Zomato Turns EBITDA Positive In Q4 Earnings Based On “Adjusted” Math

Foodtech major Zomato’s net loss narrowed 48% year-on-year (YoY) to INR 187.6 Cr in the March quarter of the financial year 2022-23 (FY23) despite a muted growth in its food delivery segment, which was offset by growth in its other business verticals and cost cuts.

The Deepinder Goyal-led startup had reported a net loss of INR 359.7 Cr in Q4 FY22. On a sequential basis, its loss fell almost 46% from INR 346.6 Cr posted in Q3 FY23.

Zomato posted a better-than-expected operating revenue of INR 2,056 Cr, which jumped over 70% from INR 1,211.8 Cr reported in the last year’s quarter. However, on a quarter-on-quarter (QoQ) basis, it was up merely 5.5% from INR 1,948.2 Cr in Q3 FY23.

Zomato’s consolidated adjusted revenue grew 57% YoY to INR 2,413 Cr in Q4 FY23. Excluding its quick-commerce business Blinkit, the company’s adjusted revenue stood at INR 2,051 Cr in the quarter under review.

“Our business excluding quick commerce turned adjusted EBITDA positive in Q4 FY23 driven by the food delivery business generating INR 0.78 billion (INR 78 Cr) of adjusted EBITDA in the quarter,” Zomato said in a statement.

Zomato’s adjusted revenue for its food delivery business increased to INR 1,530 Cr in Q4 FY23 from INR 1,284 Cr in the corresponding quarter last year. However, on a sequential basis, it declined from INR 1,565 Cr reported in the prior quarter of Q3 FY23.

The company attributed the muted growth in food delivery to February being a shorter month (negative impact of 2.2%) and shutdown of the service in 225 cities in January 2023 (negative impact of 0.3%). 

Normalised for these factors, Zomato would have seen a QoQ gross order value (GOV) growth of 0.8% in Q4 FY23 instead of a decline of 1.7%, said a top company executive in a statement.

Due to the slowdown in the food delivery business, Zomato’s GOV in the vertical stood at INR 6,569 Cr in Q4 FY23 as against INR 6,680 Cr in Q3 FY23

Meanwhile, adjusted revenue of its B2B business, Hyperpure, grew on YoY as well as QoQ basis to INR 478 Cr during the quarter under review. Blinkit’s adjusted revenue was also up QoQ to INR 363 Cr.

After achieving operational profitability in its food delivery business in Q1 FY23, Zomato said it aims to turn the consolidated business profitable on an adjusted EBITDA basis within the next four quarters. It is also targeting posting a profit after tax within this timeline.

In FY23, Zomato posted a net loss of INR 971 Cr as against INR 1,222.5 Cr reported in the prior fiscal. Its operating revenue grew to INR 7,079.4 Cr in the year from INR 4,192.4 Cr in FY22.

“We stuck to our plans and were able to make sure that the launch of Zomato Gold did not affect our overall profitability timeline,” said Goyal, MD and CEO of Zomato, in a statement. 

“Zomato Gold membership base scaled to 1.8 Mn members during the quarter and while that had some negative impact on our contribution margin, it was more than compensated for by progress across other revenue and cost levers which we have been working on in the last couple of quarters,” he added.

Cost Cuts Help Zomato

On the expenses front, Zomato spent a total of INR 2,431 Cr in Q4 FY23, which was up almost 43% YoY but 2.2% lower from Q3 FY23 as the startup managed to cut costs towards employee benefits, advertisements, sales promotions, among others. 

Zomato spent INR 339.8 Cr towards employee benefit expenses, down from INR 395 Cr spent in Q3 FY23.

It must be noted that the exodus of some top-level executives in the company, which started last year, has continued in 2023 as well. In January, Zomato’s cofounder and CTO Gunjan Patidar quit the company. 

Zomato’s expenses on advertisements and sales promotions declined to INR 302.2 Cr in the quarter under review from INR 347.9 Cr in the previous quarter. However, on a YoY basis, it was still up from INR 269.1 Cr spent towards ads in Q4 FY22.

Meanwhile, Zomato’s purchase of stock-in-trade grew on YoY and QoQ basis to INR 437.5 Cr in Q4 FY23.

Its delivery and related charges stood at INR 719.3 Cr in the quarter under review as against INR 654.9 Cr in Q3 FY23 and INR 545.1 Cr in the March quarter of FY22.

Zomato’s consolidated cash balance stood at INR 113.23 Bn at the end of March 31, 2023, compared to INR 114.63 Bn at the end of December 31, 2022.