Hipages share price sinks as 'perfect storm' hits profit

It's been a tough year for the tradies services platform. Here's what it reported.

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Key points

  • Hipages has released its FY22 results, which shows its revenue growing but the bottom line in the red 
  • Operating cash flow improved despite net loss for FY22
  • Management is optimistic about the outlook for the company

The Hipages Group Holdings Ltd (ASX: HPG) share price is falling today after the company released its results for the year ending 30 June (FY22).

Hipages shares were sinking by as much as 9% in early trading but have since partially recovered and are currently down 2.68% at $1.45 apiece.

Let's get the measuring tape out and see what unfolded in FY22 for the ASX-listed tradies services platform.

What did Hipages report for FY22?

  • Revenue of $61.9 million, up 11% from $55.8 million in FY21
  • Operating expenses of $51.1 million, up 15% from $44.3 million in FY21
  • Earnings before interest, tax, depreciation, and amortisation (EBITDA) before significant items of $10.7 million, down 8% from $11.7 million in FY21
  • EBITDA margin of 17%, down from 21% in FY21
  • Net loss after tax of $0.91 million, compared to a profit of $1.2 million in FY21

Across Hipages' key operations, it recorded higher monthly recurring revenue of 5% to $5.5 million. The number of jobs processed on the Hipages platform also lifted 6% to 1.63 million. The average revenue per user surged 11% to $1,707 compared to $1,536 in FY21.

The jump in operating expenses was due to greater investment in headcount and marketing. Marketing expenditure went up from $16 million to $18.8 million, in particular building its brand through the sponsorship of The Block.

In terms of employees, Hipages invested in its tech team to support growth and strategic execution.

Despite the reversal in Hipages' bottom line, it managed to improve its operating cash flow slightly from $12.5 million in FY21 to $12.7 million in FY22.

Hipages, which only listed in November 2020, appears to be in a sound financial position with cash and funds on deposit of $13.2 million and no debt.

What else occurred in FY22?

Hipages rolled out its job management solution, which plays a crucial role in transitioning to a software-as-a-service model. Tradie subscribers can now use the platform to schedule and personalise documentation with self-service options.

The tradie marketplace business also acquired Builderscrack, a similar business based in New Zealand. This enabled Hipages to achieve its goal of becoming the leading tradie marketplace across the trans-Tasman.

In addition, the company acquired a 25% stake in Bricks & Agent, one of Australia's leading property management technology platforms.

Management commentary

Speaking on the results, Hipages co-founder and CEO Roby Sharon-Zipser said:

In FY22 we faced a perfect storm for a marketplace business, with supply constricted by our tradie customers being unable to work due to COVID restrictions, then facing an unprecedented backlog of jobs driven by strong consumer demand.

In this environment, the strength of our subscription model shone through, enabling us to deliver growth in revenues, subscription tradies and ARPU, while executing our strategy and consolidating our position as the #1 online tradie marketplace in both Australia and New Zealand.

What's ahead for Hipages?

Management expects H1 FY23 revenue growth to stay in line with H2 FY22 and then accelerate to the mid-teens in the second half of FY23.

The EBITDA margin for FY23 is expected to be ahead of FY22.

The company advises there is a clear path towards free cash flow after recording positive free cash flow in its most recent quarter for FY22.

Commenting on the outlook, Sharon-Zipser said:

Looking ahead, I am very excited about the future for hipages Group. The countercyclical nature of our model means that we are well positioned to benefit from economic uncertainty in the near-term, while the opportunity in our existing markets and new adjacencies is significant.

Our efficient operating model gives us the confidence to continue to invest with a clear pathway to ongoing positive free cash flow. We remain highly focused on executing our strategy and investing to build the foundations for long-term profitable growth.

Hipages share price snapshot

The Hipages share price has copped a hammering alongside other ASX growth stocks over the last 12 months, dropping 52%. It has also fallen 62% this year to date. However, it has rallied in the past month, up 28%.

The S&P/ASX 200 Index (ASX: XJO) hasn't been as erratic, falling 6% in the past year and then climbing up 4% in the last month.

Hipages has a market capitalisation of around $195 million.

Motley Fool contributor Raymond Jang has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Hipages Group Holdings Ltd. The Motley Fool Australia has positions in and has recommended Hipages Group Holdings Ltd. 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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