Superloop Limited (SLC) Earnings Call Transcript & Summary

Thank you for standing by, and welcome to the Superloop Half Year Results Conference Call. [Operator Instructions] I would now like to hand the conference over to Mr. Paul Tyler, MD and CEO. Please go ahead.

Thank you very much, and welcome to everyone to our first half of the FY '22 year results. I'm sitting here with Luke Oxenham, who is our CFO. So the first half has been a pretty incredible half for Superloop. And before we get into the highlights itself, I just wanted to touch up again on who we are and what we -- some of what we communicated back in November in our Investor Day. And first and foremost, it's around our purpose. And our purpose being, we want to be a company that enables better Internet through competition. And by competition, we mean we want to be a catalyst for the telco market in Australia, achieving its more natural state of some 30% market share sitting with those challenger brands. We have invested very heavily in a platform. We've called it our Infrastructure-on-Demand platform. And we think that platform really differentiates us in the market and sets us apart from other players that have similar aspirations. Some 18 months ago, we set in place an accelerated growth strategy. I'm very pleased with the way that growth strategy has played out. So we'll share more about that during the presentation today. We're really seeing that organic growth and inorganic growth coming through. We have in place now a capital structure that really gives us optionality, that allows us to invest in growth. And with a number of the changes we've made over the last year, include -- around our organization and the way we report to the market, we are now in a place where we believe our strategy, our business and our financials are very clear and simple. And I hope you, at the end of this presentation, would agree with that. So if we jump into the highlights themselves for the first half, which, as I said, I would characterize as very strong for Superloop. I'll touch on the financial, the strategic and the operational highlights. Starting with the financial. Obviously, we lead with revenue. The revenue of the group has grown dramatically there with an increase of 125% to nearly $120 million for the half. Now obviously, a large chunk of that growth has come on the back of inorganic acquisition of Exetel, but we're very pleased with the fact that our underlying growth, the growth of our 3 Superloop segments or the -- all 3 segments in the business has continued and recorded, at a group level, some 18% growth to the previous comparable period. The growth hasn't just been in the top line, of course. You can see in the gross margin, an improvement in the gross margin is some 60% to $39 million -- or rather $39 million and then flowing through to the EBITDA line with improvements in the underlying EBITDA up to $9.1 million, which is a 12% increase year-on-year. So on the financial side, we'll dig more of that during the presentation. But clearly, strong progression in the business over the half. On the strategic side, this, again, some substantial milestones met during the half. First, the completion of the Exetel acquisition, which was completed towards the end of July in 2021. So we got -- we've realized nearly a full 6 months of the Exetel business in our first half results, very seismic, I think seismic's a good word, acquisition for Superloop, largely underpinned by the synergies that were expected through that, which I'll come back to. Another strategic milestone that we tackled during the first half was in the monetization of our Hong Kong and Singapore domestic businesses. So we're very pleased to announce back in October that we had entered into a transaction with DigitalBridge and Columbia Capital. That transaction saw us monetize their Hong Kong business in its entirety and certain assets in Singapore at a premium to the carrying value, so at a profit. The deal is on track. We still expect to complete that deal by the end of the -- end of this current quarter. And another strategic change we made during the half was in realigning our reportable segments in line with the way we changed our organization. So we look at our business -- as management, we look at our business through the lens of 3 distinct customer segments: our Consumer business, our Business segment and our Wholesale segment. And what we've done, and you'll see in these results, is we've recut our reporting -- our reportable segments in line with the way we look at things through management. And that seems like a simple change, but it is quite fundamental because it really is how we look at business as management, so through the eyes of management. But it also, I believe, simplifies things for investors to look at how we're progressing across each of the elements of our business. And again, at the end of this presentation, I hope you will have formed that same view. On the operational side, obviously, a key number there are the number of subscribers supported on our platform, growing dramatically over the period, more than 175,000 end customers that are now sitting on the platform. But a second highlight there that we call out is one category of those subscribers, which is a new category for us, the -- what we've called wholesale broadband customers. We launched an automation platform called Superloop Connect back in September. And we've seen a lot of demand for that platform. So I think we announced quite a number of deals of RSPs, or retail service providers, who have signed up to that platform, but we're really now starting to see it hit its straps with some -- or more than 11,000 subscribers that are now supported on that platform and growing quite quickly. As I mentioned before, the Exetel transaction, whilst obviously completely on strategy for us, was underpinned by the promise of synergies. So the final operational highlight that I would call out here is how those synergies have been realized or not. And we're very pleased with the way that program has gone. We're actually running well ahead of the plan. So we will actually hit the full $5 million of annualized synergies well ahead of what we had previously communicated. But anyway, I will -- I'll talk to that in more detail a bit further into the presentation. And those highlights really sum up to having us in the position that, notwithstanding the impacts of COVID and the various challenges of overage from NBN and international students not coming back in the time lines we would like, so various headwinds in the business, we're still able to affirm the guidance that we gave to the market for the full year of FY '22. EBITDA coming into the range of between $23 million and $25 million. Okay. So if we look at how the business has been developing over the last few halves, a good proxy for that, of course, is the number of end customers supported on the platform. If we look at where Superloop had previously been growing from back through the period ending June '20, December '20, June '21, you can see the steady and progressive growth in the underlying subscriber number sitting on the Superloop own platform. Then 2 large events happened. One was the acquisition of Exetel back at the end of July 2021 and the launch of the Superloop Connect platform that I mentioned before and that enabling us to have a new product, our wholesale broadband offering there going live in September. So that brought us to some 176,000 subscribers in aggregate to the end of December '21. And if you look at the breakup of those, you can see the Consumer business continues to grow very quickly, as you would expect with that large inorganic addition from Exetel, but it continues to grow organically as well, which is encouraging. And then the Business segment and this new wholesale broadband platform adding on top. On top of those, of course, not reported in those numbers are the mobile and VoIP customers that continue to grow there nicely as well. So strong growth over the period and we're quite happy with the way that the underlying platform is accommodating all that usage. So if we go to the P&L, you can see what I've touched on before there. So revenue coming in for the half of nearly $120 million, which is some 125% up year-on-year. Gross margins at around that 32.7%. Gross margin across the group, some $39.6 million for the half, leading to an underlying EBITDA of that $9.1 million for the half that I mentioned. Both the gross margin and the EBITDA, of course, being -- representing growth year-on-year with the underlying EBITDA being 12.2% up on the previous comparable period. So that's the group P&L. But there's a lot of moving parts in that, we recognize. So with the acquisition of Exetel in particular and the shift to the 3 reportable segments, a lot of moving parts. So Luke, I'll hand to you if you could sort of take us through the waterfall just to explain those moving parts to the investors.

