To Mr. Paul Tyler, Chief Executive Officer. Please go ahead.
Thank you. Good morning, all, and welcome to Superloop's 2026 First Half results investor briefing. My name is Paul Tyler. I'm the CEO of Superloop, and I'm joined here by Dean Tognella, our CFO. This is really a great day for the company. I'm incredibly proud to be delivering what I believe is one of our strongest set of financial results ever, and at the same time, announcing an important acquisition, that of Lightning Broadband, enhancing our infrastructure credentials and further building on our long-term Smart Communities strategy. If we jump to Slide 4, but in doing so, you'll glide past the earlier slide in which we showed just some of the recent awards that we've won. It's sometimes missed when we talk about the great financial results, but underpinning our performance is also a great set of customer experiences.
Products that are high speed, high performance, and supported with excellent service. We continue to invest in these products and challenge ourselves to improve. We'll cover the first half results and the second half outlook first, then move to a few slides on the Lightning acquisition, and finally, there'll be an opportunity for Q&A at the end. So jump to slide 5. Looking at the headline numbers, Superloop has delivered strong, demonstrated momentum, and clear operating leverage. Revenue increased to AUD 317.6 million, up 23% year-on-year, driven by continued customer growth in Consumer and sustained Wholesale momentum as we enable challenger retail service providers. That top-line growth translated into a material earnings uplift, with underlying EBITDA of AUD 55.8 million, up 46% year-on-year.
Importantly, we also delivered a net profit after tax of AUD 5.1 million, which is a AUD 12.9 million improvement year-on-year. Having finally achieved a positive NPAT in the last financial year, we expect net profit and earnings per share to build quickly from here. Gross operating cash flow was AUD 55.3 million, and operating cash conversion was 96% of underlying EBITDA, underlying the highly cash generative nature of our Business. Finally, customer growth remains a key driver of our performance. We ended the half with 805,000 customers, up 21% year-on-year, with 74,000 net customer additions during the half, almost all organic and industry-leading outcome. So in summary, the results demonstrate that Superloop is delivering strong revenue growth, expanding EBITDA margins, growing NPAT, and generating significant cash, all underpinned by sustained customer growth and satisfaction.
Move to slide 6, please. Across the entire group, with growth coming from all three segments and translating into higher earnings and cash flow. We continue to see our NBN market share increasing to 7%. Importantly, we captured 14.5% of NBN orders in first half 2026, which reinforces that we are consistently taking share. This customer growth is flowing through to our revenue across all segments. Consumer revenue increased 29% year-on-year. Wholesale revenue grew 28%, and Business revenue increased 4%. Our underlying EBITDA margin increased to 17.6%, up 2.7 percentage points on the previous year. As a result of the pleasing momentum in the first half and the visibility we have into the second, we are upgrading full-year underlying EBITDA guidance to between AUD 112 million and AUD 120 million.
We're also on track to achieving the last remaining metrics in our three-year plan, which we regard as no small achievement, given the ambitious targets we set of doubling our revenues while simultaneously expanding margins. I'll cover the acquisition of Lightning Broadband at the end of the presentation, as mentioned. So if you move to slide 7, please. Over several years, Superloop has delivered sustained growth across customers, revenue, and earnings, and the first half of FY 2026 is a continuation of that trend. As mentioned, customer numbers ended the half at just over 805,000. That operating leverage that comes with scale is clear, with revenue growing faster than customers. EBITDA increasing at 46% year-on-year, again, significantly faster than revenue. Our strategy aims not just to deliver growth, but rather doing that whilst simultaneously expanding margin quality.
Revenue growth in the first half was broad-based, with all three segments contributing. Consumer remains the largest contributor up to expansion, particularly on higher speed plans. Wholesale is becoming an increasingly important contributor to group revenue and quality, and Business revenue is improving, with Smart Communities now a consistent driver together with a growing revenue book from enterprise and secure connectivity wins. So while Consumer drives volume and scale, Wholesale and Business revenues are improving the resilience and sustainability of group earnings over time. On slide 9, you can see the contribution from each of the segments. On this show here is that whilst our Consumer had a great half and is clearly our largest revenue contributor, Business and Wholesale account for 46% in the structure they're structurally higher margins. Sorry. Slide 10.
