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REA Group Ltd (ASX: REA) share price is trading down today after the company reported its first quarter update. Midday on 10 November 2023, REA share price was down by 2.061% to trade at AU$156.30.
Revenue and EBITDA up in 1Q
The company registered a 12% YoY increase in revenue to AU$341 million in the latest quarter. This reflects an 11% increase in core Australian revenue, a 25% lift in India revenue, flat media, data, and other revenue, and a decline in financial services revenue.
The company reported that the Australian residential business had a strong quarter with revenue up 12%. 'Buy' revenue benefitted from the 13% average national price rise, increased Premiere+ penetration, and a positive impact from geographical mix due to the outperformance of the higher yielding Sydney and Melbourne markets.
This was partly offset by deferrals, with a stronger end to the quarter resulting in significantly more revenue being deferred from the first quarter to the second quarter.
As for costs, the ASX 100 share revealed that Australian and Group core operating costs increased 10% respectively during the quarter. This was driven by higher employee, technology, and marketing costs. Excluding the impact of the CampaignAgent acquisition, Australian and Group costs both increased 7%.
This ultimately led to REA's operating EBITDA coming in 13% higher than the prior corresponding period to AU$198 million. While this is positive, it is run-rating well short of the market's expectations for FY24.
Outlook
The company revealed that the second quarter has started strongly.
National residential new buy listings went up 16% YoY in October. As previously flagged, YoY growth rates in Q2 are expected to reflect weak prior period listing volumes. Listings for October were 1% above the 6-year average.
The company expects this positive trend to continue throughout the fiscal year 2024. Year-on-year listings growth is anticipated at 3-5%, indicating a steady and growing real estate market. One of the most promising aspects of the outlook is the expectation of double-digit growth in residential 'Buy' yields. This growth is primarily driven by an average national price rise of 13%. The company continues to target full year positive operating jaws and low to mid-teens Group operating cost growth for FY24.
