I would now like to hand the conference over to Mr. Phillip Britt, Managing Director. Please go ahead.
Thanks very much, and good morning, and welcome to today's investor and analyst call. Today is a very special day for Aussie Broadband. We're launching a new pillar to our residential strategy, our new brand, Buddy Telco, and we can't wait to tell you more about it. We're also providing the market with an update in relation to our FY 2024 trading and FY 2024 guidance. As already stated, my name is Phillip Britt, and I'm the Co-founder and Group Managing Director of Aussie Broadband, and today I'm joined by Jonathan Prosser, our Chief Strategy Officer, and Andy Giles Knopp, our Chief Financial Officer.
Before we get into the details around our FY 2024 trading and FY 2024 guidance and the launch of Buddy Telco, I'd like to acknowledge the Aboriginal and Torres Strait Islanders as the first Australians, and for their role as the original communicators, connectors, scientists, and carers for the lands and waters across Australia. We pay our respects to the 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. I'd like to begin by taking everyone through, everyone first through our preliminary results for FY 2024, which included our recent acquisition of Symbio, from the 4 months to June 30. Aussie's momentum has remained strong throughout the second half of FY 2024.
The group is happy to announce that based on preliminary, unordered figures, our FY 2024 EBITDA is expected to be at the top end of the AUD 116 million to AUD 121 million range that we provided at our February results. Our broadband connections have continued to steadily grow throughout the quarter, with total connections excluding Origin Broadband and Symbio, growing to over 884,000 broadband services. We also maintained strength in net broadband additions, with a net growth of just under 85,000 broadband connections during FY 2024. We're especially proud of the continued growth, given the industry has weathered two price rises within seven months due to the introduction of the latest wholesale agreement with NBN, along with the most recent price rises being announced in early June.
That steady growth is a testament to how resilient and beloved the Aussie Broadband brand is, and given the significant headwinds that all RSPs have faced during the time. We also wanted to point out that the figures featured in the trading and guidance up today do not include any services for Origin Broadband. Aussie is continuing to support around 145,000 services until they are migrated off the network throughout the first four months of FY 2025. Our full yearly, full yearly audited results will be released on the 26th of August, 2024, and I look forward to discussing with you in detail. For now, let's look ahead to our FY 2024 guidance, and for that, I'll hand over to Andy.
Thanks, Phil. We're pleased to announce that the group is providing an EBITDA guidance range of AUD 135 million to AUD 145 million, excluding the impacts of Buddy Telco for FY 2025. That guidance represents a rise of 12% to 20% from the top of our FY 2024 guidance, and when the impact of Buddy Telco is included, our EBITDA guidance range is AUD 125 million to AUD 135 million. The group expects the impact of Buddy Telco to total approximately AUD 10 million in one-off establishment, branding, and other marketing OpEx-related costs during FY 2025. We expect Buddy to be an EBITDA-positive from FY 2027 and beyond, and this is a formula and approach that Aussie Broadband has executed strongly in the past.
Later, you'll hear from Phil and Jono about the innovation and startup mentality behind Buddy that has laid a strong foundation for its future success. We would also like to provide a CapEx guidance for the group for FY 2025. Our CapEx range is AUD 55 million to AUD 60 million, inclusive of capitalized software development costs. This is AUD 8 million lower than the FY 2024 comparable, due to the excess capacity that has become available with the migration of Origin customers. During FY 2025, Aussie Broadband and Buddy Telco will progressively use this excess capacity. Now, I'll hand back over to you, Phil, who will talk through the strategy and the positioning of Buddy.
Thanks, Andy. We're really excited for the launch of Buddy Telco, not just because of what it represents for the Aussie Broadband group, but also because of the way in which it's come together. As Aussie continued to grow, we've been looking at the challenger brand space that we used to occupy. After extensive review of all the inorganic options available, we eventually decided on developing the brand in-house, leveraging our innovative mentality and a history of scaling broadband businesses that would provide best-in-class success. Bringing a new telco brand to life is no mean feat, and I'm hugely grateful to the team within Aussie that have worked tirelessly to make Buddy Telco happen. Buddy has been brought to life entirely within the Aussie Broadband team.