Segment delivered 49,000 net new customers, the strongest organic result we've ever achieved. Despite competitive measures associated with the NBN speed install and competitors changing their pricing structures, that customer growth translated into 29% revenue growth. Importantly, we've achieved record customer growth whilst maintaining our pricing discipline and have maintained our margin quality. We move to Wholesale on slide 11. Momentum in the Challenger ISP market drove the Wholesale segment revenue up 28%, and margin customer numbers increased to 258,000, up approximately 20,000 in the half, with 15,000 of that 20,000 total additions coming in the final 7 weeks of the half. Then finally, Business on slide 12. Business revenue increased 4% to AUD 54.3 million, with signs of improving market conditions and momentum.
New logos signed in the period include major wins such as mycar Tyre & Auto, ARB, Coles, and Village Roadshow. Is more measured than Consumer and Wholesale. Margin quality continues to improve. Absolute gross margin was up nearly 10% year-on-year, improved to 41.9%, which reflects a better mix. On slide 13, across the group. I won't cover it again, except to say that we are thrilled by how the Business has performed and look forward to a strong second half, where we expect to continue the positive momentum in Consumer and see, strong second half seasonality coming through Wholesale. Jumping to slide 15. Our customer growth is underpinned and acquisition efficiency. During the half, we saw momentum across all core brand indicators, including prompted brand awareness, branded search, and site traffic.
Branded search is particularly important in telco as it's a brand-led category, so our steady progress here is encouraging. Slide 16. Customer satisfaction directly impacts our growth and profitability. Our investments in automation and AI have been paying dividends, with demonstrable improvements in both customer experience and cost to serve. We are increasingly embedding AI and workflow automation across support and operations, and we're now seeing tangible benefits. Superloop developed customer-facing tools such as Refreshify and X-Ray, allow customers as quickly through the Superloop app, reducing the need for assisted support. At the same time, our AI agents, Teddy and Mo, are handling a growing proportion of customer interactions and delivering higher customer experience scores.
Notwithstanding our growing customer base, as a result of putting Superloop tools directly in the hands of customers, our inbound support calls per customer actually decreased around 30% over the last 18 months, and we're also reducing our reliance on voice, which is our most expensive support channel. Slide 17. The Superloop business is built on a single integrated operating model that supports Consumer, Business, and Wholesale at scale. At the core is our Infra- on-Demand network and single integrated digital stack, which allows us to launch products, onboard customers, and manage the network efficiently across segments. Importantly, we are increasingly embedding AI and automation across the business, not as standalone initiatives, but as core enablers of scale and efficiency.
Slide 18 is a quick representation of our network, which includes over 2,400 on-net data centers and commercial sites, kilometers of owned metro fiber, complemented by international subsea capacity. This footprint serves business and Wholesale customers from a common infrastructure base. Importantly, once the fiber is built, additional services can be delivered at a relatively low marginal cost, which supports the earnings progression we've discussed earlier. The network also underpins our smart community strategy with the ability to leverage our fiber footprint to connect existing and new buildings. I'll now hand over to Dean to provide some comments on the financial performance of the group during the half year.
Thanks, Paul. It has been a very strong start to FY 2026. Superloop's results in the half demonstrate the scalability, efficiency, and quality of our business. We reported revenue of AUD 317.6 million, up 23%, Consumer and Wholesale. Growth is translating directly into profitability, with underlying EBITDA up 46% to AUD 55.8 million, reflecting clear operating leverage. Our gross margin increased by AUD 23.9 million to AUD 111.9 million. Importantly, we held our Consumer gross margin at 27.5% while achieving record volume growth. Highlighting the strength of our Consumer offerings and our low cost to serve remains a key feature of the result. OpEx growth with AUD 5 million of this growth being from an increase in marketing spend.
Our OpEx to revenue declined from 15.4% in the first half last year to 13.4%. While our total employee expenses were essentially flat, reflecting our scalable operating model and increasing returns from our AI-enabled. Cash generation was a standout. Gross operating cash flow rose 43% to AUD 53.5 million, converting 96% of underlying EBITDA, demonstrating the high quality and repeatability of our earnings. Free cash flow increased to AUD 32.2 million, up 102% year-on-year. Moving to slide 21. Starting with Consumer. Consumer gross margin increased by AUD 14.3 million, broadly steady at 27.5% despite industry pricing resets. Business contributed a further AUD 2 million uplift. This increase reflects increased contribution from Smart Communities and increased traction in secure connectivity, with the GM percentage improving 2.1%- 41.9%.
