Zomato climbs 5% despite reporting big Q1 loss. Here are 9 key takeaways from earnings you should know
Brokerage houses remain positive on the stock despite the EBITDA loss as the company is in its early stages of growth
Online food ordering firm Zomato reported a net loss of Rs 356 crore on a consolidated basis for the April-June quarter. This is the first quarterly earnings update of the country’s leading food aggregator since its stellar stock market debut last month. Despite the huge loss, the stock price has jumped up to 5% in early trading session today.
Here are 9 key takeaways for investors from Zomato’s Q1 earnings
Topline growth
Revenue from operations in the first quarter of the current fiscal stood at Rs 844 crore, compared to Rs 266 crore in the corresponding period last year, marking a three-fold increase year-on-year. The revenue growth was largely on the back of growth in its core food delivery business which continued to grow despite the severe Covid wave starting April.
While Rs 806 crore of operational revenue came from India, a revenue of Rs 31 crore was logged from the UAE and the balance from other markets.
Adjusted revenue
Zomato said its adjusted revenue — which is a combination of revenue from operations and customer delivery charges — increased 26% to Rs 1,160 crore in the June quarter, compared to around Rs 920 crore in March quarter.
However, beyond its core business, Zomato also saw its losses widening in the business-to-business (B2B) supplies segment for restaurant partners, while revenue from dining out continued to decline.
More losses
Zomato reported a widening of its net loss to Rs 360.7 crore for the quarter ended on June 30, 2021, mainly on account of rising expenses.
The company had posted a net loss of Rs 99.8 crore for the corresponding period of the previous fiscal, Zomato said in a regulatory filing.
ESOP led losses
Zomato said the increase in losses is “largely on account of non-cash ESOP (employee stock ownership plan) expenses, which have increased meaningfully in Q1 of FY22 due to significant ESOP grants made… pursuant to creation of a new ESOP 2021 scheme.”
Cash Burn
Total expenses of the company rose to Rs 1,259.7 crore for the quarter ended June this year from Rs 383.3 crore for the year-ago period.
EBITDA pain
Adjusted EBITDA loss was Rs 1.7 billion in Q1 FY22 as compared to INR 1.2 billion in Q4 FY21. The loss for Q1 FY22 reported in our financial statements is INR 3.6 billion as compared to the Adjusted EBITDA loss of INR 1.7 billion. India dining-out revenue shrunk over the previous quarter which also led to increase in Adjusted EBITDA losses. Hyperpure losses expanded in Q1 FY22 due to investments in growth.
Deepinder Goyal, Founder, Zomato, mentioned in his blog that this divergence in reported profit/loss and Adjusted EBITDA will continue going forward.
Record order value
The company said the domestic food delivery business reported the highest ever gross order value (GOV) in the quarter under review. Zomato recorded its highest-ever gross order value in its history. GOV is the total monetary value of all food delivery orders placed on Zomato India, including taxes, customer delivery charges, gross of all discounts, excluding tips. The gross order value of the Indian food delivery business grew more than four-fold year-on-year to Rs 4,540 crore in the April-June quarter, while the sequential growth compared to the preceding January-March quarter of fiscal 2020-21 was 37%. Zomato said it has delivered 1 billion orders since it entered the business in 2015, with more than 100 million orders delivered in the past three months itself.
Positive outlook by management
In his blog titled ‘A billion smiles, delivered’, Goyal said that Q1 FY22 was one of the most challenging quarters for our team. As the second COVID wave ravaged the nation, we were left scrambling to work on multiple things at the same time.
“We had 310k active delivery partners in July, which is the highest ever in our lifetime. As we look ahead, we will continue to focus on making Zomato the platform of choice for all our stakeholders and consistently strive to improve the NPS for our delivery partners, restaurant partners and customers”, he added.
What should investors do ?
Motilal Oswal Financial Services
Hemang Jani of Motilal Oswal Securities said, “Zomato reported strong Q1 revenue of Rs8.44bn (+22% QoQ), led by a very strong food delivery GOV (Rs45.4bn, +37% QoQ). We saw a sharp increase in AOV in Q1 (after marginal dip in Q4), up mid to high single digits QoQ. Number of deliveries crossed 100 mn in Q1 (our estimate) from 84 mn in Q4, implying mid 20% QoQ growth. Contribution margin saw a slight dip QoQ but continue to be positive. Since its a start up in early phase of growth EBIDTA loss may not be taken negatively by markets.”
UBS
The June quarter was a strong start to the year. The foreign brokerage said the quarterly performance was better than its expectations. It maintained a price target of Rs 165 for the stock.
Jefferies
The brokerage house finds the stock Rs 175-worthy. It said revenue growth was a big beat due to a jump in gross order value (GOV). The stock hit a high of Rs 131 on BSE, up 4.84% in Wednesday’s trade.