Aussie Broadband Limited (ABB) Earnings Call Transcript & Summary

Thank you for standing by and welcome to the Aussie Broadband Limited FY '26 Results Call. [Operator Instructions] I would now like to hand the conference over to Mr. Brian Maher, CEO. Please go ahead.

Thank you. Good morning, everyone, and welcome to Aussie Broadband's FY '26 Results Briefing. My name is Brian Maher and I am the Group Chief Executive Officer of Aussie Broadband. I'd like to start off today by acknowledging the Aboriginal and Torres Strait Islanders as the First Australians and for their role as the original communicators, connectors, scientists and carers of the land and waters across Australia. We pay our respects to elders past and present and to all First Nations peoples around the world who have nurtured and sustained their lands, cultures, languages and communities for countless generations. We honor their deep knowledge systems, resilience and ongoing contributions to the well-being of our planet. I'm joined on the call today by Darren Rowland, our Group Chief Financial Officer, who joined us in February. Today is his first results announcement for us and you will hear from him shortly. On Page 3 of our deck, you can see today's agenda. We'll start by going through a quick overview of the year before diving into the financials and the performance of our 3 segments. We will then have a look at our summary and outlook for FY '27 before we head into Q&A. Before we go into the results in more detail, I just wanted to touch on some of the awards that we've won, which are allowing us to validate how we are tracking towards our ambition to become the telco people love. Let's turn to Page 4 of the deck. Aussie Broadband's reputation is underpinned by the trust that our customers and partners continue to have in us. We've never taken that trust for granted and our people continue to work hard to ensure we retain it every day. This shows in the recognition we've received from third parties. Among our many award wins that you can see, Roy Morgan once again named Aussie Broadband Australia's Most Trusted Telco. This is the fifth year in a row we've held this honor and we're looking forward to the impending announcement for 2026 and hopefully retaining that title. A first-time award for us this year was nPerf's Best Broadband Performance Award, which evaluates factors such as download and upload speeds, latency and streaming experience. Other awards included Fortinet's Australian Partner of the Year and Telco Partner of the Year and a range of others. The next section on Page 5 has a snapshot of the group. As I mentioned, customer trust and service quality continues to be the bedrock of our business across the entire group. Our customers know the value of our locally based residential service and the premium experience they receive. Owning and operating our own assets like our 2 Tier 1 voice networks, our expansive Aussie Fiber network and wholesale platforms like Carbon and Nitrogen give us that added differentiator in the market. Something that you'll hear a lot about from Darren and I today are the benefits of our diversified go-to-market approach enhanced by our strategic transactions over FY '26. This means we can play to diverse customer cohorts with a range of offerings to suit different customer needs and having growth opportunities across the Australian communications landscape. And importantly, as you can see at the bottom of the page, all of this is brought to life by our dedicated team of game changers. Finally, on the right, there are 3 key segments that have each played a role in delivering across these areas. We still maintain a challenger mindset in the residential space combining our growing scale with the same customer focus that has always set Aussie apart. That spirit is also thriving in our business sector. Our reputation in the segment grows every year with our teams winning more clients and expanding our relationship with our existing customers. Same is true for wholesale where our platforms and product accessibility enable the growth of other challenger brands. On Page 6, we can see the progression of revenue, gross margin, EBITDA and EBITDA margin. Since 2021, revenue has grown by a compound growth rate of 30% and EBITDA at a rate of 54%. Gross margin has steadily improved over those years most markedly in FY '23 following our investment in our fiber infrastructure. Since then, we've held gross margin reasonably well, but the competitive environment is fierce and this margin eased modestly in FY '26. Over recent years, however, we have seen operating leverage emerge. But despite those gross margin pressures, we increased our EBITDA margin by 1.2 percentage points in the last financial year. This is a trend we are looking to continue. On the right of the page, you can see our revenue and gross profit by segment and product. Residential continues to be the engine room of the business with 59% of total revenue and 50% of our total gross profit. Our ambition is to continue to grow our market share in residential while growing fast in the other areas to maintain our revenue diversification. The relatively higher GP contribution of voice is also evident here. Let's dive into an overview of FY '26 for Aussie starting with the highlights for the year on Page 8. Aussie has had another strong organic year in FY '26 while also executing major strategic transactions and laying solid foundations that will materially benefit our future growth in FY '27 and beyond. Our premium telco offering continue to attract customers and partners, delivering organic connections growth, strategic