The Aussie Broadband Ltd (ASX: ABB) share price is up today after giving an update about its FY22 second quarter broadband net additions.
This company is a telco, its main focus is NBN subscription plans and bundles to residential homes, small businesses and so on.
Aussie Broadband progress in the second quarter
Two months ago, it provided its FY22 first quarter trading update, which included guidance for between 53,000 to 60,000 broadband net additions in the second quarter of FY22.
This range was made up of between 33,000 to 40,000 organic broadband net additions (through all channels), and the migration of 20,000 white label services.
Sales during the quarter have remained “strong” and organic net additions for the quarter are expected to be at the top end of the range (which was 33,000 to 40,000).
However, due to “teething issues” in the early stages of the white label migration, only 8,715 services have been migrated in the quarter, not the 20,000 anticipated. The shortfall will now be migrated in the third quarter of FY22 and when combined with the originally planned FY22 third quarter migrations, it’s expecting approximately 22,700 migrations to be completed in the third quarter of FY22 (subject to churn).
Are these issues going to continue?
Aussie Broadband said that the teething issues have now been resolved. But, due to the Christmas break, migrations have now paused for the time being and will recommence in the middle of January 2022.
Management noted that the migration shortfall is a timing issue and all services will be migrated by the end of the third quarter of FY22.
Total connections
Aussie Broadband revealed that combining the strong organic sales and successful white label migrations to date, it’s expecting broadband services to grow from 445,780 at 30 September 2021 to a range of 492,495 to 494,495 at 30 December 2021.
Summary thoughts on Aussie Broadband and the share price
A slight delay of the migration of some services is certainly nothing to worry about the long-term.
I think it’s very impressive that Aussie Broadband continues to grow its broadband subscribers so much every quarter. Adding 38,000 connections is a lot in just one quarter. A potential acquisition also looks good.
I’m not surprised that the Aussie Broadband share price has risen so much in the past year. Is it still an opportunity? Probably, for a while still, but at some point Aussie Broadband will hit a ceiling of fast growth, I’m just not sure where that is.
There are other ASX growth shares I would rather look at for long-term growth with higher profit margin potential.