Wholesale was the standout contributor, with reported GM up AUD 7.6 million and reported GM percentage up 5.6 points to 65.9%. This reflects healthier product mix and the end of modem pass-through revenue for a Wholesale customer. The group gross margin percentage remains stable at 35.2%, even as we achieve. Moving to slide 22. This slide really illustrates the cost advantage. Total operating expenses increased by AUD 8.6 million or about 16.6% year-on-year. That uplift was in to capture a market opportunity. Marketing was the largest increase, up AUD 5.1 million. This investment contributed to the addition of 49,000 new Consumer customers and boosted brand awareness for both Superloop. Other OpEx increased modestly, up AUD 3.3 million. Of note, employee expenses were essentially flat despite the scale.
This is a direct outcome of the digital investments we've been making, including automation, AI workflow tools, and improved digital customer journeys. We are increasingly able to support more customers, more orders, and do so by leveraging technology to provide an excellent customer experience. Moving to slide 23. OpEx spend continues to be highly targeted and aligned to growth, efficiency, and long-term margin expansion. Total CapEx for the half is AUD 21 million, representing a heavier first half due to a number of larger fiber and network-related investments. This increases in spend with digital and transformation, where we invested AUD 5.2 million into automation and AI in our platforms, and in customer-related CapEx, where we invested AUD 7.7 million in building our Smart Communities infrastructure and other growth opportunities. Now, moving to slide 24. Good strength for the half.
Gross operating cash flow increased to AUD 53.5 million, and cash conversion remained excellent at 96% of underlying EBITDA, which continues to be a distinguishing feature of the business. It has held up even as we have accelerated growth, demonstrating our underlying discipline in working capital and the repeatable nature of our revenues to AUD 32.2 million, up 102% year-on-year. We finished the half in a positive net cash position of AUD 3.9 million, and we remain well inside all covenant thresholds. We also completed the refinancing of our facility in October, securing a new AUD 300 million four-year loan package with significantly improved terms. The expanded facility provides ample investment and the acquisition of Lightning Broadband. Even post the completion of Lightning Broadband acquisition, the Business will maintain substantial, with a leverage ratio of approximately 1.4 x. I'll now pass back to Paul for the FY 2026 outlook.
Thanks very much. So we're on slide 20, on track to deliver the final ambitions of our 3-year Double Down strategy by the end of FY 2026. While not anticipated in that plan, it's encouraging that our growth to date has been almost entirely organic. On slide 27, based on the strong first half performance and the continued trading momentum we've had to date, we've upgraded full year FY 2026 underlying EBITDA guidance to a range of between AUD 112 million and AUD 120 million, which represents approximately 21%-30% growth on FY 2025. Capital expenditure guidance remains unchanged at AUD 32 million-AUD 35 million, excluding the IRU. CapEx guidance does not assume any contribution from Lightning Broadband. So with that, I'll now spend a couple of minutes on the acquisition itself.
On slide 28, before I move into the detailed slides, I wanted to note that this acquisition accelerates Superloop into a scaled national fiber to the premises challenger, with materially greater exposure to high margin, annuity style revenues. This is a business model we know well. The acquisition adds scale and momentum to our Smart Community strategy, which we've been executing over a number of years. Over the next few slides, we'll step through why Lightning is such a strong strategic fit, how it enhances our Smart Community strategy, and how this acquisition for shareholders. Slide 29. So this acquisition is the next step in a strategy we've been executing for some years. Superloop has deliberately built capabilities in Smart Communities, and has now added significant scale through the Lightning Broadband acquisition. Lightning Broadband adds a large built FTTP network and a larger contracted book.
This is an acceleration of an established strategy, as you can see by the milestones on this chart. Slide 30. Post-acquisition, Superloop becomes a scaled national fiber to the premise challenger, with today, Lightning Broadband having 24,000 built FTTP lots and a contract book of an additional 30,000 lots. These 30,000 lots are expected to be built over the next five years and provide visible revenue and earnings growth. The acquisition enhances your retail service providers. From a financial perspective, Lightning Broadband has strong financials with high gross margins and annuity-style revenues. We expect to be able to further improve margins through synergies from leveraging Superloop's existing domestic and international assets. Slide 31. Superloop has entered into a binding agreement to acquire 100% of Lightning, funded from existing cash and debt facilities.