We've been planning a brand like Buddy for some time now, and it felt like it was the right time to bring Buddy to market. It is a remarkable accomplishment that speaks volumes to Aussie's ability to innovate and adapt within the ever-changing telecommunications space. But I also want to highlight just how valuable the Buddy brand will be to Aussie and its future, and to do that, I'm going to hand over to Jonathan Prosser, Aussie Broadband's Chief Strategy Officer, who will talk through more of the Buddy strategy and positioning in market.
Thank you very much, Phil, and I'll do my best to contain my excitement here. So thank you everyone for joining the call this morning. I am incredibly excited to take you through Buddy's positioning, segmentation, and go-to-market, and why we chose to do this. Aussie is not just a well-established brand, but one of the most beloved brands in Australia. We have a stellar reputation as Australia's most trusted telco and have set record highs for customer satisfaction, both according to Roy Morgan. So while that challenger mindset and willingness to disrupt the telco space lives on in the heart of Aussie, the reality is, Aussie Broadband is no longer a challenger telco. By creating Buddy, it presents Aussie with several key advantages that really leverage our strengths in innovation, automation, and our ability to scale broadband businesses.
The first advantage is that Buddy gives us the opportunity to innovate and experiment in ways that would be much riskier under the Aussie brand. By establishing Buddy, we can target the 4 million households in Australia's value-seeking NBN market without sacrificing the premium brand and service that Aussie Broadband provides today. This is thanks to all the years of ingenuity and expertise that Aussie has in automation, machine learning, and network management. By leveraging our strengths here, we can provide Buddy Telco services today across the Aussie fiber backbone and the entirety of the NBN's 121 Points of Interconnect. From day one, Buddy services will be available to 77% of all Australian households, and we will continue to expand our offering and availability across the country as the brand progresses.
As we were researching the market opportunity for Buddy, we also aligned on a clear idea, that Buddy would target a very different type of end user from Aussie Broadband. Aussie Broadband has been very successful with first adopters and tech-savvy audiences. Buddy's approach will be different. Not only will we be competitive on price with our lower cost to serve and the self-service model, but Buddy is focused on the Australian audience who prioritize reliability and ease of service. These are users who want a digital-only experience with as little interaction as possible. They want simplicity. They don't want to be bombarded with excess information about products and technology types that don't apply to them. These are customers who expect the internet to work when they need it, and they want to know they're getting a great deal at the same time.
Our expertise in automation and robust infrastructure means that we know we can onboard and service these users through the Buddy Telco app, website, and live chat quickly and at scale, as we do for our white label and wholesale customers today. Because we have such a clear differentiation in the audiences we're targeting with Buddy, we expect there to be minimal customer crossover between the two brands. We expect our target customers will likely be longer-term users of Telstra and Optus, who value reliability and simplicity. As a result, we anticipate that we'll be competing with the likes of Belong, Tangerine, Mate, TPG, Dodo, and Superloop. As mentioned earlier on the call, we expect the impact of Buddy to be approximately AUD 10 million in FY 2025, and that spend will not affect marketing activity or investment in the Aussie Broadband brand.
We will continue to actively drive growth across both Aussie Broadband and Buddy Telco concurrently, and we look forward to having Buddy service around 100,000 customers within 3 years. From an advertising perspective, we will be mirroring the brand's digital-only offering with a strong digitally led campaign across multiple channels and broadband comparison sites, using video and social media where appropriate. The brand will be serviced out of Aussie's existing Perth office, and we have recruited staff internally to support Buddy's launch. We are hugely excited to bring this brand to life, as it further diversifies the Aussie Broadband group by allowing us to strongly compete in both the premium and value-added ends of the broadband market. With that, I'll hand back to you, Phil.
Thanks, Jono. As mentioned, this is an exciting day for Aussie, and just to further showcase our growth, diversity, innovation, and ability to adapt to changing market conditions. So with that, I'll now open to the floor for any questions that you may have.
Thank you. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star two. If you're on a speakerphone, please pick up the handset to ask your question. Your first question today comes from Jonathan Higgins with Unified Capital Partners. Please go ahead.
