers who give you value in a digital-first space. But also as a safety net for those customers who are leaving Aussie anyway seeking value, particularly in a time of, you know, customer need crisis.
So initially, there was a spike in movement between Aussie and Buddy, and you'd expect on launch, where you've got those people who tech people, particularly tech-savvy people, who love the Aussie Broadband, that Aussie Broadband network, but largely self-serve, and so it made sense for them to move across to Buddy. So there was a little spike at the start. Beyond that, what we're finding is that it's acting as we hoped, which is acting as a safety net for those customers who would otherwise go to the other value players in the market, and we're picking up a fair degree of those.
But, you know, we're six weeks in. We monitor data every day and we'll see how that goes. But as I said, so far, we're very, very positive about the outlook for Buddy.
Perfect. And last one from me. Just on the fiber business, I think for the first time, you sort of publicly called out in the presentation just the AUD 20 million of CVC sort of savings or earnings there. You know, there's been a lot of fiber getting laid. I was wondering if you could just sort of talk towards your ambitions in this business, maybe a couple of years out?
Yeah, we're not specifically providing any guidance on what numbers we might attach to that. But we are looking at, you know, being a little bit more aggressive in our build there. So we've been doing some research lately on all the service requests we've had over the last year in areas where we say we don't currently have fiber close enough to service. And we're mapping all that and looking at where we can be a little bit more proactive in building our fiber to where we've seen that historic demand. And so, a little bit more build than may well come.
We're not going to take ridiculous risks, but we'll take a little bit more risk in that regard, in building where we see there is future demand. So, we're pretty excited about the opportunities that when we see, when we certainly when we look at that historical data, opportunities we may have been able to pick up on had we had a little bit more fiber in the ground. So that's sort of the way we're going to look at that.
Thanks, guys. I'll just jump in.
Thank you. Your next question comes from Entcho Raykovski from E&P. Please go ahead.
Morning, Bill and team. So my first question is just around the churn impact post the price increases in July. I think Brian, in his presentation, mentioned that there has been some greater churn post price increases. So I'm interested. Has there been greater churn this time around than what you saw in November last year when the NBN AVC first came into place?
And so yes, but within the margin of error, not significantly higher. There's definitely a little bit more, but nothing that overly concerned us. And we're seeing now a return to normal, as I said, pretty much in parallel to what we saw earlier in the year. I mean, I think the question goes to, and naturally, two increases in such a short space of time, you think would have a compounding impact. And I think we did see a little bit of that, but it's bounced back really quickly. And it's probably important to say that, you know, we did lobby quite heavily during the SAU process for that July increase to be waived, because of that very reason.
We thought that was particularly unfair on consumers to have those two price increases in a short space of time.
Okay, great. Thank you. And so in the context of that, do you expect the 13,000 net broadband connections that you've seen so far in the first quarter to be indicative of the run rate for the rest of the year? Or do you think you can actually see an acceleration given that spike in churn post the July price increase?
Yeah, we no longer provide guidance on connection numbers, but fair to say, we're pretty happy with how we've started the year, and we're always looking to accelerate.
Okay, cool. And then a question on the Origin overhead costs, which, obviously you've given us greater detail now, so that's quite useful. But of that AUD 8 million of overhead costs remaining at the end of FY 2025, is there an opportunity to allocate some of those costs to Buddy? I guess I'm just trying to reconcile the need to remove those overheads with the Buddy investment. Presumably, you can redeploy some staff into the Buddy launch, or is that... Are they quite different functions and it's not so easy to do?
Yes. So I think the answer is we see Buddy really being an automated and not really requiring labor. So in that sense, it's not about allocation of overheads to Buddy. What it really looks to, and there are a couple of parts to this. One is, as we think about the opportunities for new business through FY 2025 and into 2026 , it was really making sure we understood all those opportunities before we took definitive action on the overheads allocated in the business. And then the second part will be, you know, planning to remove some of the overheads. Largely, the OpEx that is still remaining in the business is labor-related. So we're just gonna look through and plan for that from 2026 onwards.
So, so those are the key messages, but certainly we're not looking to allocate labor to Buddy, because that's not the core platform for Buddy Telco.
Okay, thank you, and if I can maybe sneak in a final one. Just around the competitive environment in enterprise and government, you've talked about the Bunnings contract win in April. Can you give us maybe some more color on what delivered that win? Was it pricing, service, other factors, and are you seeing any moderation in competition, or does it remain pretty tense?
Okay. I want to check. I wish we saw moderation in competition. We do not. It's pretty fierce, particularly our larger competitors aggressively defend those contracts. So there is margin pressure in there. We recently had both Bunnings and Lorna Jane present to our teams at our annual sales kick-off, where we asked them that very question, why was Aussie successful? And whilst commercials were important, they very much told us it was around ease of doing business, flexibility, innovation thinking, and more broadly, just being, you know, very no bullshit to deal with.
While commercials will always be preeminent, we believe that the Aussie approach to doing business is carrying a lot of sway with these energy-style customers, particularly multi-site retail businesses, where we seem to do very well.