On completion, leverage remains modest, with net debt expected to be around 1.4 x balance sheet flexibility. Lightning is expected to generate approximately AUD 11 million of EBITDA in FY 2027 on a pre-synergy basis. A nd the transaction is expected to be EPS accretive in FY 2027. We expect to realize around AUD 5 million of annualized synergies, achieved within the first three years, primarily through network integration and infrastructure efficiencies. Completion is subject to customary regulatory approvals, and we currently expect the transaction to complete in the fourth quarter of this financial year. Slide 32. The Lightning Group includes Lynham Networks as the FTTP infrastructure owner and Wholesale network owner-operator, sorry, operating as a Statutory Infrastructure Provider across more than 400 locations. It also includes Lightning Broadband as a retail service.
The group builds and owns fiber to the premise infrastructure in residential, apartment, and commercial developments, where overbuild is commercially unattractive once. Today, Lightning has around 54,000 contracted lots, of which approximately 24,000 are already built and around, across 400+ developments. The network operates on an open access Wholesale model, allowing multiple retail service providing in- infrastructure. While the group generates some retail earnings, the core value of the business is from the Wholesale services it provides. Slide 33. Lightning has historically been strong in multi-dwelling developments, while Superloop adds student accommodation. The combination also materially expands the number of retail service providers who use the FTTP network. From a sales perspective, the development bases are largely additive, expanding our national coverage and effectively doubling sales reach and pipeline depth. Product set and infrastructure scale expand our addressable market.
While leveraging Superloop's existing fiber to improve network economics over time. Slide 34. Lightning Broadband generates annuity-style revenues with a strong skew towards Wholesale infrastructure income. The revenue mix is predominantly Wholesale, with the balance coming from retail and other services. High recurring revenue, stable occupancy-driven cash flows, and strong inflation resilience over time. Importantly, underlying intrinsically well in excess of 25 years, which support durable, predictable earnings. From an economics perspective, the model has high operating leverage. Once the fiber is built, the cost base is largely fixed, and incremental services are delivered at high gross margins. The acquisition provides long-term organic growth. The attractive revenue characteristics are underpinned by a highly visible contracted growth pipeline, future revenue and earnings expansion comes from the lots that are already committed by developers, often years in advance, which provides strong forward earnings visibility.
Future contracted premises are around 2.8 x the current active base, which highlights the long runway for organic growth as sites are constructed and activated. Lightning's contract book is more MDU-weighted, as mentioned, which typically have shorter construction timelines, supporting faster conversions from contracted to revenue-generating assets than in comparable broad acre developments. On slide 36, by integrating Lightning's FTTP footprint onto Superloop's existing network, we can reduce backhaul and transit costs, improve utilization of our own fiber assets, and systems across a larger footprint. We expect to realize around AUD 5 million of annualized cost synergies within 3 years, as discussed. On slide 37, Lightning Broadband accelerates our smart community strategy.
It strengthens our competitive position with developers and retail service providers and improves network iteration is funded within existing facilities, expected to be EPS accretive, and supported by low-risk network-led synergies. Overall, this equity and supports long-term shareholder value creation. Okay, slide 38. So to close, I just wanna step back. We've delivered an exceptional set of results in the business, with the first half of FY 2026 demonstrating that our strategy is working and we are scaling as intended. We've delivered strong broad-based growth, increased profitability, and excellent cash generation, whilst continuing to grow customers at an industry-leading rate. Importantly, this performance has been organic. Further, we've taken a significant step forward in our smart community strategy with the acquisition of Lightning Broadband, which accelerates our scale as a national FTTP challenger and expands the infrastructure earnings of the business. With that, very happy to take questions.
Thank you. If you wish to ask a question, please press star for your name to be announced. If you wish to cancel your request, please press star two. If you are on a speakerphone, please pick up the handset to ask your question. Your first question comes from Nick Harris with Morgans. Please go ahead.
Hi, Nick.
Hey, Paul. Thanks very much. Great set of numbers. I've fielded, I guess, a barrage of questions just for three months. I really wanted to focus on that. So I'll just hit you with my two questions and then answer them, if that's okay. So if I look at Wholesale and Origin, and I sort of backsolve from the AGM, it looks to me like the net adds in the Wholesale segment have basically 3x from November to December 2025. And if you use that December 2025 run rate, it suggests Wholesale/Origin could be adding more than 60,000 subs in the second half. So that'd be a better half than last year, which is probably a bit different to what some people were worried about.