Hi, Phil, Andy. Appreciate the time today. Just keen to sniff a few things out today, if that's okay. So just the first one from me, can you just tell us a little bit further, just in regards to the challenger brand, potential for cannibalization of your core brand as well as if it allows you to sort of experiment with anything that you may take across into the core premium product that you have, firstly? Thank you.
Hi, Jono, it's Jono, and I'll, I'll take both of those questions. I'll start off with the cannibalization and then go into the experimentation. So yeah, very, very good question, and obviously there will be a degree of cannibalization from Aussie to Buddy. The key thing here is how we've factored it, factored that into our modeling. So for both the Aussie Broadband brand itself and for Buddy Telco itself, our assumption is that 5% of the sales from Buddy will come from Aussie Broadband. The other really important part to this equation or this discussion is that most of those we do believe are value-led customers who would likely be leaving the Aussie Broadband brand anyway. And in that case, there's some really important math to kind of point out.
When those customers are with Aussie Broadband as a brand, try saying that fast too many times! They deliver AUD 10 net to us from a net profit perspective under Aussie Broadband. When we retain those customers by moving them into Buddy, we retain AUD 8, so effectively losing 2. And so that's a really important part of how we're looking at the cannibalization risk, as well as treating those customers moving forward. Do you have any questions on that, Jono?
No, that's... I mean, that's good clarity, and you know, I mean, that obviously starts to help out the net subs in general. I might ask another one, just a couple more, if that's okay. Maybe towards... to Phil and Andy. So Phil, can you just explain a little bit, just in regards to what goes into guidance, give us some clarity in terms of, you know, some of the businesses that are sort of, you know, contributing to that number? Look, I mean, fully, I think you're probably a little bit light on what I had, but the second half runway was pretty good. You know, we've got Symbio coming in, some synergies from there. I know you've previously spoken about the TCV in Or- in, not in Origin, sorry, in E&G.
Can you just expand a little bit around that makeup, please?
Yeah, so there's a few parts to sort of make up in the guidance range. We'll call out that Symbio is contributing AUD 38 of that number. And then the rest of that is the core Aussie business. And so, and Symbio will probably make up about AUD 12 of the 4 months into FY 2025. So there's a couple of sort of metrics for you to be able to work on. The AUD 38 number includes the synergy benefit that we're receiving from Symbio so far, and that will continue to progress, and we'll talk more about Symbio synergies at the August results. But that gives you a feel of sort of the split between those numbers.
No, I appreciate that context. That's a good color. Last one from me, and then I'll join the queue again. I mean, I think today with the guidance that we're seeing, you know, we're seeing probably the final sort of cleanse out from what's occurred with the white labeling relationship. You know, it wasn't that too many months long. It wasn't too far ago that that actually occurred. So my next question would be around just other initiatives, like can you talk us through any of the pipeline on other potential white labeling relationships, energy retailers, anything on the acquisition front, E&G, and that's my final question. Thank you.
Yeah. So look, we're continuing to progress opportunities in the white label and also reseller space, and hopefully we'll have something more to talk about that on in the next month or two. E&G has performed very well, leading into the end of Q4 . The pipeline grew quite significantly into that, and we'll call out some more specifics around that at the August results. But we've won a significant number of very large, high-profile brands in E&G, which are currently being provisioned. And they'll continue to roll through. So there's a lot of work still going on in the background.
I think the other perspective I'd also add is that whilst we've been working hard away on Buddy, there's been no impact to Aussie's retail growth in that period. There's been about 70 people work on Buddy over the last sort of two quarters, and so we've been able to do that with no impact on resi. But we've also been able to grow all our other segments as well. So we're sort of walking and chewing gum all at the same time as we're bringing this together, which I think is a huge testament to the team, so.
Thanks, gentlemen.
Your next question comes from Entcho Raykovski with E&P. Please go ahead.
Morning, all. I've got one question on the guidance as well. Just doing some very quick math, based on that number, Phil, which you gave us, a AUD 38 million contribution from Symbio. That seems to assume a decline for the business, ex Symbio. I guess just wanted to make sure that's correct. And then, is the Origin impact in 2025 perhaps greater than the AUD 14 million which you previously mentioned? I guess I'm just trying to get to an underlying, a clean underlying growth number, perhaps ex Origin, ex Symbio. Thank you.
