Aussie Broadband (ASX:ABB) share price higher after delivering 49% revenue growth

Aussie Broadband had a mixed half…

| More on:
telstra share price

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Key points

  • Aussie Broadband delivered strong revenue growth during the first half
  • Operating earnings margins crunched by its investment in promotions and increased usage costs during lockdowns
  • Margins expected to improve in second half

The Aussie Broadband Ltd (ASX: ABB) share price is on the move following the release of its first half trading update.

In morning trade, the telco's shares are up 2.5% to $4.33.

Aussie Broadband share price higher on strong first half growth

  • Total broadband subscribers up 45% year on year to 494,803
  • Total services (broadband, voice, mobile, fetch, managed) up 41% to 636,446
  • First half gross revenue growth of 49% to $237.3 million
  • Marketing expenses up 69% to $16.4 million
  • First half EBITDA (before transaction costs) up 7% to $9.1 million
  • Guidance: Full year EBITDA expected to be $27 million to $30 million

What happened during the first half?

Aussie Broadband had another strong half for subscriber and revenue growth. For the six months ended 31 December, the company recorded a 45% year on year (11% quarter on quarter) jump in broadband subscribers to 494,803. This underpinned a 49% increase in gross revenue over the prior corresponding period to $237.3 million.

However, due to its investment in marketing to grow customer numbers, its operating earnings (EBITDA) was impacted. Management notes that promotions were used extensively to encourage customers already on the NBN to switch to Aussie Broadband. This led to its marketing expense as a percentage of revenue increasing to 12.6% from 11.9%. Combined with higher usage costs during lockdowns, this meant EBITDA grew only 7% to $9.1 million.

Positively, management expects its marketing spend as a percentage of revenue to ease in the second half, which should lead to stronger margins.

In light of this and the end of lockdowns, it is forecasting full year EBITDA in the range of $27 million to $30 million excluding acquisition costs and benefits. This will be up from $19.1 million in FY 2021.

Management commentary

Aussie Broadband's Managing Director, Phillip Britt, commented: "We're very pleased with how all segments have performed across the quarter, despite the Christmas period impacting residential sales slightly. The business segment remained strong. So far in 1H FY22 we have taken 15% of all NBN enterprise ethernet net service activation orders. We continue to be excited about our Carbon platform (our self-service platform for business), it now has more than 10,000 active services and over 400 MSPs (managed service providers) onboarded."

"Whilst first half EBITDA has been impacted by increased promotional costs, and CVC expense due to lockdowns, we expect to see the benefits of operating leverage in 2H FY22 with employee, marketing and administration expenses expected to be lower as a percentage of revenue. The second half will also benefit from the organic connection growth achieved in the first half, additional white label migrations, and operating leverage to produce a full year EBITDA in the range $27m to $30m. This validates our strategy of continuing to invest in connection growth at the expense of short-term EBITDA gains," he concluded.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns and has recommended Aussie Broadband Limited. The Motley Fool Australia has recommended Aussie Broadband Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Earnings Results

A young male ASX investor raises his clenched fists in excitement because of rising ASX share prices today
Consumer Staples & Discretionary Shares

Guess which ASX 200 stock is rocketing 26% on better than expected results

The KFC operator has delivered on expectations with its FY 2025 results.

Read more »

Man drawing an upward line on a bar graph symbolising a rising share price.
Earnings Results

Which ASX 200 stock is up 5% to a 52-week high on results day?

This blue chip is having a strong start to the week. Let's find out why.

Read more »

A woman looks up at a plane flying in the sky with arms outstretched as the Flight Centre share price surges
Earnings Results

Web Travel share price rockets 13% on market leading full-year growth

Investors are sending Web Travel shares soaring today. Here’s why.

Read more »

Happy shopper at a clothes shop.
Earnings Results

Why did Myer shares just rocket 9%?

Investors are piling into Myer shares on Friday. But why?

Read more »

A woman looks up at a plane flying in the sky with arms outstretched as the Flight Centre share price surges
Earnings Results

Up 78% since April, why is the Webjet share price taking off again today?

Webjet shares have soared 78% since 4 April and are lifting off again today. But why?

Read more »

a woman holds her hands to her temples as she sits in front of a computer screen with a concerned look on her face.
Industrials Shares

Guess which ASX 200 stock is crashing 24% on results day

Investors were not impressed with this result. But why?

Read more »

A man in full American NFL playing kit crouches over with his arms across his chest in a defensive stance against a dark background.
Technology Shares

ASX 300 tech stock charges 7% higher to record high on stellar results

This tech stock delivered another impressive result this morning.

Read more »

a group of people sit around a computer in an office environment.
Earnings Results

Guess which ASX 200 tech stock is rocketing 12% on record results

Another half, another record result from this high-quality company.

Read more »