So my first question is: Is that logic reasonable and flavor or color around what's happened post-December? And my second question is just on Superloop Consumer NBN. Kinda similar math, on pricing, obviously from much higher levels, but in November, December, and a bunch of Superloop investors seemed worried that it was going to hurt your NBN Consumer growth. But from what I can see, your adds in December, on Superloop-branded NBN were double what they were in November. So the numbers I'm seeing actually suggest you're doing better, which is consistent with the 14%, 14.5% add. So the question is really, sorry, it's a mouthful, is it safe to say what your competitors are doing is not slowing your growth? Actually, it's accelerating it. Any reason to think differently about the net adds in Consumer December? I'll stop and breathe. Thank you.
Thanks, Nick. Let me try and give some color without being cute. Obviously, we haven't, and we, and we don't comment on Origin specifically, but, but the, the trend you call out for our Wholesale business, is, is correct. I think the logic is fine. We would expect our Wholesale business to have a weak first quarter, which it, which it did as expected, and, and there's there's clear seasonality in that, and we've explained that many times. We definitely picked up materially in the second quarter, and, and particularly in the back end of the second quarter, as our Wholesale and more aggressive propositions to market, and we've continued doing that into the, the first half. So yes, we feel good about where Wholesale is going.
As I said, we haven't given guidance for uplifted our earnings guidance for the full year. So you can sort of read out of that that we have confidence in where the business is going. On our Consumer business in particular, I'll make a couple of comments. We've always said that any disruption in the market is good for us. We are than our existing back book share. As we've said, you know, we're now 7% market share and acquiring at 14.5% of the market on an ongoing market is good. Be that price shocks from NBN, you know, free speed installs, breaks up the rusted-on bases is good because we generally acquire quite well.
But I'd also call out, it's not just a price game. If you look at some of the accolades that we have demonstrated at the very start of this presentation, and we have a fantastic product. So the Marquee customer awards, the very starting award we haven't won before, is one of the best RSPs in the market. Obviously, we've been winning the best, but we've, we really do have a great product that's getting, you know, rave reviews, frankly, from the marketplace, and the brand is working. So our brand preference is increasing, and, you know, with that, in strengthening brand, market disruption, and a value product that performs exceptionally well, you know, it's very good environment for us to take share.
I think some of the commentary around the news of our demise, based on the, you know, a price change from a, you know, a legacy RSP, even a large one, is a little bit bemusing.
Thank you. I'll, I'll jump to the back of the queue and let someone else ask another question. Thanks, Paul.
Thanks, Nick.
Your next question comes from Evan Karatzas with UBS. Please go ahead.
Hi, Evan.
Hi. Hi. Morning. Morning, all. Just the first one around the marketing within that. But just can you understand, I guess, a bit more depth, how you're seeing the ROI from that, that marketing, and if it's helping at all to reduce any of your churn or any sort of, I guess, yeah, further metrics you can provide around the marketing spend? And then also into 2H, how you're thinking that line should look as well. Thanks.
I'll pass to you on this one, Dean.
Yeah, I'm happy to take that one. We increased our marketing spend in the first half, and the returns are excellent in terms of what we're seeing in Consumer net ads. The other piece as well was there was a fairly significant directed at our brand, and we're trying to give you a sense of the brand metrics are really starting to help us. So what we're seeing is increasing efficiency as our prompted awareness and conversion rates improve. So we're extremely happy with the results of the spend in the first half. And coming into the second half, you know, trading is good now, and we're happy with the costs that we're acquiring.
If it stays in these sorts of conditions, then, yes, we will potentially come back a little bit from the first half and spend on marketing, reserving the right to keep spending a little bit higher than what we have historically in the second half on marketing, 'cause the conditions are good, the acquisition rates are high, and we're not seeing a substantial change in the costs that we've been historically acquiring at.
Yeah. Good one. Good one. Okay, and then just coming, firstly, congrats on the deal. Are you able to give us an idea of how many RSPs you have now, assuming Lightning goes through, and if possible, which are the larger ones you've now added as well? I just remember Opticomm talking a lot about how important it was to add more and more RSPs. So just keen to sort of unpack that element of it a bit, if that's possible.