Well, we've never called out a number for Origin for 2025. We've only called out a number for Origin in 2024. And so the impact in 2025 is always greater than 14, because obviously you've got the run rate leading into 2025. So that's the first thing I'd clarify there, is that we haven't called out a 2025 number for Origin. And there is some conservatism in how we're approaching this, because the phase out of Origin as it moves forward is still unclear, and we're still running a full staff base to support Origin into that period. We don't know what that looks like in terms of the timing of the run out.
We believe it's going to be the first four months of the year, but we don't have the phasing of what that looks like yet, and so there are a number of moving parts still around all of that.
Yeah, and Phil, I'd just add that the EBITDA, basically for ABB, the core business for 2025 is broadly in line with 2024, which includes Origin. So there's sort of, there's certainly not a decline in terms of the core business. It's broadly in line.
Okay, great. Thank you. And then second question, the AUD 10 million of startup costs for Buddy, do you expect those will be permanent in nature? So should we assume they stay in the base? I think you used the word one-off, or do you see that sort of like a one-off, or is it like a one-off step change? Just wanted to understand whether we should capitalize those going forward.
There's some a small amount of it is set up costs that we can be capitalized, but the majority of it is the marketing investment in Buddy, which would be an ongoing type basis. So, just as Aussie was when it was going through its growth phase, we over-invested in marketing in the early stage to build the base and grow the business. We're anticipating that we'll do exactly the same thing with Buddy. The marketing investment will be there to support its growth. We've been open for business for a few hours this morning and already seen really good sales coming through, so we're off to a good start in that regard.
But yes, we'll be continuing to invest in Buddy's marketing line, just as we have done with Aussie's over time.
What I'd just add again to that, Phil, is just that the actual marketing dollars per connection or per sale will become more efficient over time. So, the investment in totality will obviously change a little bit of shape over the future years, just as we learn more particularly.
Okay, thank you. Final one on Buddy. Are you able to give us the likely cost to serve for Buddy once you ramp up, and perhaps how it compares to the main brand?
The cost, the cost to serve will be lower. I think we've called out in the announcement that it will have a similar EBITDA contribution percentage to what ABB does. And so, whilst its gross margin is lower, once you drop through to EBITDA, it comes out similar.
Okay, great. Thank you.
Your next question comes from Eric Choi with Barrenjoey. Please go ahead.
Morning, guys. Sorry, can I just ask a follow-up to Enzo, and Jono's questions? Just on FY 2025 guidance and the impact of that Origin contract. I was just picking up what you said, Phil, and you sort of said you're still assuming full run rate of staff costs into 2025. So, if that Origin EBITDA contribution was AUD 14 million in FY 2024, do we assume like the gross margin contribution was higher than that? And can you give us an estimate for the gross margin contribution? Thanks.
Look, we're not calling out any specific numbers around Origin, in terms of its contribution in 2024 or 2025. It's a business that will run off over the next four months and won't be part of our numbers moving forward. So we've provided our guidance for 2025, and that's where we're leaving it.
Gotcha. I thought I would try. Can I, can I just take a step back, Phil, and, and go, like, if you just think about your organic business, you know, there's what's happening with Symbio, there's what's happening with Origin. But if you think about the organic business, and you just, you just dumb it down, and you go, "How many subs are you adding next year versus what you did in FY 2024, and, and what are the unit economics per customer in 2025 versus FY 2024?" It, it doesn't feel like, like, you're, you're forecasting a slowdown in sub growth or a deterioration in those unit economics. So, so something is slowing down that organic growth into 2025 versus 2024. And, and, and my, my view is we've just all modeled Origin badly, and, and that's purely the difference.
Would that be the right high-level conclusion?
Yeah, look, that's, that's our conclusion, to be honest, because our, our growth numbers, are very similar to 2024. And the unit economics are the same, but the way Origin has been modeled moving forward is, is really where the gap is.
Awesome. Just super last question. It's very helpful you gave us the Symbio estimates for next year. It's very small, but are you assuming you win the Symbio wholesale contract from SLC in that number?
