Superloop Ltd (ASX:SLC) (FY 2026) Earnings Call Highlights: Record Growth and Strategic Milestones

Negative Points

• Superloop Ltd ( ASX:SLC ) faces a more competitive consumer market following NBN's speed upgrade, with competitors responding with pricing aggression, which could pressure future growth and margins.

• Consumer gross margin softened in the second half due to a higher proportion of customers in promo periods, which is temporarily dilutive to margins.

• The company will face a headwind from the removal of credit card surcharges from October onwards, which will have a small but negative impact on earnings.

• Superloop Ltd ( ASX:SLC ) expects to lose approximately AUD4 million in gross margin from the AGL Energy supply arrangement, which is expected to end in the near future.

• The company faces increasing regulatory compliance costs across the industry, which it must absorb, although it is offsetting these with top-line growth.

• CapEx for FY26 was slightly above the provided range, reflecting higher investment in Lynham fiber builds, indicating potential for continued capital intensity in growth areas.

Q & A Highlights

Q: Can you provide an update on how subscriber growth is tracking in early FY27, particularly regarding churn from the strong growth in FY26? A: Paul Tyler (CEO): It is very early in the year to give a trading update, with only one month completed. Trading conditions continue to be strong, and the momentum from the second half of FY26 has continued into the first half. July is always a messy month with price changes, so it is too early to call a trend, but trading is tracking to expectation.

Q: Consumer gross margin was softer in the second half. What are the drivers, and how should we think about FY27, especially with the credit card surcharge removal? A: Paul Tyler (CEO) and Dean Tognella (CFO): The slight softening in gross margin is a "champagne problem" driven by very strong growth, meaning a higher proportion of customers were in promo periods, which is temporarily dilutive. The credit card surcharge removal will have a small impact on the industry from October. For FY27, consumer gross margins are expected to remain stable as promo periods roll off, providing an advantage in GM expansion.

Q: You are already at a 19% EBITDA margin in the second half. Is there any reason FY27 should dip below this level? A: Dean Tognella (CFO): No. The ambition set in the SuperCharge29 strategy is to achieve a 20% EBITDA margin. The company has consistently grown its EBITDA margin and intends to do the same in FY27, against a much higher top line.

Q: Can you unpack the improvement in the business segment's second-half revenue and gross margin? Is it driven by Smart Communities or the underlying B2B business? A: Paul Tyler (CEO): It is a combination of both. Smart Communities is contributing more from active sites, but the underlying business (classic secure connectivity) is also performing as expected. The industry-wide price erosion has stabilized, leading to double-digit year-on-year growth in the second half, which was an internal target. The security portfolio is also doing well, and green shoots have turned into a mainstream business trend.

Q: What is driving the significant increase in billings in advance, and is it across all segments? A: Dean Tognella (CFO): The increase reflects continued business growth. The company bills at different points during the month, so roughly half of the month's billings are in advance at any point. This is predominantly driven by growth in the consumer base and will continue to grow as the business grows.

Q: Can you provide an update on the migration of subscribers from AGL Energy's network and the estimated impact? A: Paul Tyler (CEO): Superloop never had AGL Energy customers in its subscriber numbers; it was a supply arrangement selling backhaul capacity. The business lost is around AUD4 million in gross margin, which is still in the books today. It is expected to come to an end in the near future, but the company is still providing the service at this stage.

Q: Can you talk about the quantum of cost savings expected from AI initiatives and the sustainable floor for OpEx as a percentage of sales? A: Paul Tyler (CEO): The company has provided data on avoided calls, and OpEx as a percentage of sales has decreased from around 20% a couple of years ago to mid-13% now. It can go a bit further but is flattening out. The focus is shifting to cost avoidance rather than taking large chunks out of the organization. The company does not provide a specific target for the long-term floor.

Q: What has been the uptake of the PriceLock guarantee, and what drove the decision to launch it? A: Paul Tyler (CEO) and Dean Tognella (CFO): PriceLock is a targeted proposition designed to extend customer lifetime value by giving up short-term ARPU for a lower churn profile. It was tested on a cohort 15 months ago with pleasing results. The product requires an upfront fee, increasing customer investment and loyalty. There has been reasonable take-up, and it is doing exactly what it was designed to do.

Q: Is the wholesale segment's second-half gross margin of around 70% sustainable, and is there room for further improvement? A: Paul Tyler (CEO): The growth in wholesale has been driven by higher-margin white label and aggregation products, leading to a progressive improvement in gross margin towards 70%. This is a good number to model for the time being. The previous target of 60% is now considered too light for the future.

Q: How are you thinking about the increased regulatory compliance costs, and can you absorb them through OpEx initiatives? A: Paul Tyler (CEO): Compliance costs are increasing across the industry, and Superloop has increased investment in compliance resources and tools. These costs are included in the OpEx outlook and are being offset by a rapidly growing top line. If the company were not enjoying top-line growth, these costs would be a real drag on earnings.

For the complete transcript of the earnings call, please refer to the full earnings call transcript .