Yeah, look, it's certainly important, and the acquisition of Lightning does double the number of RSPs that are on our network as announced. We're gonna have an investor day in June, probably early in June, we'll announce a date soon, where we'll really lay all that out. And we should have completed by then, so. Well, hopefully, we'll complete it by then. So yeah, we'll lay out, you know, RSP lists and all those sort of things in that investor day. It is important. I'd make the distinction that it's a little bit different in our case, because we do come with strong RSPs ourselves, right?
In Opticomm's case, they didn't have, you know, a strong internal RSP, whereas clearly, as fast-growing brand in the market, Superloop already turns up with a pretty important. But certainly, you know, a higher amount of choice is a feature that we'll continue to promote. So we'll give you some more precision on that.
Okay, good one. Thanks. Thanks, Paul.
No other questions? Your next question comes from James Wilson with Macquarie. Please go ahead.
Thanks for taking my question. Just firstly, on the guidance that you've given us, if we take last year's seasonality as a proxy and apply it to your first half result, it implies around AUD 135 million of EBITDA for the full year. Now, conscious that you know, conservatism is appreciated by the market, but are there any drags in the second half this year that we might be missing relative to last year, that could impact the seasonality for FY 2026?
Nothing dramatic. We've, you know, I mean, yeah, there's a degree of conservatism, but the, you know, the short-term market changes, you know, we've assumed a degree of seasonality, obviously, in the guidance of 112-120. That's, you know, that's a, you know, a similar skew to last year. If things go well, you know, if, if we continue to trade at the, at the levels we are, then obviously we'll be in the upper end of the range. If trading conditions come off a little bit, then it'll be sort of further down the range. We've given a range. It's, it's, you know, it's a material uplift on the prior year. I think, the top end of the range will be 30% year-on-year increase in EBITDA. So, look, I think it's a pretty strong progression.
All right, guys, and just on, Lightning as well. You've given us an 85-15 split on revenue between Wholesale and Retail. Are you able to give us an idea about maybe the different margin structures between both of those bit of revenue they contribute to in terms of dollars?
Well, I don't think we're gonna give much more detail than we've given in the announcement, and we will if we've completed the transaction. Yeah, I think we'd probably just leave it at that.
All right. Thanks for that.
Your next question comes from William Park . Please go ahead.
Hi, William.
Dean, thanks for taking my question. Just a quick one with respect to Lightning Broadband acquisition and synergy number that you've called out. Can I just ask what's factored into those synergies? Are you effectively factoring in some of those 30,000 lots coming to the market? I guess being effectively active, you know, and you called out sort of 5-year, in the top 5-year timeframe, but are you factoring synergies effectively based on, you know, what you've already got, so 24,000 lots? Thank you.
No, it's synergy based on the business there today. Obviously, growth from here is additive on top. I think the slide on synergy realization really gives a pictorial perspective on the synergy. So these aren't synergies that are premised on firing a lot of people or anything like that. These are network-based synergies, primarily. If you look at the map that we have on slide-
36.
36, you can see in the, in the blue, that is a map of our fiber. A lot of that being the fiber that we purchased through the Uecomm acquisition, and some various other elements of our fiber. So that's an, that's an existing asset that Superloop had. If you look at the red dots, that's where we've mapped the Lightning Broadband locations on top of it. You can see how close those, or how well-mapped those locations are to our fiber. Obviously, that allows us to bring all those sites on net, so fiber tails or, or, you know, leased tails, and bring them onto our own network. And that's the biggest, single line item of synergy, and there's various other network synergies associated with that. But to, to reiterate, it's off the existing network, so the...
It's additive to the AUD 11 million EBITDA that is in the existing business. The future growth comes on top.
Thank you. And then, just, just appreciate it's been more than a week, but just the AGL contract. Just, could you just provide some color around whether there will be on that and, and, yeah, so just any color around that will be, will be great if there is going to be a breakthrough. Thank you.
Well, I mean, we don't. There hasn't been a break. Obviously, we have an existing contract with AGL. You know, they advised us that they no longer need our services. I wouldn't expect any windfall coming out of that. And it's not, you know. Let's be honest, it wasn't an unexpected outcome. You know, we, I think even with yourself, William, we had a lot of discussions about whether we'd be able to keep AGL after we won the Origin contract. It also isn't such a material part of our business. I think we put out a release saying it represented around about 4% on an annualized basis. So, not a particularly unexpected event. I wouldn't expect any windfall one-off, some, y ou know, there's only so much we can say about a commercial contract.
Thanks very much.
Your next question comes from Benjamin Jones with JP Morgan. Please go ahead.