There's a little bit in there. But yeah, there is an assumption we'll win that in time, but not very much of it in 2025.
Yeah. Thanks very much.
No worries.
Your next question comes from Ian Munro with Ord Minnett. Please go ahead.
Hi, Phil. Hi, John. Hi, Andy. Just firstly on the Buddy, can you just maybe confirm whether you've included any revenue and GP assumptions in that AUD 10 million OpEx investment in FY 2025? Is that a net number?
It is a net number. So we have assumed some GP, and we've got some other operating costs, which gives you the sort of round range of AUD 10 million down on our call, and relates to the AUD 10 million in marketing. But there is an assumption of GP, yeah.
Okay. Then just in terms of the operating cost structure going forward, you've noted that a lot of those costs are marketing. Can you perhaps give us a bit of a rough split of, you know, is it sort of 70% marketing, 30% operating costs, and how does that kind of look going forward?
It would be more significant marketing than the 70/30. So there's very little operational cost. So we've got a very lean, cost to serve and contact center resource modeled in. It predominantly is a marketing costs, and that's what, you know, going back to Phil's commentary, although the gross margin is sort of, less than our core business, by year three, what we'll see is our, EBITDA being at, at least the same as Aussie Broadband, so in the core business. So, yeah, I-
Understood.
More breakdown at this stage.
Yep. Yep, and just, just looking at the ENJ performance, can you maybe give us a sense of, on the terms of like the pipeline's been, you know, really active and obviously a few new contract wins. Maybe give us a sense of the contribution of those. Like, are we seeing positive GP and EBITDA in that segment into FY 25 under this sort of new guidance environment?
We are. It's, it's just a progressive onboarding, as we sort of talked about before. Like, when we win a deal, it can take 6-plus months to onboard a customer. And so there was a run-in to the end of financial year of a number of large deals, one that we're not anticipating will come on until the second half, from a revenue perspective. So there is some built into this financial year. But you don't get the full run rate into this year.
Very good. Thank you.
Thanks, Ian.
Your next question comes from Ross Barrows with Wilsons Advisory. Please go ahead.
Hi, good morning. Thanks for taking the question. I've got two, if I might. The announcement mentions that Buddy's pricing will be highly competitive, but also generate, you know, EBITDA and margin percentage similar to the Aussie's premium offer. Can you help us maybe, or can you quantify or even further clarify what you mean by similar? And the second part is really just around, you know, the lower cost to serve you've noted includes automation, AI, and a more direct method. But are you able to talk about whether it will require any offshore staff? Thanks.
Yeah. So look, it's. I'll answer the first one first. At this stage, we're planning to service it onshore, and we've been able to do that because of essentially additional automation and the AI pieces that we've built into the support model. Aussie's model today is based on a really high touch, phone-based support platform that will help the customer literally with virtually any, internet, even remotely internet-related problem sort of thing. Buddy is a very different model to that in that it will help with the internet service through online chat-based things, but it won't assist with other things that are not directly related to the connection. And so it's a very different model in terms of the level of support we're providing to customers.
That flows through in that a less touch with customers means less staff involved in servicing it. In terms of similar, we're thinking within a few percent of basically what Aussie's EBITDA contribution percentage is for those services, to clarify that piece.
Yeah, that's great. Thanks. Just a second one around the brand differentiation and the value proposition, I guess. You've noted that Aussie's obviously been very successful as a brand, and the knowledge of that team is being leveraged into this product. But I guess for the customer, I would assume that the Buddy brand needs to be totally independent from Aussie. So can you help us understand, I guess, how you can give the potential new customers the confidence that Buddy's gonna execute really well, and what the product differentiation is, I guess, without letting them know that it's Aussie, because there could be some migration risk if they really understand it's a similar product being provided by Aussie, if that makes sense?
It certainly makes sense, and it's a very good question. So I do encourage you to jump on to the Buddy Telco website after this, just to have a good look. What you'll start to see through that is the way in which Buddy is positioned, talks directly to the key customer concerns and pain points that exist at that value-driven end of the NBN market. So we're being very deliberate to make it very simple to understand what Buddy offers, why it exists, and why it's a great choice. In doing so, it is deliberately very separate to the Aussie Broadband brand itself. There's no "Powered by" logo for example.