customer wins and strong financial performance despite a competitive market backdrop. We grew revenue while expanding operating leverage resulting in EBITDA margin expansion and accelerated earnings growth. Importantly, we also completed a number of strategic transactions that materially strengthen our growth platform. The migration of More and Tangerine connections and the acquisitions of AGL Telco and Nexgen have increased our scale, broadened our customer base and enhanced our ability to meet the evolving needs of customers across all segments. We are partway through a step change in scale, which when completed, will have increased our on-net connections by over 60% in less than 12 months. We have completed a significant transaction in each of our 3 segments providing them with impetus to drive future organic growth. When I spoke to you this time last year, Aussie's NBN market share was at 8.4% excluding satellite. At 30th of June, our combined residential, business, enterprise and government and wholesale connections makes up 12.1% of the NBN market and is still growing with market share now passing 13% in the last month. This growth is being supplemented by increasing momentum in our mobile services. The completion of the largest NBN migration to date adds significant scale and earnings uplift from FY '27 with approximately 269,000 More and Tangerine services added to our network by 30th of June. I would like to acknowledge Andy Branson and the team at More who have been amazing collaborators in achieving this outcome. The combination of these achievements meant that we reimagined the future for the group and upgraded our Look-to-28 ambitions only 8 months into the strategic horizon and our ambition will not stop there as we focus on how we deliver more profitable long-term growth beyond FY '28. Turning to Page 9 for the last year's operational metrics. Looking at our operational metrics. As I mentioned, our market share of on-net NBN connections has climbed by 3.7 points to 12.1% with group broadband connections growing by 323,000 to see us reach over 1.1 million total broadband connections at the 30th of June. We've had a strong organic start to the new financial year with 11,000 new broadband connections added excluding connections from AGL, More and Tangerine. The ongoing migration of AGL services, which commenced on schedule in July, have supplemented these volumes and has also seen Aussie Broadband become the third largest NBN provider. This is a milestone we originally expected to reach by the end of FY '28 and I'm extremely proud that we've achieved it well ahead of schedule. It is important that I call out our teams for their tireless work in helping us reach this milestone and I want to thank them all for helping to grow Aussie Broadband from a regional provider to one of Australia's most trusted telecommunications providers. Mobile has had a strong year for Aussie with mobile services across the group growing by 48,000 to 263,000, up 22%. We successfully launched international mobile roaming and eSIMs recently to our residential and business and enterprise and government customers and both have seen great take-up from customers in the last few months. These new features speak to the maturation of our mobile offering as an MVNO and we expect this momentum to carry forward into FY '27. At 30th of June, we hosted 8.3 million members across our Symbio and NetSIP Tier 1 voice networks with 8.8 billion call minutes across domestic networks for the year. Our Aussie Fiber network spans 2,058 kilometers and has 1.31 connections per building. As we advised in February, our focus has switched to winning customers within buildings already served by our network allowing us to allocate capital to higher return initiatives. Next, we'll look a little deeper at our strategic growth initiatives launched during the year. Aussie Broadband announced 3 key growth opportunities in FY '26. The acquisition of AGL's Telco business, a wholesale services agreement with More and the acquisition of Nexgen. Our AGL migration kicked off at the start of FY '27 when the portfolio had 350,000 services across broadband and mobile. This acquisition when combined with our long-term partnership with AGL provides Aussie with the growth potential of access to AGL's 4.2 million energy customers. We see an earnings upside through net service growth and operating leverage over time and have a 5-year target of 500,000 services. I've already discussed the completion of the More and Tangerine customer migration under our exclusive Wholesale Services Agreement, which added approximately 269,000 services. The partnership provides us with indirect access to the banking sector through the More brand as well as the growth potential for Tangerine. Finally, our Nexgen acquisition was completed in the second half of FY '26. The combination of the businesses has already started to bear fruit with Nexgen offering new telephonic capability to our kit bag and enabling improved lead conversion and an encouraging start to FY '27. We also expect to deliver cost synergies over time and earnings growth and margin expansion. These initiatives are also a core part of realizing our Look-to-28 ambitions and they will play a crucial role in creating further opportunities for adding scale and continuing to expand our operating leverage. Together, these 3 initiatives will create value through a diversified growth model, which broadens our customer reach and product offering and deepens customer exposure across our segments. I'll now hand you over to Darren, who will take you through the key financial figures for the year.