Thanks, Paul, and good morning, everybody. Thanks for your interest and time in spending some time with us this morning to look through the results. As Paul mentioned, the result is probably, on the face it, a little bit difficult to read through, given the fact that we have had the acquisition of Exetel in the half. But also from an accounting standard perspective, we've been required to account for the assets of Hong Kong and Singapore that we have entered the transaction -- entered into the transaction for, we've been required to account for those and reclassify them as assets held for sale. So when you look at the face of the income statement in the accounts and in the 4D this morning, you have to remember that, that does separate out from ongoing activities of those assets that are held for sale. But what we've attempted to do over the next couple of slides is really just provide everybody with a bridge to ground them in what you have seen previously in relation to results that Superloop presented in the first half of last year, and build a bridge between those results to where we've ended for the first half of this year. And so Slide 8 builds that bridge from a revenue perspective. If you start on the left-hand side, the reported revenue in the first half of FY '21 was $53.3 million. Just to remind everybody that, that did include $3.1 million of revenue from the managed services business, which Superloop made a decision to exit from during FY '21, and only the first half of FY '21 contained results for that particular business. By the time we got to the second half, that had washed through. But it will be a feature as we talk about the prior comparative period in the first half of '21. And obviously, when we get to the full year results, it will still be a feature as well. But what we've done on the slide here is to adjust for that number. And you see that the rebased revenue for Superloop on a same-store basis, to steal that term, was $50.3 million -- $50.2 million, sorry, for the first half of FY '21. And what you can see is that all of those 3 core segments that Paul has spoken about have contributed in terms of growth to the overall performance. Clearly, the Exetel acquisition was a significant portion of that and contributed in both the Business and Consumer space, but we've attempted on the right-hand side to show you what the contribution in revenue from the Exetel business was in the first half at $60.5 million and the contribution from the same-store ongoing Superloop business in the first half was $59.3 million. So that $9.1 million increase over $50.2 million is an 18.1% increase in revenue from the Superloop business on a same-store basis and an overall doubling of revenue for the group as a consequence of the acquisition of Exetel during the half. We've attempted then on the following slide to the same thing from an EBITDA perspective. So again, the reported numbers are slightly confusing given all of the movements from an accounting standards perspective. And after this call, we're happy to take any questions and help people understand that in more detail. But what we've tried to do on this slide is to base people in what the market saw in the first half of FY '21 of the reported underlying EBITDA of $8.2 million on the left-hand side. And then we've attempted to show the various factors that have contributed to the change in EBITDA, a 12.2% growth to $9.1 million in the first half of this year. And you can see again the feature of that managed services business, which was discontinued, it had a $1.7 million EBITDA contribution in the first half of last year. The first half of last year also featured an abnormal one-off item, a benefit from jobkeeper of $2.5 million that was received by the business in the first half of last year. So when you adjust the reported number from the first half '21 for those 2 items, you can see that on a core basis or rebasing the number, the EBITDA would have been $4 million. And then you can see that, that has increased from $4 million, more than doubled to $9.1 million in the first half of this year. And that does include the fact that we have, and we'll talk about this as a feature of the business moving forward, we have started to increase that reinvestment for growth in the business. So there has been a step change in the marketing spend that was experienced in the first half of this year. So that reported EBITDA of $9.1 million included an additional $2.6 million of marketing spend over and above what was spent in the first half of last year. So all in all, a very solid result, and that reinvestment for growth, as Paul will talk to in the coming slides, really positions us well for, as Paul said, the delivery of FY '22 guidance of EBITDA between $23 million and $25 million.