The key thing here is really just appreciate the kind of wealth of customer research that underpins not only what Buddy is called, but also how Buddy is positioned. That ranges from everything from the iconography with the really cool dog that you see there, to the color schemes that have been chosen, to the key words that are used to encourage customers through that sign-up journey. Everything that we've done with Buddy is customer driven, and it's driven to really understand how to allay fears around a new brand coming into that market. It is very, very evidence driven. But do have a look at the website.
Okay. Thank you, Russell.
Thank you.
Once again, if you wish to ask a question, please press star one on your telephone. Your next question comes from John Campbell with Jefferies. Please go ahead.
Hi, guys. Just a couple of questions. Firstly, just around the pricing matrix of Buddy, it looks like it's pretty much positioned down towards the bottom end of that sort of competitive range, with the possible exception of Tangerine. Does that sound right?
Yeah. It's definitely targeted at the bottom end of that range, and I think there's movement like even with Tangerine in that it's... I think that's an offer that's probably appeared today. But yeah, it's definitely aimed to combat that bottom end of the market.
Yeah. Yeah. Thanks. Thanks, Phil. And in terms of that loss rate or that startup, those startup costs, or the startup losses for Buddy into 2026, we just assume that that AUD 10 million mitigates into 2026, as you start to get good customer ramp up and gross profit. And by and are you You're calling out FY 2027 to be EBITDA positive for the full year?
Yes.
Yeah, and look, if you look at it on a monthly basis, it will actually occur in FY 2026, but in terms of when the full pendulum swings, it's, it's-
Yeah
... 2027. Yeah.
For the full year. Yep. Yep, makes sense. And, Phil, just on Symbio integration, can you just give us an update around the timing, when you expect it to be, fully integrated? And, whether there's any update in terms of what you think the potential synergies are?
We're not, as we sort of called out, we're not integrating Symbio into Aussie. We're running it as a separate standalone business.
Yeah.
We are getting synergies come through today, and they're progressing. Opportunities like moving some of Symbio's dark fiber onto Aussie's dark fiber network is in train at the moment. And it's already been talked about on the call around the 18,000 NBN services that they've got that are sitting off with Superloop today, will eventually come onto our network as well. So all those things are all in train, but we don't have any plans to integrate Symbio-
No
Like what we did with Over the Wire. It'll, it'll remain a separate business at this point.
... Sure, but when would you be able to call out that the synergies such as they are have been fully delivered?
Fully delivered? I would say it will be in the Q3 of this financial year. We'll have most of that complete.
Okay. Is there an updated sort of dollar value of synergies that you expect?
We'll provide more clarity on that at the full year results. You can see some of it in that 38 number I've called out today, but we'll provide more clarity on that at, in August.
Okay. And, Phil, just lastly, just around on the resi side, and, just sort of eyeballing a lot of the plans over the last couple of months, it sort of looks like it hasn't become more competitive. It's potentially, if anything, some have gone up in price. Is that roughly right?
Yeah. So virtually all the market moved in June up in price, and Jono might jump in on this as well.
That's a very fair comment, Phil. So yes, in the June to now period, if you have a look at the market activity from pricing, everyone has more or less moved up between AUD 3 to AUD 5 at the retail level. And so while compared to kind of a historic base, we are more expensive compared to ourselves kind of yesterday, but when you look at the market, our positioning has remained exactly as it was. So it's important to see that market movement holistically.
Yeah. Excellent. Thanks very much, guys.
No worries. Thank you.
There are no further questions at this time. I'll now hand back to Mr. Britt for any closing remarks.
All right. Thanks for all your time today, folks. As I said, we believe Buddy will really really go gangbusters in market, and that's what we're hoping to see. The work that's gone into this has been huge, and as Jono said, it's been a very much a research led approach in how we're delivering this. So, we've got a good degree of confidence that this will go, and certainly the sales volumes that we're seeing through this morning already offer a standing start or a pleasing start. So we'll see you all in August, and look forward to chatting more then. Thank you.