Morning, guys. Thanks for taking the question and congrats on the Consumer segment. Obviously, the market was obviously very active last year and appreciate your comments on subs growth. But any observations that you're seeing thus far on market pricing, and should we be assuming any sort of step change in ARPU or margin expectations as a result?
Look, we've given our gross margin, our midterm gross margin target. We've maintained that target. Obviously, we're delivering above that target and have been for some time, and we'd be disappointed. Very competitive in the marketplace, as you know, as you can obviously see, and has been for the last six months. So we're quite pleased we've been able to maintain our margins in intense competition and yet maintain volume, in fact, accelerate volumes. So, you know, I think you can read quite a bit into that. We haven't our margin target in Consumer, meaning if things do get even more competitive, then we will be ready to respond. But as I've said many times, we won't lead that race to the bottom on pricing. We'll see what others do.
We're certainly ready to respond to it. We have the artillery to respond should we need to. I don't know that it can get much more competitive because it is intensely competitive at the moment and has been since the speed boost event, coming into the start of the second quarter.
Yep, very, very helpful. Then just on the Lightning Broadband business, I mean, how should we think of Smart Communities business and how much of a step up in CapEx can we expect into 2027?
Look, the Smart Communities business we've made no secret of that. We're delighted to spend capital in the Smart Communities business, to be frank, because it's such it generates such defensible, high-quality earnings with such a, you know, a deep moat and long-dated returns. And this acquisition itself, we think will uplift our capital requirements around about, you know, AUD 8 million-AUD 10 million into the future once we get into a run rates position, AUD 8 million-AUD 10 million per annum. But again, that's it was largely sort of telegraphed as a core part of our strategy into the future, and that CapEx in this part of our business would continue to rise with sales success. There's no...
We only deploy capital on successfully won projects, so returns are pretty secure.
Got it. Very helpful. Thanks, guys.
Your next question comes from Brian Han with Morningstar. Please go ahead.
Your high margins and low cost to serve, can you make some comments as to how sustainable they are? Or, God, when you say, you know, Superloop will respond if there is a race to the bottom.
So the Superloop strategy for the last five years has been one of Efficiency and Automation. We're very proud of the network. So we have network econ, you know, ownership back in the end world. We've invested very heavily in Automation and integrating all the various acquisitions into a single digital stack. We've been an investor for several years in AI. We, you know, we believe that this is a commodity. You know, the Consumer broadband are shinier and faster and prettier than anyone else's, but fundamentally it is a, it's a commodity proposition. So price will be a feature of this part of the market, and we wanted to make sure that we could have a value proposition.
We think the value part of the market is the long-term defensible part of the market, which is why we've positioned ourselves there. But to exist in that part of the market, we've got to ensure we're delivering a great product with high levels of customer satisfaction at a value price. So that's why we've invested so heavily in automation and efficiency. The best metric to explore that, I think, is on slide 16, where you look at customer interactions. Another metric to look at is. Sorry, in the customer interactions per customer, obviously, as we've been putting those self-help tools into the hands of customers.
Something else to look at is OpEx as a percentage of sales over the past sort of four years, has continued to reduce aggressively, and we think has still some way to go. So, you know, that is a view that it was the right part of the market to focus on. I would argue that 13.4% OpEx as a percentage of revenue is probably market leading. I don't have everyone else's numbers to hand, but I'd be surprised if anyone else is able to deliver that outcome. So that does mean we are fit to continue to make good, healthy margin in a, you know, a very large but commoditized category.
That's very helpful, Paul. And, my second question is, sorry, did you say you're not going to disclose the revenue base of Lightning?
No, I didn't say that. We just haven't disclosed it as yet. We'll give a lot more detail on Lightning's financials when we complete the transaction, which we said will happen in the fourth quarter.
Paul, can you at least tell us how many employees will be coming across?
Well, all of them. I don't have the numbers.
Okay. Bye. Okay, okay. Thank you.
Your next question comes from Olivia Onslow with Macquarie. Please go ahead.
No question from me. Thank you.
Your next question comes from Nick Harris with Morgans. Please-
Hello again. Just two more questions, if I could. One was just, unpacking Lightning a little bit more. So you talked to AUD 11 million EBITDA in FY 2025, just 20,000k, sorry, whatever it is, 14,000 active lots. Or and then how do we think about lot activation over the next few years? And I've obviously got that 30% revenue CAGR. Is that basically how lots activate?