Thanks, Luke. So what I might do now is jump into each of the 3 segments in turn. So if we start with the Consumer segment. Obviously, there are some huge numbers here in terms of growth percentages with the growth in subscribers and revenue increasing more than 200% and 300%, respectively. Now clearly, that growth is fueled by the Exetel transaction and bringing those subscribers onto the platform. But there is organic growth in the Consumer segment as well. We have called out more than 6,000 net subscribers growth in the underlying Superloop business. What we -- another feature here of the Consumer business, which tends to perform well is that we've made some substantial investments in the platform really around improving customer experience and bring the cost to serve down as well as we continue to push the trend line down on churn. So you will notice here the reduction in gross margin. The reduction in gross margin really is a mathematical function. It's blending the higher-margin Superloop business with the lower-margin Exetel business as we brought it onto the platform and the fact that the synergies from the Exetel transaction, whilst we've realized fully and the run rate weren't enjoyed in full in the [ full ] half. As we come into the second half, clearly, those synergies will be realized in full and so there will be an improvement in the gross margin in the outlook. So if I jump to the Business segment, again, characterized by pretty dramatic growth there in the revenue line, again, largely underpinned by the addition of the Exetel business into the platform. One interesting highlight to call out here, though, in the Business segment is that in an effort to not see our costs grow linearly with our revenue, we are putting more and more into the partner channel. And very pleased with the level of partner sales we have now achieved through that platform. So more than half of the sales that are coming into the Business segments are now being brought through our partner channel. It's a feature that we want to continue to push. We think it's a very cost-effective way of scaling that segment in a business which is largely a person-to-person sale. Of course, the gross margin decline is also evident there for the same reasons that it was evident there in the first half. With the addition of the fact that we have seen some further headwinds in some of the On-net business from the traditional Superloop space being, we didn't see a significant resumption of students in our managed WiFi business with COVID, although some early signs that, that looks to be a bit more positive now come -- with the February results coming through now. So maybe -- we hope for a better outlook into the second half. But also, we see that our fixed wireless business continues to be suffering from some headwinds there. But again, the synergies from the Exetel transaction will lead to an improvement in the gross margin for the second half. With the Wholesale segment, this segment obviously is not impacted by the Exetel transaction. The growth that we're highlighting here, the 13% growth is -- or 12.8% growth is all organic growth. One of the main contributors to that growth is the new platform that we have established there on new automation for wholesale broadband users through the Superloop Connect platform, as I said. And yes, we're really quite shocked with that offering, and we have high hopes for it into the future. The gross margins that we see here in the Wholesale division are actually now at above the target gross margins that we have set for the division, which we'd set, as discussed back in the Investor Day -- or the Strategy Day, for -- at the 70% level. So everything I've talked through there is about revenue and subscriber numbers, which I guess is a lagging indicator. To give you a leading indicator for our 2 B2B segments, so our Wholesale and our Business segments, we called out here some of the sales progress that we've actually had, which clearly will be a leading indicator for what we'll then see flow through the revenue. And as you can see on the chart, we've signed some marquee customers, so quite a significant amount of marquee customers here. I mean this is a small subset of the customers -- the new and renewed customers that we have signed during the period in both the Wholesale and the Business segments. Perhaps an interesting call out for you to look at here is how the backlog of contracted sales has been building over time. So you can see in the Wholesale segment there, we have progressively increased the total contract value that we write in each half to the point that we wrote some $32 million worth of contracted revenue into the Wholesale segment and $8.7 million into the Business segment. And where you really see the rubber hit the road there is how the new monthly recurring revenue has been -- the new, new monthly recurring revenue has been increasing progressively during the half. So that gives you a bit of a, as I say, a forward indicator of what will flow through the revenue into future halves. Okay. The other thing I wanted to highlight, I mentioned previously was the Exetel acquisition synergies. So a lot of the industrial logic of the transaction, whilst being on strategy and all that good stuff and properly priced, was really around the realization of the synergies. And we had committed to realizing some $5 million worth of run rate synergies by the end of the financial year. There's been some incredible work done here by some really smart hard-working engineers and I'm very grateful for that. And so that program has actually run well ahead of the schedule. So I won't go through each of the acronyms that's over on the right as to what that program comprise of. But I think what's interesting to everyone is the fact we've been able to bring forward the full realization of those run rate synergies to January this year. So as of now, we are at the point where we are realizing the full $5 million worth of run rate synergies -- annualized run rate synergies. And you can see here a breakdown of where those synergies have come from and the phasing into first half. So the result was we did enjoy some synergies in the first half, some $1.3 million worth of synergies. But as we get into the second half now, we'll be realizing that run rate in full. So great work and we're very grateful for all the professionalism that was approached through that program. Okay. I'll hand back to you, Luke, for the cash flow.