Thank you, Brian. I just wanted to start by thanking you and the team for the very warm welcome into the business. I also want to give a special shout out to the teams involved in pulling together the reporting suite for today, many of whom I know are listening in on the call. It's a significant effort to pull together the results and I think they've done an amazing job. If we turn to Page 12, you can see here that FY '26 was another fantastic year for the business, which you can see from the highlights on this page with strong organic momentum across all key financial metrics. While the execution of a number of these strategic transactions kept us very busy operationally, their contribution to the FY '26 earnings was minimal. We will see those financial impacts flow through into FY '27. FY '26 demonstrates the quality of the growth that we are delivering. Organic growth across all 3 operating segments translated into 25.8% growth in both underlying NPATA and EPSA materially outpacing the revenue growth. Importantly, those earnings are converting into cash. Operating cash flow increased 42.5% to $167 million, strengthening our financial flexibility and supporting investment in growth, shareholder returns and future strategic opportunities. I will turn now to the group's underlying P&L on Page 13. So the underlying P&L removes some of the noise caused by the strategic transactions and the associated one-off P&L impacts. But as you can see, the underlying business performed extremely well with organic revenue growth translating into a 42% uplift in underlying profit after tax and a 26% increase in earnings per share. As Brian mentioned, the competitive environment and significant promotional activity in the residential and business markets have had an impact on our gross margin percentage year-on-year. But this has been more than offset by cost control and the emerging operating leverage, which has resulted in a 1.2 percentage point increase in our EBITDA margin to 12.8%. On Page 14, we'll take a look at what's driving the underlying EBITDA growth. As you can see on the bridge on the right, the earnings uplift for FY '26 was largely an organic story with 9% increase in broadband connections and a 22% increase in mobile services contributing to a 19.6% increase in underlying EBITDA. As I mentioned earlier, there was minimal net earnings contribution from our strategic transactions in FY '26 with positive contributions from Nexgen and More offset by divestments of Digital Sense and Buddy Telco. There was also some one-off network costs to expand network capacity in advance of the More and AGL migrations. Overwhelmingly though, FY '26 was a story of organic growth with a significant uplift in EBITDA attributable to revenue growth from new and existing customers and gains in productivity and operating leverage. If we just turn to Page 15 now for a look at the CapEx investment. Capital expenditure for the year totaled $59 million, which was at the top end of our guidance range consistent with the update we put out in June. Due to the timing of spending and some pricing pressures around network equipment, we finished at the upper end of the range. During the year, we announced a shift in our fiber strategy to focus on maximizing on-net connections and winning customers in buildings that are already on our network. This shift was made to improve return on capital already invested in our fiber network, but also to allocate capital towards the modernization and simplification of our core technology systems, which have been shaped by multiple acquisitions over many years. This includes the replacement of life cycle legacy systems and hardware as you can see in some of the capital allocation on the chart on the right. During FY '26, we continue to invest in the enablement platforms that are supporting our scaled and multichannel growth. These platforms are helping us expand existing customer volumes and onboarding new volumes across broadband and mobile services. We also invested in our people experience with new office spaces in regional Victoria and Perth reinforcing our commitment to our teams so that they can continue to provide the high quality service that our customers have become accustomed to. We'll now move to our cash flow and balance sheet on the next page. As I mentioned earlier, the increase in operating cash flow is driven by organic growth and margin expansion. The increased EBITDA has translated into a strong improvement in our operating cash flow, which has increased 42.5% to $167 million. The strong cash generation underpins capital management flexibility and strategic optionality. Our debt facility was renegotiated during the year maintaining the current facility size, but with improving margins, tenor and terms. We'd like to thank our banking partners; the NAB, CBA, ANZ and Westpac; for their commitment to our business and support of our Look-to-28 strategy. Our net leverage ratio of 0.9x provides flexibility to execute with capacity for future growth. Let's go over the page and we'll take a bit more of a look at capital management. The disciplined approach to capital management continued in FY '26 with no material changes to our capital management strategy. One small change we'd like to note is we've changed our leverage ratio tolerance to be up to 2.5x, dropping the bottom end of the range. This is just to provide clarity about where we expect to operate going forward. The increase in NPATA and operating cash flow enabled the acquisition of Nexgen to be funded predominantly from operating cash flow. We were also able to increase our returns to shareholders with a 50% increase in our ordinary dividend, which is fully franked, as well as announcing today an on-market share buyback of up to $115 million, which reflects the confidence we have in Aussie's outlook and balance sheet strength. I'll now hand back to Brian, who's going to go into the performance of our segments in a little bit more detail.

