The Helloworld (ASX:HLO) share price is on the rise after trading update

The travel company released its latest earnings report today. Here are the details

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A smiling woman in a hat holding a ticket takes selfie inside a plane next to the window.

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The Helloworld Travel Ltd (ASX: HLO) share price has been on an upward trajectory this past month or so.

At the time of writing, Helloworld shares are edging higher and are now trading up around 0.72% at $2.79. However, that’s down from an earlier high of $2.89.

Shares in the international and domestic travel retailer are on the move after it released its trading update for the 3 months ended 30 September 2021.

Helloworld share price spikes on 63% revenue jump

The company detailed several investment highlights this quarter, including:

  • Revenue for the period totalled $20.3 million, up 62.7% year on year (YoY);
  • EBITDA loss for the quarter was $3.6 million compared with $6.3 million in Q1 FY21;
  • September quarter last year benefitted from $10.4 million of wage subsidies in Australia and NZ which materially offset the gross wages and on-costs of $19.3 million for the period, reducing the net cost to $8.9 million; and
  • Total transaction value (TTV) for the quarter was $266.5 million, up 50.7% on the same period last year.

What happened this quarter for Helloworld?

The Helloworld share price is gaining after what appears to be positive news out of the travel company. It seems to have made an impressive start to the financial year, having increased its TTV year-on-year for the last 3 consecutive months.

Helloworld defines TTV as the price at which travel products and services have been sold into its end markets, such as airlines and logistics.

Consequently, the company derives its revenue from TTV, despite this being in misalignment with the Australian Accounting Standards’ classification of revenue.

In saying this, the company also said roadblocks to its earnings potential were lifted this quarter. For instance, July and August of 2021 saw losses at the earnings before interest, taxes, depreciation, and amortisation (EBITDA) line of approximately $1.5 million each month.

Fast forward a month to September, and the EBITDA loss was reduced to just $600,000 each month.

The release also notes that “headcount and gross personnel costs were reduced in the current quarter to $16.9 million”.

Partially offsetting this liability was “$2.7 million in government assistance” which effectively reduced the net cost to $14.2 million.

Corporate TTV in Australia came in around 25% higher to $132 million. That drove revenue 55% higher on the year in its domestic operations. Wholesale TTV was also up in Australia when exiting the quarter, climbing 154% YoY.

Meanwhile, in the company’s New Zealand operations, corporate TTV increased 15.7%. Wholesale TTV saw a massive hike from NZ$212,000 in Q1 FY21 to NZ$4.4 million.

Overall, TTV for Q1 FY22 came in around 51% higher than the year prior at $266.5 million.

The summation of these factors enabled the company to recognise a 63% YoY jump in revenues to $20 million.

This carried through to an EBITDA loss of $3.6 million for the quarter. That is substantially lower than the $6.3 million in the same period last year.

These figures seem to have been well received, judging by the Helloworld share price today.

What’s next for Helloworld?

The company provided extensive colour on its expected FY22 guidance. It forecasts Q1 FY22 TTV to increase to about 51% and derive a 63% hike in revenue from the same.

It also sees the loss at the EBITDA level improving by 50% for the quarter, even when factoring in a $7.9 million reduction in wage subsidies.

In addition to these factors, the company is presumably eager to get domestic and international travel started once again. In fact, Helloworld called the decision to re-open state and international borders later this year as “incredibly welcomed news”.

The company also stated it has a sufficient cash runway to last beyond CY22, based on its current cash burn rate and levels of liquidity.

Regarding its outlook, Helloworld CEO Andrew Burnes AO said: “Based on retail, wholesale, and corporate booking intakes across the first three weeks of October we expect a rapid improvement in sales volumes and revenues across the next six months.”

The Helloworld share price has enjoyed bathing in a pool of green this year to date. It has climbed 11% since January 1 and almost 50% in the last 12 months.

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The author Zach Bristow has no positions in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended Helloworld Limited. The Motley Fool Australia owns shares of and has recommended Helloworld Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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