Yes. Thanks, Paul. Just some very brief things from a cash flow perspective. I think the first thing to point out on Slide 15 is that from an operating cash flow point of view, we were operating cash flow positive during the first half this year. What will be reported in the numbers does have a slight negative on that line, but that does include 2 very significant one-off items. We had a tax payment that we needed to make in relation to Exetel. And a period of time before we acquired them, obviously there was an adjustment made in the final purchase price when we settled the transaction for that. It was a known cost that we were taking on and were able to adjust for that. But from a cash flow point of view, it did show up as a payment that came from us to the ATO in the first half of this year. And that's not something that will be repeated obviously moving forward. And secondly, there are a significant amount of transaction costs that were related to both the Exetel transaction, but also more recently to the sale of Singapore and Hong Kong, which were obviously cash payments that we've made out, the benefit of which will come through once that transaction finally settles in the first quarter of this calendar year. The remainder of the cash flows, relatively sort of large items, but obviously the majority of which is focused on the acquisition of Exetel, which as we've spoken about, completed on the 31st of July. And I guess the last point that I would make just on this slide is around capital expenditures. So the CapEx in the first half, not exactly a sort of even split of the $20 million CapEx spend that we believe that we'll have on an annual basis, but certainly, that's because some of that CapEx has been front-ended. And you see there that we spent around $11 million of capital expenditure in the first half. We're still well and truly on track to be within that capital window of $20 million for the full year this year. And lastly, before I sort of hand back to Paul to sum up, I wanted to spend a little bit of time just talking about the Hong Kong and Singapore disposal, and in particular, the use of funds, if you like, that we'll be thinking about as we go through the end of this quarter and into the rest of the year. We have evaluated a number of options that are available to us. We've also canvassed a number of views from investors in relation to how they think that we should be applying the funds and also had a look across the sector to understand the sort of balance sheet position of a number of people who are in a similar space to ourselves. We did evaluate the potential from a capital perspective of returning some of this capital to shareholders, either by way of a dividend or a special dividend or potentially on- or off-market buybacks. So we did run the ruler over all of those alternatives. But ultimately, we came to the conclusion that the best use of funds that we have at the moment and given the momentum that's starting to build in the business is to apply those funds to continue to grow the Superloop business and continue to fill out the number of users that are sitting on the platform at the moment. So that will be the key use of funds from the disposal of the Hong Kong and Singapore assets. We will look at both organic and inorganic growth opportunities. Obviously, we can't talk about the inorganic opportunities that we are sort of in the process of evaluating at the moment, and there are some that fit into that category, but we're not in a position to be able to speak about those. But certainly, from an organic growth point of view, we're going to continue to invest in each of the 3 segments and grow them over the course of the second half of this year. In the meantime and until those inorganic growth opportunities present themselves or solidify from where we are at the moment, we will look to, in the medium term, repay some of the debt just to save on obviously the cash cost of interest and other associated sort of costs over the remainder of this year. But ultimately, we do believe, when you look at the metrics of the business and from the transaction that goes through, we have probably in excess of $110 million available to us from this transaction to reinvest in those organic and inorganic growth opportunities moving forward. And we'll obviously look to move as quickly as we can to deploy that potential into the market moving forward.