Yeah, Nick, the way that the FY 2027 has worked out, it's based on the FA, plus our expectations for buildings that will be completed in FY 2027 and the activation rates that come with that. And they have more than 14,000 active, but right now, as of today, we have 14,000 active services.
Gotcha. And so the more than 14, does that get you to 11? Is that the right way to think about it?
Yes.
11 is the starting point.
Yeah.
Okay, thank you. And then just the second question was, is there any sort of material or does it just kinda get covered by business as usual, CapEx? Thanks, Dean.
Yeah. So from a systems perspective, I think we've indicated that the expectation would be around AUD 8 million-1AUD 0 million on CapEx associated with supporting Lightning's contract book. I think that sort of represents what we'd expect to see, as we build out the 30,000 contracted book. From a financial perspective, what excites me is the fact that not day one earnings, but the fact we have a contracted book of 30,000, which is more than the actual built network of 24,000. So when we talk about growth in revenue and earnings, that comes from clear visibility into that contract book, and modeling that out going forward.
That's great. Thank you.
Your next question comes from Cameron Bell with Canaccord Genuity. Please go ahead.
Thanks. Morning, guys. Okay, I might just flesh out Nick's question, the EBITDA from more than 14,000 lots. Like, is there much of a cost base, and how does the operating leverage look within that as you ramp up?
Yeah. Yeah. So, we've indicated that the Lightning Broadband business has high margins. So, essentially what we have is once you connect a lot to that network, you have a really quite a fixed cost, and you have high margins ongoing. So, there's CapEx required to build out to a building, connect the buildings, and then on an ongoing basis, you have a high GM. What was the question again?
I'll push my luck and go more direct on it then. So the-
Yeah.
The 54,000 lots, what would you say is the-
Well, I mean, our intent will be to have billing customers in every single one of those lots. Now, that's, that's, you know, unrealistic to think that you're gonna have every single lot filled. But, I think the best proxy to look at, Cam, is NBN. You know, the earnings profile, the pricing, the fill rates, all those sort of things. It's a pretty good proxy for way that the Smart Communities business in general will pan out as it does for our competitors. The key thing is winning the development and getting the Statutory Infrastructure Provider protection, getting the registration, owning the fiber in each of those lots, and then, you know, and having the patience to wait, to put the capital and then wait for the earnings to come in.
But in the long run, we would want to fill the vast majority of those lots. And obviously, it's, you know, hard.
Yep, okay. And then, last one from me. You previously said that your existing Smart Communities business, yes, annually, the addition of Lightning, how high does that group number, sort of rough annual target go?
We have an organic sales target. That's a live discussion, but obviously it has to increase from here. The market is only as big as the market is big, though. So, you know, there's a limit on how much we can grow organically on an ongoing basis. But we, you know, combined now, we have some 170,000 contracted lots, as we said, so it's already a substantial book of, ye ah, it's a focus for the business. We'll continue to try and grow from here.
Thanks, guys.
Your next question comes from Jimmy. Please go ahead.
Yeah. Hi, guys. I guess I'm trying to get at the same thing, which is understanding the incremental margins. If you're basically got incremental margins in the group of about 30% versus what you reported for the period at y ou're adding further high gross margin revenues with Lightning. Is it fair to think that there's upside retail margin that's sort of in expectations at the moment?
You mean EBITDA percentage over time? As the, as the mix of Wholesale, you know, that drives margin quality up as the, we currently report our Smart Communities business in, in Business, but we will probably review that in time. But overall, as the proportion of Wholesale and Smart Communities grows as a, as a, you know, proportion of our, our overall earnings, then yes, of course, the group margin quality will rise.
Perfect.
Once again, if you wish to ask a question, please press star one on your telephone and wait for your name to be announced. There are no further questions at this time. I'll now hand back Mr. Tyler, for closing remarks.
Okay, thanks. Well, thanks, everyone, for taking the time. I know we've taken the full hour, but we do think this is a really important result for the business. As I mentioned before, you know, we're very proud of the first half result, the growth in the top line, the growth in the profit, and particularly the cash that the business is throwing out. We're excited about Lightning Broadband and what it means for the group. We're, you know, pleased we've been able to uplift guidance for the full year, and we're pretty pumped about the outlook from here. So, thanks all for your time, and wish you a good day. Thank you.
That does conclude our conference for today. Thank you for participating. You may now disconnect.