Thanks, Darren. We're now on Page 19. Residential continues to be the volume and revenue driver for our business and FY '26 was another strong year of organic growth with a 12.4% increase in revenue to $760 million. Broadband connections were the primary driver of that result, which saw a 6% uptick in subscribers. We've also seen some revenue expansion as more customers begin to adopt the new high-speed plans that were introduced under NBN's Accelerate Growth program. Residential broadband business is ably supported by our mobile multiproduct strategy, which is starting to scale. We now have 95,800 total mobile services in operation in residential, up from 72,100 the prior year, a 33% increase. Our expanded partnership with Optus has really enabled Aussie to start delivering a true premium type service backed by our recent launches of international mobile roaming and eSIMs for residential and business users. Our gross margin grew by 10.2% to $234.7 million although our gross margin percentage declined in part due to our July 2025 pricing strategy ahead of Accelerate Growth and as our residential customer mix has shifted more towards the highly competitive higher speed tiers. Below gross margin, we've made some productivity gains that contributed to the delivery of improved group EBITDA margin. Our customer retention over the year has also been strong with our year-on-year relative churn rates remaining stable despite intense market competition. On the next page, we look at business, enterprise and government. Revenue in this segment grew by 12.4% to $237.8 million. That growth reflects the reputation we've built as a trusted telco partner to medium and large organizations across Australia and the confidence customers are increasingly placing in Aussie Broadband to support more complex and critical communication needs. We continue to win new customers while also growing with existing customers as their requirements expand across connectivity, networks, voice and managed network. At the same time, we're seeing continued demand from small businesses for high speed broadband and bundled services. For us, the opportunity is clear; earn the trust to win, deliver the experience to stay and build the capability to grow with our customers over time. On Page 21, we look at our Wholesale segment. This segment saw a 9.4% increase in revenue to $297.3 million backed by growth in data and mobile. A key milestone from the year was the migration of More and Tangerine customer connections, which we completed in June through our Nitrogen enablement platform. We expect to see a full year contribution from that migration in FY '27. Mobile also had a strong year with 18,000 net additions through strong retention of our existing customers and some new wins. We also maintained our position in the voice market despite some intense market competition. On Page 22, we'll talk about our summary and outlook for the road. Moving to 23. While I've covered most of what is on this slide previously, I think it's important to reiterate what we're working towards beyond FY '26 now that we have executed our strategic transactions and upgraded our Look-to-28 ambitions. At a high level, our overarching ambition remains to change the game and be the telco people love. In February, just 8 months into the strategic period, we upgraded our ambitions as per the slide as it became apparent that we would achieve our original ambitions early. We are focused on strengthening our market position, expanding scale and delivering accelerating returns. As I've said, FY '26 was a big year. We positioned ourselves strongly to grow through Accelerate Growth, continued our organic growth story and concluded significant transactions to create growth platforms across all 3 segments. With the foundations from FY '26 firmly in place, the focus for FY '27 now shifts from executing transactions to realizing their benefits as we leverage increasing scale, broaden customer acquisition channels and strengthen capabilities to drive continued organic growth. The aim is to be delivering a full year effect of all these earlier initiatives in FY '28 with scale driving further efficiencies, the realization of the opportunities presented by the recent transactions, seeing those improved margins from productivity initiatives and ultimately delivering on our ambition. As Aussie has grown, our technology has grown with us and we touch on this on Page 24. In FY '26, we started to lay the foundation for simplifying our technology stack for the years to come. This is a program that will span across the next few years. We've already laid the road map, defined our future state and established a governance framework to get there. And we've already begun modernizing our operational support systems or OSS, which will improve the operations of our network, inventory management and network orchestration. By the end of FY '27, we will establish that network orchestration and inventory capability. We will have completed a detailed design and architecture for our future business support systems while our new OSS systems will have undergone testing and operational readiness. The spending for this body of work is already factored into our forecast guidance range. By FY '28, we aim to be delivering our new business support systems or BSS, which will modernize our customer product sales and support platforms. This will allow us to simplify our sales, support, product and customer journeys giving us the ability to launch and manage products at even greater scale and pace. From FY '29, that foundational work will provide even greater returns. Our staff will have less manual work by removing some of the complexity from our legacy platforms. Having a simpler product and support journeys will allow Aussie to provide an even better customer experience while launching products faster than before. And the