Thanks, Luke. Okay. So if I sum up. I characterized the first half as very strong half for Superloop, and I think that's a fair characterization. The mix of organic and inorganic growth across our 3 segments in revenue and EBITDA is really encouraging and, I think, speaks to the strength of the diversification of our businesses over a single network platform. We passed some really major strategic milestones with the completion of the Exetel transaction and the monetization of Singapore and Hong Kong. We're really encouraged with the way the synergy capture has proceeded for Exetel, and I think really does bear out that we are able to plan and execute M&A in a diligent and successful way. We believe we are very well positioned for growth from both the P&L and balance sheet perspective. And that's allowed us to affirm our guidance for the full year, as I said, in a range of $23 million to $25 million for EBITDA. So those are the points we wanted to make for the first half. And with that, we're happy to take any questions.

[Operator Instructions] The first question comes from Bob Chen from JPMorgan.

A few questions from me. I mean, firstly, just around some of the working capital movements. I mean it looks like the trade payables balances has increased quite a bit this half. Any reason why there?

Sorry, Bob, you were just breaking a bit, you say increased?

Yes, increased.

Yes. I think one of the major factors will be the acquisition of Exetel, so we've obviously brought on not only the Superloop business that we've had sort of moving forward, but we've also now got the Exetel business, and that brings with that, that increase in the overall balance there.

Okay. And just on the operating cash flow, it looks like the cash flow conversion is a little bit softer this half. I think you called out some sort of one-offs there. I mean is there anything else that might be impacting that as well?

No. I mean they're the major sort of factors at this point in time. Obviously, we want to increase that, and we believe that it will increase sort of over time. I think that we'll see that improve in the second half as we get the benefits of the realization of those synergies coming through on that same factor that you're talking about, the cost of goods sold, in particular in relation to the Exetel side of the business. So as we see that sort of coming through in the second half, I think that you will see that improve in the second half as well.

Okay. Great. And I can see the Exetel acquisition obviously had some impact to gross margins, particularly in the Consumer segment. I mean given that the run rate synergies are tracking ahead of plan, I mean, do you expect that GP margin to improve materially in the second half there?

I think we sort of stated at the investor presentation back in November that we had a goal for the Consumer segment to produce a gross margin around about 25%. I think that when we have the full run rate of synergies coming through in that business in the second half, just if you work that out mathematically, it does get you back much closer to that 25% number. So we do still continue to believe that medium to longer term, 25% gross margin in the Consumer space is the appropriate level to be targeting, and we think that we will be able to deliver that in that time frame.

Okay. Perfect. And just on the overall sort of M&A strategy going forward. I mean which areas would still be interesting for Superloop to play in? I mean can you break that down in terms of like which segment of your business, in terms of more opportunity for M&A?

Yes. Thanks, Bob. Look, I think one of the real strengths of our business is that we have 3 distinct market segments. And the single underlying platform that serves all those markets is best served by us aspiring to grow each of them independently. And so we are considering both organic and inorganic investments in each of the 3 segments. We have been and will continue to be quite prudent and disciplined in our approach to inorganic opportunities. We're not forced to buy anything. We've got a lot of organic opportunity in each of them. But if we find opportunities and as Luke said, we are considering a couple of things at the moment, then we'll explore those if we think they are appropriately priced and on strategy, et cetera. We are considering opportunities in all 3 segments. And I wouldn't say that any one of them that is a preferred or a primary area of focus.

