Zomato Ltd. posted a net profit on a consolidated basis for the first time ever in the quarter ended June, beating its own guidance of reaching profitability.
The food delivery major reported a profit of Rs 2 crore against losses of Rs 188.2 crore in the fourth quarter of the previous fiscal, according to an exchange filing on Thursday. That compares with a Bloomberg forecast of Rs 166.4 crore in losses.
Zomato received a deferred tax credit of Rs 17 crore during the quarter, which helped it report a profit.
Zomato Q1 FY24 Highlights (Consolidated, QoQ)
Revenue is up 18% at Rs 2,416 crore vs Rs 2,056 crore, as compared with an estimate of Rs 2,261.1 crore.
Ebitda loss at Rs 48 crore vs Rs 225.4 crore, as against an estimate of Rs 208.4 crore.
Zomato has beaten its own projections of profitability. In its quarterly shareholders' letter released in Q4 of the previous fiscal, the company mentioned that its consolidated business would become profitable in the following four quarters, or by Q4 FY24. Instead, it posted a profit in the first quarter itself.
"Realistically speaking, we were expecting to hit this milestone in the September quarter (Q2 FY24), and we were being conservative in our earlier guidance," Chief Financial Officer Akshant Goyal said in this quarter's letter to shareholders. "However, some critical parts of the team across our businesses out-executed our expectations and plans, and some of our initiatives delivered better outcomes than we had expected."
"Most of our seemingly 'risky' bets have changed the trajectory of the business significantly, much faster than we expected," Chief Executive Officer Deepinder Goyal said.
Akshant Goyal expects the business to remain profitable, and Zomato will "continue to deliver 40% plus YoY top line (adjusted revenue) growth for at least the next couple of years".
Blinkit Update
Zomato's quick commerce business, Blinkit, turned contribution margin positive for the first time ever in the month of June. The company is now aiming to deliver adjusted Ebitda breakeven in the next four quarters at Blinkit.
However, Blinkit reported a decline in the number of orders in the April-June quarter and the average monthly transacting customers also remained stagnant.
"The slower sequential gross order value growth in Q1 was mainly due to the temporary business disruption we had in the month of April resulting from the change in the delivery partner payout structure. Due to this, some of our dark stores were shut for a few days in certain parts of the country, which caused a decline in overall order volumes during the quarter," said Albinder Dhindsa, co-founder and chief executive officer at Blinkit.
"While the operations were back on within a few days, we faced a challenging period of around 45 days where the overall gig workers available to work in our system were 15-20% lower than normal ... For us, this started to normalise in early June and we have seen healthy growth since then," he said.
A New Consumer App By Zomato Soon?
Deepinder Goyal, in the shareholders' letter, said that the company's dining out business "is starting to shape up well".
"About Rs 515 crore of gross order value was transacted through Zomato Dining-Out in India in Q1 FY24, which is ~7% of the GOV (gross order value) our food delivery business did in the same quarter. This business is also already profitable with an adjusted Ebitda margin of about 1%," he said.
At scale, the dining out business has the potential to generate 5% adjusted Ebitda margin, according to him.
Starting next quarter, Zomato will also report 'going out' as a separate business segment in its financials. The segment will include revenue from its dining out business and live events such as 'Zomaland'.
"We believe this combo could be the fourth large business coming out of Zomato ... We are also contemplating spinning out our 'going out' business into a separate app, in line with our so-far-successful strategy of building super brands," he said.
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