Zomato Q2 Results: Net Loss Widens, Revenue Rises
This is the first quarter where Zomato crossed the billion-dollar annualised revenue mark.
Zomato Ltd.'s second quarter net loss widened, but was less than expected by analyst estimates.
The Gurugram-based food aggregator posted a consolidated net loss of Rs 250.8 crore in the quarter ended September, compared to Rs 185.7 crore in the preceding three months, on account of consolidation of quick commerce losses. That compares with the Rs 252.75 crore consensus estimate of analysts tracked by Bloomberg.
On a year-on-year basis, its net losses narrowed from Rs 430 crore.
Zomato Q2 Key Highlights (Consolidated, QoQ)
Revenue up 17% at Rs 1,661.3 crore; it rose 62.2% over the previous year. Analysts had projected it at Rs 1,558.3 crore.
Operating losses are at Rs 418 crore compared to an estimate of Rs 331.98 crore. The increase in loss was due to consolidation of quick commerce losses.
Its core business, food ordering and delivery, saw 5.7% growth in revenues to Rs 1,135.7 crore.
Average monthly transacting customers grew 4.4% to 17.5 million.
While the food delivery business has been growing and steadily moving towards profitability, there is room for the business to grow much faster than what it is currently trending at, said its Chief Executive Officer Deepinder Goyal, in the exchange filing.
"I don’t know if I can attribute this to the macro environment—I don’t want macro headwinds to be an excuse for us to innovate less."
The acquisition of Blinkit, the quick commerce business, closed on Aug. 10, 2022. "Hence, this quarter includes 50 days of Blinkit financials consolidated into the company's overall financials," said Zomato, in a stock exchange filing.
Ex-Blinkit, the company's adjusted revenues rose 9% sequentially and 38% year-on-year. This is the first quarter where Zomato crossed the billion-dollar annualised revenue mark at $1.05 billion, the online food delivery aggregator said.
Adjusted operating losses, ex-Blinkit, reduced by more than half to Rs 60 crore in Q2 versus Rs 150 crore in the previous quarter.
Zomato's Chief Financial Officer, Akshant Goyal expects the adjusted Ebitda loss (ex-quick commerce) to come down further and eventually break-even in the next two to four quarters.
The gross order value for the food delivery business grew 3% quarter-on-quarter and 23% YoY driven by higher order volumes and average order value. The growth in revenue per order led to a higher adjusted revenue growth for food delivery. On the profitability front, contribution margin as a percentage of GOV improved meaningfully from 2.8% in Q1 to 4.5% in Q2.
"As a result, the food delivery adjusted Ebitda hit break-even in Q2," said Akshant Goyal.
"Over the medium term, our ambition lies in getting food delivery adjusted Ebitda to 4-5% of our GOV."
Zomato has reported rapid increase in contribution margin from 1.1% to 4.5% in the last three quarters. "We have pocketed a large portion of the low hanging gains for now and we expect the pace of progress to slow down from here," he said.
As far as quick commerce is concerned, Zomato hasn't seen much slowdown in the business. "I know that most investors currently ascribe zero value to the Blinkit business, and that’s understandable, said the CEO. "But I am confident this will change in due course of time."
Quick commerce is turning out to be another opportunity for Zomato's B2B business, Hyperpure. Its revenues grew 23% sequentially to Rs 334.1 crore in the three months till September.
Sellers on Blinkit's marketplace procure supplies like fruits and vegetables from Hyperpure. "This has the potential to further accelerate revenue growth for Hyperpure going forward," said the CEO.
For now, Zomato has no plans to make any new investments. But it has been on the look-out for "new and potentially large growth ideas" for the long-term growth, such as intercity food delivery and Zomato instant food delivery in 10-15 minutes.
"These are innovations within the food delivery business, and are relatively low investment initiatives," Akshant Goyal said.
Over the past few quarters, especially in the last quarter, the revenue from dining out has fallen substantially, according to the company.
Deepinder Goyal expects losses to further expand in this segment in the near term as the company discontinued monetising dining out, which included sale of Zomato Pro membership.
"It will be a couple of quarters before we get back to some scale and profitability in this business," he said.
"We are building for the long term, and we are going to continue evaluating and taking bets, which may compromise short-term expectations for the long-term," said the CEO.
Shares of the company closed 2.07% lower on Thursday, compared with a 0.17% rise in the benchmark Nifty50.