Domain share price plummets 9% as expenses grow

Domain's revenue rose 23% in financial year 2022 while its expenses lifted 24%.

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Key points

  • The Domain share price is struggling on Wednesday, falling 9% before clawing back to trade at $3.87, 4.44% lower
  • Its fall follows the release of the company's financial year 2022 earnings, which saw its revenue increase by 23% and its profit lift by 2%
  • However, the company noted its expenses increased 24% while it expects its costs to lift further in financial year 2023

The Domain Holdings Australia Ltd (ASX: DHG) share price is in the red after the company released its financial year 2022 earnings.

The property marketing provider's stock opened 5% lower at $3.85 before tumbling to $3.70. That marks an 8.64% fall on its previous close. At the time of writing, the Domain share price has recovered some ground to trade at $3.87, down 4.44%.

Domain share price tumbles on full-year earnings

Here are the key takeaways from the company's full-year earnings:

The company's latest full-year results were impacted by the timing of JobKeeper payments, as well as costs and benefits of its voluntary employee program Zipline.

It received a $6.5 million EBITDA benefit from JobKeeper and Zipline in financial year 2021. That reversed to an $8 million expense in financial year 2022.

Adjusted for such impacts, Domain's EBITDA increased to $130.1 million, a 38.2% improvement. Its EBITDA margin also lifted to 36.5%. Meanwhile, its expenses, including its acquisition of Realbase, came in at $226.7 million, 15.9% greater than those of the prior corresponding period.

Additionally, after discounting significant items, the company's net profits came in at $55.3 million, representing a 46% improvement.

It ended financial year 2022 with $151.5 million of net debt, representing a leverage ratio of 1.2 times ongoing EBITDA.

What else happened in FY22?

Domain made two notable acquisitions in financial year 2022.

First, it announced its plan to snap up property data business Insight Data Solutions for $60 million in September.

Next, it underwent a capital raise to acquire campaign management technology platform Realbase in a deal worth as much as $230 million in April. Its share price ultimately slumped 2% on the back of the news.

What did management say?

Domain CEO and managing director Jason Pellegrino commented on the company's earnings, saying:

Over the past four years our team has remained laser focused on the elements of our business that we can control, against a backdrop of considerable trading volatility. This mindset has positioned Domain to leverage property market strength, while providing downside protection when the cycle has been less supportive. The creativity and hard work of our team are building Domain into a fundamentally stronger business, and this is reflected in the outstanding set of results we are delivering today.

What's next?

The company didn't provide vast earnings guidance for financial year 2022 today. Though, it did provide a quick update and made note of several expected happenings.

Firstly, it said the first six weeks of financial year 2023 saw ongoing growth in new 'for sale' listings and a return to normal trading patterns.

The company expects its financial year 2023 costs, excluding acquisition impacts, to increase in the low double-digit range. It also believes this fiscal year will see the full-year expense impact of the Insight Data Solutions and Realbase acquisitions. Together, they're expected to add around $27 million to ongoing operating expenses and an associated incremental revenue contribution.

Finally, it anticipates its financial year 2023 EBITDA margins will remain stable on an adjusted basis, while expanding on a reported basis.

Domain share price snapshot

Today's tumble included, the Domain share price is trading 34.9% lower than it was at the start of 2022.

It has also slipped 24% since this time last year.

In comparison, the S&P/ASX 200 Index (ASX: XJO) has fallen 6% year to date and 6% over the last 12 months.

Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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