Okay, great. Thank you. Thank you.
Thank you. Your next question comes from Eric Choi at Barrenjoey. Please go ahead.
Morning, guys. Just a first question, following up on the remaining Origin overheads. I think you've got a comment in your outlook on investing in measures to deliver operating leverage post Origin. So is that referring to that remaining AUD 8 million of overheads to be potentially used for new wholesale customers? And just listening to your answer, are you saying that to the extent that new customers don't come through, you'd consider removing that overhead in either late 2025 or FY 2026? That's the first question.
Yes, that's what that comment relates to. So it really is about assessing the new business that may come in through 2025 and using the resources against that new business. We've got strong growth assumed on our core business as well that we had to trade off this year in terms of timing. But otherwise, yes, we will be looking for leverage on our labor through the end of 2025 and into 2026.
Excellent. Thanks for clarifying. Second question, just pivoting a bit to FY 2025 guidance. I think on the last conference call, Phil mentioned FY 2025 guidance assumed roughly the same subscriber growth in unit economics as FY 2024, and I was just wondering, could that be conservative on the residential side, given we saw the dollar gross margin step up in the second half, and I'm not sure if you're a net beneficiary post your retail price increases versus wholesale CPI price increases in July this year, so just wondering if those unit economics on resi could step up.
So in terms of the second part of the question, I'd say we're probably net neutral on the net effect of the SLA increases and the price increases, largely because of that short time frame between the two increases. We didn't want to be overly aggressive in pricing to, you know, possibly hurt the consumers in a very difficult time, and the impact that may have had on that compounding term aspect. So that was a big consideration for us in how we set prices following the July increases. And in terms of the margin, therefore, you know, the margin will roll through into the FY 2025. I'll leave others to decide whether they're conservative or not.
But you know, we're confident in our growth is largely compoundable year on year, but then you've got Buddy in addition to that in FY 2025.
Got you. And if I could throw one last one in on capital management. Just wondering, is there potential for a buyback on top of the dividend, given you've put capital management in as your fifth bullet point, and your net leverage is tracking below your one point seven five to two point five targets?
Look, I think all options are on the table, Eric. It really comes down to where we see the next twelve to eighteen months, as Andy called out in his speech. But yeah, we're considering, we're open to the idea. It's, we've just got to look at all the plans over the next twelve and eighteen months and determine whether there's a better use of capital than a buyback.
Awesome. Thanks very much, guys.
Thank you.
Thank you. Once again, if you would like to ask a question, please register by pressing star then one on your phone. Your next question comes from John Campbell at Jefferies. Please go ahead. Pardon me, John Campbell, your line is live. Let's move on. Your next question comes from Ian Munro at Ord Minnett. Please go ahead.
Morning, guys. Thanks for taking my question. Just with respect to E&G, obviously, a number of contract wins during the second half. Just interested, how does that contribute into FY 2025, in terms of the, the mix across first half, second half? Is it reasonable to expect, a decent kind of scale up shorter term, or is that sort of, time taken to deployment still widening? And just in terms of resourcing and operating costs to service that growth, how are you kind of feeling about, that, that cost to serve as, as, the revenue builds out? Thank you.
Thanks, Ian. You know, we don't provide segment-specific guidance or half-specific guidance, but your comment broadly around times to provisioning, but they're still. I wouldn't say they're widening, but they're not shortening, and that's what we ideally would like to achieve. We've got a few things we're looking at as to how we might restructure and get some of those provisions I'm sure. And part of the story is also that, as I touched on, the building ahead or taking a few more risks on building the fiber is also aimed at shortening that provisioning time. So we're closer to the buildings, and therefore can connect up much quicker. So that's definitely the case. I mean, the Bunnings contract was signed probably two months ago or so.
And we're, as I said, we're connecting our first connection in the next fortnight or so, which is pretty reasonably quick versus the average time. So that's really pleasing. Hopefully we can get to the rest of those fairly quickly too. So that's something we focus on constantly. What was the second part of your question, sorry again?
Just with respect to operating costs.
Operating, yes.
The growth in the customer pool. Thanks, Brian.
Yep. So again, part of our reviews at the moment are looking at how we can be as efficient as possible in delivering all aspects of our business, so service and others. We've expanded our sales team recently to the opportunities are there. And obviously there needs to be the appropriate support structure behind that, so we're not just selling more and then, as you say, widening that gap in terms of delivery. So it's something we look at constantly, but not something we're going to provide any, you know, particular detail on.
Just, just one follow-up, if that's okay. On Symbio's obviously called out AUD 8-12 million of synergies. So, just interested, firstly, whether there's been any change in how the operating costs are getting re-recorded. Looks like Aussie's taking a more conservative approach to the accounting on Symbio, and is taking the expenses for the share-based payments above the line. And then secondly, is there any cost to acquiring those synergies in a one-off nature? Thank you.