business will also have the flexibility to enable future growth and acquisitions because of the disciplined platform that we've built. We also want to stress that our margin ambitions for our Look-to-28 strategy are not dependent on this modernization program with the true benefits of this work to be delivered from FY '29 onwards. One piece of that platform will be AI. Let's turn to Page 29 for what that looks like at Aussie. There is a lot of excitement and hype around AI and automation. At Aussie, we've used automation very successfully over a number of years across our networks and customer journeys. So we're excited to implement AI while managing the operational and brand risks. In the short term, our priorities are to organize our data and to grow our AI capabilities across the business through broad-based literacy and specialist experience. We will also continue to leverage existing pilot programs to firm up targeted use cases that have clear customer, operational and financial benefits. As we outlined at our Investor Day last year, our aim is to evolve our digital tools and the digital experience to be equal partners to our in-person customer experience. As part of that, we've embarked on some pilots across the business to find better ways in which we can empower our people, systems and services through different applications of AI. In our customer call center, we've been able to improve engagement with our customers by leveraging AI to improve the performance of our customer-facing service stack. It's early days, but we are excited about the opportunities. We've also embedded some AI capabilities into our observability stack, which allows us to better identify early warning signs for issues with network performance or consistency. In addition, our developers have been able to accelerate the delivery of core products for our AGL project through the use of AI-assisted development. We want to continue improving the quality and productivity of our service, the efficiency of our business, productivity, insights on our operations with AI; but only where it makes sense and where there is clear human oversight and accountability. This will be an ongoing body of work that will apply across our business. AI is part of our journey to delivering leverage, which we consider further on Page 26. In FY '26, we surpassed our original Look-to-28 ambitions of 12.5% EBITDA margin by achieving 12.8%. As this slide shows, initially the new AGL acquisition has a dilutive effect on EBITDA margin represented here on a full year pro forma basis for FY '26. We see opportunities to improve the performance of the AGL portfolio itself through reduced churn and improved cross-sell as well as business-wide productivity initiatives and a lower unit cost to serve from our network scale. Beyond AGL and following the execution of all of our strategic transactions, we've laid the foundations to grow our operating leverage and achieve our upgraded ambition for FY '28 of 13.5% EBITDA margin with potential further gains beyond that time frame. Let's now take a look at our guidance for the year ahead and the work we've already completed in FY '27. Our underlying momentum across all our major metrics for FY '27 is positive. The business is on track for an underlying EBITDA range of $205 million to $215 million representing growth of 24% to 30% on the prior year. You can see from the bridge on the right that next year's growth is a mix of continued organic growth and the impact of the strategic transactions completed in FY '26, which include a full year for More, Tangerine and Nexgen and a part year impact for AGL and net of the impacts of the divestment of Buddy and Digital Sense. We've already added around 11,000 net broadband connections since 1 July 2026 with more than 7,000 of those coming from our residential segment excluding AGL Telco. We anticipate the AGL Telco migration will be fully complete in the second quarter of FY '27. To date, we have 116,000 AGL broadband connections on our network and the completion of that migration and our continued organic growth means we expect to have more than 1.3 million connections on our network in Q2 FY '27. Our mobile product continues to evolve as well and we expect continued growth from mobile throughout 2027. On to Page 28 and in summary. FY '26 was a year of portfolio reshaping with strategic transactions delivered that are core to realizing our upgraded Look-to-28 ambitions and represent a significant step in the evolution of the group. Underlying momentum remains positive across all of our 3 segments with continuing organic growth in residential and momentum building in mobile. AGL Telco, once migrated, will also provide a platform for future residential growth. For business, enterprise and government, we had a strong year. Key enterprise wins have grown our customer base and existing customer relationships have been expanded. We have an encouraging opportunity pipeline as we continue to build our reputation as a trusted connectivity partner. On the wholesale front, our enablement platforms like Nitrogen allow us to scale growth across products enabling existing and new clients in the space and further building on our portfolio diversification. FY '27 will be underpinned by delivering continued organic growth, completing the migration of AGL Telco and realizing the opportunities from our strategic transactions. It's an exciting year ahead and we've started very well. I'd like to close by once again thanking our amazing team. Completing 4 material transactions in 6 months while simultaneously executing the largest migration of connections on the NBN network to date is simply exceptional. The credit, as always, belongs entirely to our amazing people here at Aussie. Thank you for your time and thank you for our shareholders for your continued support and we're now available to take your questions.

