Hostelworld Group PLC (HSWLF) (H1 2024) Earnings Call Highlights: Strong Net Margin Growth ...

GuruFocus News
3 min read

In This Article:

  • Net Bookings: 3.7 million, up 9% year over year.

  • Revenue Growth: 1% year over year.

  • Average Booking Value (ABV): Contracted by 10% from EUR15.15 to EUR13.60.

  • Net Margin: Grew by 23% to EUR22 million.

  • Operating Expenses (OpEx): Declined by 2% from EUR12.8 million to EUR12.4 million.

  • EBITDA: Increased by 88% from EUR5.1 million to EUR9.6 million.

  • Operating Cash Flow: EUR12.4 million generated.

  • Net Debt: Reduced to EUR2.6 million.

  • Marketing as a Percent of Net Revenue: Reduced to 45% from 51% in H1 '23.

  • App Bookings Growth: Up 20%, now 45% of total bookings.

Release Date: August 08, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

  • Net bookings increased by 9% year over year, with a notable rise in solo travelers and a strong preference for lower-cost destinations.

  • The social strategy has been effective, reducing marketing costs as a percentage of net revenue from 51% to 45%, contributing to a 23% growth in net margin.

  • App bookings grew by 20% year over year, now accounting for 45% of total bookings, indicating successful customer engagement through the app.

  • Operating expenses decreased by 2% year over year, demonstrating effective cost management despite increased booking volumes.

  • The company fully repaid its AIB debt two years ahead of schedule, improving its balance sheet and reducing interest costs.

Negative Points

  • Average Booking Value (ABV) contracted by 10% due to a shift towards lower-cost destinations and shorter stays by solo travelers.

  • Revenue growth was limited to 1% year over year, impacted by the decline in ABV.

  • Oceania was the only region to see a contraction in bookings, with a shift towards more short-haul travel.

  • Generated revenue was down 2% year over year, reflecting the impact of lower-cost destination preferences.

  • The company still has EUR7.5 million outstanding in warehoused debt to the Irish Revenue, indicating ongoing financial obligations.

Q & A Highlights

Q: How has the recent news of slowing growth in the US impacted Hostelworld's first-half results, and what is the outlook for demand in Europe and the US? A: Gary Morrison, CEO, noted that bookings from UK and European customers increased significantly, with a strong preference for lower-cost destinations like Asia. The US market, while a small portion of total bookings, also saw a shift towards Asia. Despite these shifts, the social strategy has driven a 23% increase in net margin.

Q: Can you explain how marketing costs are managed across different geographies and their impact on revenue and cost performance? A: Gary Morrison explained that Hostelworld operates as a global platform with variable marketing costs that adjust with destination revenue. The social strategy helps reduce marketing expenses, and the company focuses on ensuring competitive supply to stimulate demand.

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