Thanks, Ian. Yeah, so as you said, so starting off with regard to, I suppose, the more conservative approach, that bridge that we've got there sort of shows that. So with FY 2024, that's AUD 4.5 million that was previously would've been below the line in terms of Symbio accounting that we've shown above. And when we talk to our guidance through to 2025, that is basically accounting for it in that way, so it will be above the line. With regard to the synergies, as you spoke about, there is some restructure costs involved in that. That but when we sort of do it, we'll sort of definitely call out as one-off costs.
But the synergies as a whole is actually less around people and more around efficiencies. The way we're sort of structuring the buying between the groups and just some of those other bits. So it's not, when you look to that 8-12, it's not just, you know, cutting of people. I suppose are the really key messages there. It is actually about the benefit of the combined entities together is the true benefit.
Fantastic. Thank you.
Thank you. Your next question comes from John Campbell at Jefferies. Please go ahead.
Thanks, guys. Apologies for my technical difficulties. Mo, just another question for you. I guess the hosted numbers that you display are showing strong growth, but revenues are flat, gross margins up. So that sort of suggests lower unit pricing, but better operating efficiencies and better sort of scale, I guess, driving that margin uplift. So could you maybe talk a little bit about, I guess, the pricing environment in CPaaS and Telco as a Service, in particular, how you see that pricing environment? And you've already sort of suggested, I think, slight gross margin contraction into 2025.
Yes. So I'll actually just tackle that last little bit first. The gross margin actually is not contraction. There's actually a slight expansion-
Okay.
As you sort of see it up on half and then into 2025.
Yeah.
In order to answer the first question, John, if you sort of look at Symbio historically over the last couple of years, and in sort of those public slide decks that called out as well, Symbio is sort of facing increased competition, and as part of that, there was sort of a lot of repricing done, that like, to use the Symbio terminology, you know, the unit economics on those numbers had actually decreased over time. We've now found that they're sort of, you know, they found a new norm, let's call it. So that's a large part of that.
So, to your point, when you look at those two previous years of revenues, and you say looking flat, the numbers growing, that's the primary reason for that, is those unit economics sort of dropped over that period of time. Moving forward, you know, we do sort of expect the numbers to grow as they're called out, including, you know, numbers, minutes, and then, as you said, around the telco service business, the SIOs that make that business up. And we generally, you know, in terms of our expectations, think that those unit economics around all of those services will sort of reflect more recent history. Hopefully, that answered the question?
Yeah. No, that, that's good color. And I suppose you're sort of suggesting we should, you know, you really wanna go back in history and look through the totality of how sort of numbers and services in operation have grown versus revenue, to get a sense of, I guess, pricing overall through a reasonable period of time. Just also, the fact that now Aussie just discloses domestic SIO numbers on Symbio's domestic network. What's the-- Why is that? Because obviously, part of Symbio's growth is sort of Asia Pac and hosting Asia Pac numbers, I guess. Why only disclosing domestic network?
Yeah. So when we talk domestic, and there is a footnote in one of the documents there. So domestic is basically countries that we're a Tier 1. So for us, domestic at the moment is Australia, New Zealand, Singapore, and then when we finish completing the build of Malaysia, Malaysia will be in that. So it's really just trying to create that differentiation of, you know, the countries that we effectively have our own voice infrastructure in, versus countries that we might have sort of Tier 2 or exchange-style arrangements in. So there's really just trying to sort of give clarity around the countries that we've actually are directly investing in. So that's what that is.
It is like, as we build out, you know, the Telco as a Service area. You know, there's, you know, that sort of changes that, and we might look to introduce new components in there. But that's the primary thing. So domestic is-
Got-
Countries that we are Tier 1 in.
Got it. Thank you for that.
Probably, John, just one more thing I'd call out is that, you'll notice in one of the notes for Symbio, that, we've stated numbers, growth over period based on the Aussie method of accounting for numbers. And so that's if you're going to go back and look at prior periods and prior public reports from Symbio, you need to take that note into the equation, because the numbers that we've stated in our deck are lower than the numbers that were previously stated, by Symbio.
Yeah. Got it. Thanks, thanks for that clarification, Phil. Just the last question from me on Symbio. I mean, obviously you're running it as a standalone business for the foreseeable future, but can you, or I suppose Phil and Mo, can you see at some point there could be benefits from collapsing Symbio into, you know, more enmeshed within Aussie?
Look, at this stage, we're really happy with how Symbio is running separately. We're naturally always looking at what we do with structure and efficient operations and so on. But all I'll say at the moment, John, is that we're quite comfortable with the approach and the leadership that we've got in at Symbio. And so, yeah, we'll continue to evolve our thinking on that over time.
Yeah. Great. Thanks for that.
Thank you. That concludes our question and answer session. I'll now hand back to Philip Britt for closing remarks.
Thanks, everyone. Hopefully, you can see the impressive growth that Aussie's had over the last year, and the opportunities that are in front of us as we head into FY 2025. I think I'm certainly hugely encouraged by what I'm seeing across the organization. The growth in Symbio, the growth in enterprise and government, and I think they're gonna be our core focuses and strengths as we move through. Thanks very much for joining us today, and we'll look forward to speaking with you again soon. Thank you.
Thank you, everyone. That concludes our conference for today. Thank you for participating. You may now disconnect.