Release Date: August 22, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- hipages Group Holdings Ltd (ASX:HPG, Financial) achieved a significant milestone by reaching positive free cash flow in FY24.
- Recurring revenue grew by 15% to $72.1 million, demonstrating strong financial performance.
- The launch of hipages tradiecore, a single app merging core solutions, marks a key strategic evolution for the company.
- Subscription tradies increased by 3% to 36,700, indicating growth in the user base.
- The company remains well-capitalized with $21.3 million in liquidity and no debt, providing a strong financial position.
Negative Points
- Subdued consumer demand in the current economic environment resulted in a 6% decline in job volumes.
- Operating expenses increased in certain areas, such as sales employment costs (up 16%) and marketing spend (up 6%).
- Despite positive free cash flow, the net profit after tax before significant items was only $0.1 million.
- The transition to the new hipages tradiecore app may pose challenges in terms of user adoption and retention.
- The company faces ongoing pressure to maintain cost discipline while continuing to invest in technology and marketing.
Q & A Highlights
Q: Do you have any update on recent trends around net adds since the tradiecore integration?
A: The momentum for subscribers is continuing as per FY24. The hipages tradiecore app has seen about 6,000 downloads, and this number grows materially every month. We will start migrating our existing customer database onto hipages tradiecore from October onwards, with a full migration expected by FY26. We anticipate seeing improvements in customer counts and retention rates in H2 of FY25.
Q: What are your expectations around net subscription growth over the year?
A: We expect net subscription growth to be consistent with FY24. We anticipate seeing more uptick as the adoption of the technology translates into improved retention rates in H2 of FY25.
Q: Can you provide an update on capitalization and tech spend?
A: We will continue to invest in our technology spend, with several features and enhancements planned for our platform rollout. However, we expect technology spend as a percentage of revenue to decrease annually by roughly 1%.
Q: Is it your intention to use tradiecore as a software-as-a-service for tradies who don't get jobs through hipages in the future? What would be the timing around this?
A: Yes, tradiecore is available for tradies to use for all jobs, not just those generated by hipages. Tradies can use it to schedule work, process payments, and manage jobs that were not originally generated by hipages. This is part of our strategy to provide a comprehensive CRM system and management tool to help trade businesses improve productivity. Future features will include procurement, financing options, and insurance solutions.
Q: What are the key financial highlights from FY24?
A: We saw a 15% increase in recurring revenue to $72.1 million, a 13% increase in MRR to $6.4 million, and an 11% increase in ARPU to $2,079. Operating revenue was up 14% to $75.3 million, and total revenue increased by 13% to $75.8 million. We achieved a 33% increase in EBITDA before significant items to $16.4 million, with an EBITDA margin of 22%. Net profit after tax before significant items was $0.1 million, a turnaround from a $2.3 million loss last year.
Q: How did the tradie-homeowner connections perform in FY24?
A: The number of tradie-homeowner connections grew 3% to a record 2.7 million connections. This reflects increased activity on the marketplace, resulting in an exceptional homeowner experience with 86% of jobs being connected with a tradie in H2.
Q: What are the strategic priorities for hipages moving forward?
A: Our strategic priorities include maintaining marketplace balance by growing our tradie network, capitalizing on pricing and value delivery opportunities, enhancing the value exchange through AI and machine learning, and expanding the features available in our job management solutions. We are also committed to driving relevant job leads for our tradies and expanding our homeowner network.
Q: What is the outlook for FY25?
A: We are targeting continued strong revenue growth and further EBITDA expansion, delivering free cash flow of $4 million to $6 million. We are developing new products, optimizing pricing, and maintaining cost discipline to drive performance and growth.
Q: How is the New Zealand operation performing?
A: Builderscrack, our New Zealand operation, is transitioning to a subscription-based model, delivering 28% revenue growth and a 21% improvement in ARPU for the year. We expect strong ARPU growth as we convert 100% of our tradies to the full-subscription model.
Q: What are the key drivers underpinning the FY24 results?
A: Key drivers include a 3% increase in subscription tradies to 36,700, an 11% growth in ARPU to $2,079, and a 3% increase in tradie-homeowner connections to 2.7 million. Our disciplined cost management and strong sales execution also contributed to the positive results.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