Your next question comes from Joseph Michael from Morgan Stanley.

Great. I just had a couple. So maybe the first one I'll start off with is just around the seasonality in the business. I guess the guidance implies a first half, second half EBITDA skew of 38% to -- 38% in the first half, 62% in the second half. Can you just talk us through what's driving that second half skew?

Yes. There's probably a couple of factors. I get -- I appreciate that they're probably difficult to disaggregate, but a couple of factors are that we have been investing in growth in the Consumer business, for example, so we have seen a significant growth coming through in net new subscribers in the first half. It does take some time obviously for that then to flow through from a revenue and profitability point of view. So that will be one factor that will contribute. The growth in the Wholesale segment that we've spoken about, we do have an expectation internally that you will see a fairly significant growth in those number of wholesale broadband aggregated services that will be sitting on the Superloop Connect network by the time we come and report at 30 June of this year. So that will contribute to growth in the second half as well. But probably the most meaningful contribution in difference between first half and second half will be the fact that we did only achieve $1.3 million of those synergies from an Exetel point of view in the first half. You will see, if you look at the slide, those numbers are a realistic expectation of what we hope to get out of the synergies in the second half based on what we're experiencing, in particular, in the months of December and January. So we think that, that real -- full realization of those synergies will also make a contribution to the sort of seasonality, if you like, between first half and second half. So all of those factors are the things that give us the underlying confidence from our own internal forecasting that the guidance that we provided back at the AGM remains appropriate at this point.

Okay. Got it. And just a follow-up there. I mean if the synergy targets have been brought forward but the guidance has been maintained, is there any other offsetting factors in the guidance?

Look, I think I touched on a couple of things there. And if you listen to some of our peers' report, obviously there are some headwinds largely due to COVID in the business, be they headwinds in the NBN business there with excess overage charges reflected, but you can imagine from people staying at home, working from home, studying from home and you see that flowing through, I think that's well understood in the market across multiple parties now. So we've absorbed that. And the other thing is the student business, as I said, has not -- Omicron became a little bit unexpected. We were seeing -- when we gave the guidance, we were seeing the tail end of Delta. And with the hope that we would see a recovery in that WiFi business, we've -- obviously Omicron knocked that for a bit of a six, but actually, it is starting to recover a little bit now, but certainly not at the pace that we had hoped when we gave the guidance in the first place. Notwithstanding those headwinds, obviously the balance of the business is performing very well so we're able to maintain the guidance.

Okay. Great. And then just one last question for me, just around, I guess, your returns on marketing spend. I guess it's well sort of documented that the digital marketing environment has become more challenging with some channels becoming more expensive and other channels becoming less effective. So just wondering if you could comment on the returns you're getting on your marketing spend.

Look, I don't think we've actually disclosed a cost of acquisition for competitive reasons. We -- we've learned a lot about the Consumer business over the last 12 months really at a very granular level. And we know exactly the threshold at which we get a return on investments. We know how -- I think we've looked at the blend of digital marketing channels we use, we try and maintain a very competitive CPA relative to others in the market, and that does mute our growth a little bit. We could certainly grow faster if we chose to spend more. And again, relative to peers, you can see we've not taken that decision despite having the capacity do so because we do want to get the right balance between investment and return there. So maintaining a reasonable CPA is something that we are very focused on and will continue into the future.

I might just add a comment to that as well, Paul. I mean the other side of it, Paul did speak to is that part of what we spoke about in terms of that additional spend that we're looking at in the Consumer business is not only in marketing, but behind the scenes from a back-office point of view, we are focused on the customer experience. That obviously contributes to the lowering the churn rate, which is definitely a target that we have internally to improve our performance there, and secondly, to improve our performance on a cost to serve basis. So there's a number of initiatives that are happening across the Consumer business to improve both of those factors, so that we can balance that cost to acquire the business against how long do we hold that business for before it churns off. And obviously, if we can improve on the back end in relation to churn and cost to serve, it does give us more latitude from a growth point of view on the flip side to invest in acquisition moving forward as well.

Your next question comes from Nick Harris from Morgans.

So starting with an easy one. Just that Slide 16, that $110 million of potential growth capital, just so I understand the framework and make sure I'm actually reading it right, so $135 million of cash minus $50 million of net debt gives you $85 million net cash. And then to get to the $110 million, you're saying add basically $25 million or 1x net debt to EBITDA. Is that -- am I thinking about that right?