[Operator Instructions] Your first telephone question comes from Jonathon Higgins with United Capital Partners.

Great set of results for FY '26. My first one just in regards to the year-to-date trading. It sort of looks like you started the year obviously well there on year-to-date trading. Wondering if you can just provide some context. I mean is that something that you think you can continue to deliver or has it been a bit patchy sort of around the price rises? It sort of looks like it's been pretty rational around that period. Just any overarching thoughts that you have there, firstly.

Yes. So I think you'll be able to see from the numbers that the June quarter was pretty tough with the price rises going through and obviously intense market competition. When we compare our churn experience year-on-year, we actually increased more prices this year than last year, but the churn rate has stayed relatively consistent with last year. So that was encouraging. We've started the year well. We've had a look at sort of the mix of our marketing spend, if you like, looking at we've done well over the last few years in building our brand. We've got very, very high brand recognition now. So we're sort of reconfiguring some of that marketing spend to sort of ease off on the brand spend a bit and more be what we term performance marketing, which we're seeing good results in so far this year. So we will remain active in the market, keep monitoring the market and keep doing what we can to continue our growth.

Understand. I mean the second question just around the FY '28 target. So you presented sort of a consolidated earnings number with the acquisitions and movements you've done on the wholesale front and sort of various moving parts, as you stated, a few things there. It sort of implies efficiencies or price or margins or such to get there. I'm certain none of those targets just yet and I think most of the market isn't. Can you just sort of talk towards the levers that you are looking to pull and maybe perhaps your confidence on those '28 targets at the earnings level?

Yes. So they are strategic ambitions by their very nature. We're still very optimistic that we can get there. We can see avenues for organic growth. We can see opportunities in the wholesale and business space that potentially can add some revenue and margin. We think we've got a way to go on our leverage journey as well. We've got a number of projects in train to focus on productivity and efficiency in our business and part of that journey will be with how AI helps us along the way as well. So we see it's a combination of top line and cost management and continuing the journey we're already on. I think we've shown good progress and we remain optimistic about our ambitions.

Your next question comes from Entcho Raykovski with E&P.

So my first question is also sort of related to near-term trading. But more specifically, you put through price increases for the 100 and 500 plans whereas a lot of other operators haven't. So can you perhaps talk us through the rationale for that increase and where do you think this will impact your subs near term? Or in fact given you said churn stabilizing, you think that's something that the market can absorb quite easily? I've got another one, but maybe I'll wait for the answer to this one.

Sure. I mean the correct answer is that the rationale for price increases, NBN put their prices up and there's a fairly significant cost impact there that the whole industry has to bear and we decided to pass some of that on through price increases. More broadly in terms of the market itself, as I said, churn rate was pretty similar to the prior year. So yes, churn is always elevated during that period, but it was no more elevated than the previous years and we started the year strongly. So ultimately we've got to either both of these things. So actually we've got to get our pricing right and/or drive cost out of the business or become more productive over time. And our aim is that we can grow revenue faster than we can grow our OpEx line and even faster again than any squeeze on gross margin over time. So I think when you look at some of the pricing in the market, it's essentially wholesale prices that makes life very, very difficult for everybody.

Okay. Got it. That's good color. And I've got a question around the rationale behind the buyback announcement and whether we should read into it that there's less focus on acquisition activity and greater focus on capital returns. I wonder if it simply means or simply reflects your updated leverage comfort range. And as part of that answer, I know in the past you said that your Look-to-28 ambitions don't factor in any further acquisitions, if you can confirm that that's still the case?

Entcho, it's Darren here. I want to jump in on this one. So I'll answer the last part first, which is yes, the upgraded ambitions don't factor in any further acquisitions. But flowing on from that, it's not to say that we won't look at further acquisitions. We will, but they would be incremental. The rationale for the buyback really is we have had obviously a very busy period on the transaction front. There's an element of work to do to integrate those transactions into the business and we don't have any particular additional transactions imminent at the moment. So adding to that, the significant improvement in cash generation in the business gave us the opportunity to announce the buyback without increasing leverage too much. Because the buyback will be completed over the next 12 months, it will be largely funded from operating cash flow in FY '27 so the leverage ratio won't really move too much. The tweak to the leverage ratio was really just to, I guess, send a signal that we don't intend to gear up just to get within the range. The top end of the range is exactly where it was before and we'll operate somewhere below that going forward.

