Company Interview / Swoop narrows losses, boosts subscribers

Key points:

Swoop (ASX:SWP) reduces losses to $3.8M, boosts FY 23 revenue by 14%Company sees subscriber growth in mobile and residential NBN services$17M in funding likely to drive organic growth and acquisitions

Swoop (ASX:SWP) narrows its full-year losses to $3.8M, a significant improvement from $37.5M. FY 23 revenue rises 14% to nearly $89M, driven by an 18% growth in subscribers, says CEO Alex West. Organic growth, enhanced systems, and improved customer support fuel these achievements.

Alex notes that mobile services under the Moose brand and residential NBN services drive subscriber growth. They've also secured $17M in funding, part of which is earmarked for potential acquisitions, aiming to expand in similar product sets like MVNOs and NBN resellers.

With a 300km fibre network under a $36M contract, Swoop (ASX:SWP) targets Melbourne's greater suburbs, boosting business and residential coverage. Alex envisages significant growth over the next 2-3 years, aiming for positive cash flow and a streamlined operation without job cuts.

Full unedited transcript below:

0:11

Swoop has narrowed its full year losses to $3.8 million for the full year, significant improvement on a loss of 37.5 million, and FY 23 revenue up 14% to close to $89 million, and the subscriber base has grown by 18%. So we got the details with swoop CEO Alex West. This year was fantastic for us. We've been beating down our systems, we've been improving our customer support and our go to market efforts, and that's resulted in an 18% increase in subscriber numbers, which has driven that 14% increase in revenue. And it's all from organic. So we had previously been a very acquisitive company, but we've made no acquisitions in the past 12 months. So tell us where you're seeing the subscriber growth come from because you're across a number of businesses, including residential and SMB broadband and also mobile telephony.

1:06

So, um, we see there are two main areas of growth. One is in that mobile, um, those mobile services that's for customers under the, uh, moose brand. They're looking for value, but also great customer service. And that's demonstrated by obviously the massive increase in customer numbers, but also in the fact that we've been winning several customer awards and driving customers towards that. We also see significant growth in our residential customers, both on the NBN. Um, and we're a national reseller of that network, but also from our residential customers that are on our own infrastructure, and that's delivering quality services, reliable on high margin for very similar outputs. It looks like you have a fair amount of available funding. What are you planning on doing with that? More than $17 million?

1:54

Sure. Um, and noting that that was actually ahead of, um, a recent divestment announcement where we've divested one of our wholesale companies for for $9 million. So it doesn't actually um. That's not reflected in that. 17. So with that combined, uh, we'll be driving more organic growth. So marketing efforts, improving our systems. Uh, but also it's been a while since we've done an acquisition. So we've been spending a lot of time, uh, ensuring we've been beating down the systems and automating our processes. So we're about ready potentially to look at another acquisition. All right, so where would you be looking? I know you're not going to tell us the fine points, but just tell us what you and the board are thinking of.

2:32

Joe. Look, we we want to do something that's in a similar product set that we're already in. So it could potentially be another MVNO that would bolt on to our existing offerings. Uh, potentially another, uh, NBN reseller. Uh, we're selling NBN on our own national network now, so we'd be able to look at adding to that through a customer acquisition. Uh, we're also whilst previously our acquisitions have been in sort of a fixed wireless in regional areas, our most recent, you know, infrastructure acquisition has been in fibre. So looking at others in that space and then finally, uh, we did a small acquisition in sort of the SMB space. Uh, potentially looking at something in that to help us grow inorganically, uh, improve, uh, sort of a customer offerings as well as sort of our scale in that space there. How do you feel that you fare against the big giant so the likes of Telstra and Optus?

3:25

Sure. Look, I think, uh, there's a number of challenger brands, uh, particularly in the sort of NBN reseller space. Uh, we've been faring quite well. Uh, we've seen our market share growing, uh, whilst they've been, um, declining. And that's mainly due from sort of being able to be nimble, uh, being able to offer sort of value for money, obviously in tighter economic times, uh, reliable services. And that remains of that customer focus. Well, that is obviously a really key point to the cost of living challenges that many Australian households are facing. Is this sort of your key competitive advantage, offering cheaper services.

4:02

So look, I definitely under our mobile brand we are a value led, um, sort of uh, offering under the most, uh, but also, it's not just about being cheaper. You actually still have to provide a reliable service if the service is, um, cheap, it doesn't work. People aren't going to use it. And that's definitely more important since Covid, obviously more people working from home. You have to make sure that the service is always working. And um, and if it doesn't, that you've actually got reliable support, um, mechanisms and be able to bring customers back up to, to make sure that we focus on that. So, Alex, tell us a little bit more about your service then, because you've got a 300 kilometre fiber network, and this is also under a $36 million contract with a Nasdaq company. Sure. Look, that that project only just started. Uh, it'll take us over the next two years to construct, um, where basically, uh, great suburbs of greater Melbourne, uh, sort of north and western Melbourne, connecting various key um, data infrastructure areas. But it also allows us to

5:02

have a coverage area that could potentially support, uh, businesses and residential customers in that space. Uh, the actual coverage area itself will actually be able to target another 42,000, uh, business addresses. Um, apparently. So it'll take us some time to get deployed. But once that's in the ground, uh, we'll definitely see some growth coming from that area. But so, as we mentioned, you significantly narrowed your loss for full year 24 from full year 23. What's the hopes for for you? 25 when could you be back in the black?

5:32

Uh, look, um, obviously we are we are targeting that over a number of years, obviously with the impairment charge, uh, in 23, we're significantly better on that. Um, so we're actually looking over the next 2 to 3 years, significantly sort of improving on an impact basis, uh, getting towards free cash flow, which is our primary focus at the moment. So we'll be actually be able to fund our own growth. Uh, and we're anticipating that in the next 1 or 2 years. And when you're looking at strengthening that balance sheet and returning to positive cash flow, what does that look like in terms of potentially, um, streamlining operations? Are you looking at job cuts?

6:08

Look, we've been able to, um, to keep our numbers relatively stable over the last 12 months. But what we have implemented in FY 24 was we offshored a number of our roles, and that allowed us to achieve scale, um, whilst maintaining sort of a cost base. We're not necessarily seeing any significant increases in costs. Um, from a personnel perspective over the next three years. And we're actually built the systems and automated things so we can significantly grow our customers without having to significantly grow our staff. Most of your customers do come from the residential market, but I note that you had a 31% increase in your business, um, channel as well. What is the plans for growth there in terms of broadening out your scope to business, residential and others?

6:52

So definitely business has been a focus for us. Obviously similar type products, but it is small business but it's uh, higher up. So offering greater reliability, um, higher SLAs on our products. Uh, we'll continue to focus in that area, uh, improving our marketing and just our brand awareness and targeting sort of areas where we have our own infrastructure so that we can ensure that we're maintaining the customer experience.