Yes, there's obviously -- I mean, they're very sort of high-level numbers, Nick, that we provided from a guidance point of view. Clearly, because the framework that we're looking at, the opportunity within and the potential of what we have to spend does include a leverage sort of number as well, so a debt to EBITDA kind of opportunity, you're right, that's sort of a very basic sort of view that we have. Clearly, the acquisition or any acquisitions that we might make, to the extent that they do add EBITDA, then they -- it does give you the opportunity. And it becomes a bit of a circular sort of discussion. And if you're adding $5 million of EBITDA, does it give you more firepower? Yes is the answer to that. So it's really put down as a bit of a guide for you to understand a very conservative potential we have to look at opportunities that are out there. But obviously, depending on the opportunity, there may be more scope to actually have growth opportunities that are larger than that $110 million number.

Got you. I just wanted to understand your kind of framework. Second question is probably a Luke question as well. Just the Exetel contribution. I think on Slide 8, you've got that $59 million of revenue. This is probably not there, but if I just annualize that, it sort of suggests it's down maybe 9% year-on-year. So first question, is it actually fair to annualize that? Or is there some seasonality in that business? And I guess should we be thinking that will be up back a bit in the second half on sales and marketing uplift?

Yes, it's probably not fair to annualize it, to be honest. Much like we sort of -- the guidance expectation from an EBITDA point of view, some of those initiatives that we've sort of invested in, in the first half and, to be fair, to the -- in the back half of last year from a growth point of view, should see a greater contribution to the annual revenue come in the second half of the year. So there will be some seasonality to that.

Excellent. And then just...

And the other thing I should say obviously excluding Exetel, but just as a reminder, the Exetel revenue number that sits there is only 5 months' worth of revenue in the first half of this year.

Got it. Yes. Got it. That's great. And then just one last question and just a statement as well. So just, I guess, WiFi business, obviously it's kind of the sleeper in the business that has the potential to bounce back, as Paul pointed out. We've opened international borders today or this week, I should say. And I guess are you able to give us any idea of the leverage in that business in terms of if it was 100% or whatever your peak sort of occupancy is, would that add a couple million bucks of EBITDA or more? Or how should we think about the upside in that business?

So there's no reason to think that it won't go back to the pre-COVID levels in terms of the business in its entirety. We have not lost any market share. In fact, we've continued to try and grow that business at an infrastructure level. So yes, there is capacity there for a recovery. How much recovery are going to come in the next couple of months versus progressively over the year, it's a bit hard to say at the stage. We were quite pessimistic about it in January, but a little bit more optimistic over the last sort of week or so with students starting to come back in. But I think you're right, it is a bit of a sleeper in our business. It's something we do want to scale. We are still quite motivated to expand that business and have plans to do so.

Yes. And I think just to round out the conversation, we haven't -- from an expectation point of view, we haven't built that expectation in at this point in time. It's probably dangerous to try and put a number on what could the potential benefit be if we did see a turnaround. But it's worthwhile just noting that we can only go on what we have seen and experienced. And that's the number that's sort of gone in and informed our position in relation to guidance.

Got it. So I'll sort of interpret that is don't expect a big bounce back this half, but in the medium term, there's some really good potential. And I just wanted to say well done. I think on the results call 12 months ago, you just recently hired a couple of your colleagues -- previous colleagues, and I'd asked you what should we expect. Should they give business side of the -- of Superloop a good kick along? And you were a little bit hesitant to say too much. But obviously, that segment works, so well done to you and those guys.

Thanks. Thanks, mate.

Thanks, Nick.

Your next question comes from Cameron Bell from Canaccord Genuity.

I just wanted to quickly ask about some -- just expanding on the second half guidance basically. So it was sort of asked before but I want to tie in under -- you're guiding effectively to, let's call it to $14 million to $16 million EBITDA in the second half. You've just done $9 million. Is it fair to say the waterfall looks roughly Hong Kong, Singapore falls by, say, $1 million to $2 million, synergies come through $2 million to $3 million and then organic growth is on top of that?

Yes, that's roughly fair.

[Operator Instructions] Ladies and gentlemen, that would be our last question for today. That does conclude our conference. Thank you all for participating. You may now disconnect.