Your next question comes from Siraj Ahmed with Citi.

Just the first question is a 2-part question. Just on the 4Q performance, can you just touch on because, it's like you said, churn has been stable, but ARPU has come down and net adds were slower, right? Just keen to understand does that just mean the back book you had to give up pricing to keep those customers? Is that what you saw? And just second part to that, in terms of the start to the year, 11,000 is down from 12,000 in the last year, but it seems like resi is doing well so it's the other parts that's not doing as well. And I can also see that wholesale was down year-to-date. Can you just clarify that as well?

Okay. That is 2 questions by the way, that's not 2-part question. So second one first, I think your numbers are wrong. At the same time last year, we said 12,000 not 20,000 adds. But importantly, that 12,000 included 2,000 from Buddy, which we no longer have. So excluding Buddy, the equivalent number last year was 10,000 and this year is 11,000. With respect to wholesale going backwards, I think what we've talked about there is that More and Tangerine have faced some headwinds with migration challenges, not challenges. But during migration, you do get elevated churn. They also put prices up on 500 like us so they faced more churn. But ultimately questions for More and Tangerine are for them not for us, but that's the impact in wholesale. I didn't quite understand your first question so could you recap that, please?

Just trying to understand the slowdown in the ARPU decline in the ARPU gross margin -- gross margin decline in the second half, right? So are you sort of saying that market is competitive moving to the higher speed tiers. So you have to sort of just do some discounting to keep your existing customers. Is that what you saw in the second half?

Right. So the margin on the slower speeds is slightly higher than the margin on higher speeds. So if we got proportionately more people on higher speeds, that impacts on the average margin albeit it increases the dollar margin. And then yes, and promo activity in the front book also impacts on that margin as well.

So just clarify, so we just assume that similar trends continue into '27 in terms of [indiscernible]?

That's a third question, but the market remains tough.

Your next question comes from Liam Robertson with Jarden.

Just one firstly on OpEx. Good result for the year, only up sort of 1% so if I compare that to inflation, obviously doing a really good job. I guess over the next couple of years, it sounds like you've got a number of levers at your disposal, you're talking to AI adoption, but then also the tech modernization, which sounds like it's an FY '29 story. But I guess in the absence of that, if I look at your guidance sort of infers that you'll be able to keep OpEx flat year-on-year or roughly flat year-on-year into '27. And then I guess I was just wondering as part of the '28 ambition, so do you think you can actually see OpEx decline year-on-year into '28 without the benefits of tech modernization?

Did you say OpEx decline in dollar terms or in percentage terms?

In absolute dollar terms on an organic basis obviously.

Yes. So that feels stretchy to go backwards in absolute dollars. We've got labor increases and those sorts of things. We do think we can get leverage in the OpEx lines will increase at a slower rate than revenue. But I don't have numbers in front of me, but I'd be surprised if going backwards in absolute dollars is achievable given the scale of the revenue we're adding. If you think about the connections we're adding, we still got another 100,000 or so AGL connections to go in that will require servicing from customer service and things like that. So I think that feels stretchy, but we do think we can get OpEx as a percentage of revenue down over time. Was there a first part of the question I missed there I think?

No, no, that's all right. I guess my second part just changing tack slightly on to Symbio. I noticed in your '27 bridge, you're still calling out the full $3 million impact from the ACCC voice determination. Hasn't there been anything you're able to do I guess to mitigate that? And the reason I'm asking is because I'm just conscious into '28 with how you previously announced you're expecting that impact to double to sort of $6 million. So can you just talk to some of the mitigants that you've been able to potentially pass through?

Yes. I think if you go back to the announcement we made on that, that was after mitigants was the $3 million. So we're still holding that we have mitigated it to get to the $3 million. So there's no change to those numbers.

Your next question comes from Annie Zhu with Barrenjoey.

My first question is could you talk us through what sort of resi gross margins you're assuming in the FY '27 guidance? There's quite a few moving parts with your $15 promos going on at the moment and price increases you put through in July and then also continued scaled benefits. So can we assume broadly the same gross margins as in FY '26 or have you conservatively assumed a little lower than that?

I'm not going to guide on individual line items of the P&L. We've given you EBITDA guidance. I'll just say what I've reiterated, which market is tough. There's a trajectory there that you've seen over the recent years across the industry in terms of margins. We would hope that pricing rationality returns at some point, but there's no sign of it currently.