Zomato declared its results for Q3FY25 today and held an Earnings Call to discuss the financials. Here’s the key pointers that stood out for me after reading the Shareholder’s Letter and analyzing the Results.
- Topline(Adjusted Revenue) demonstrated a robust growth at 58% YoY(12% QoQ) at 5746 crore. However, the bottomline(Adjusted EBITDA) took a slight dip of 14% QoQ at 285 crore due to investments in expedited store openings and customer acquisition to keep up with the intense competition in the Quick Commerce segment. This is in line with the guidance given by the management in the previous Earnings call in which they acknowledged that the rapid expansion will come at the cost of their short-term margins. However, the company believes that these costs are temporary and the company will sharply turn profitable once a large chunk of their business comprises matured stores since they carry better margins and improved GOVs.
- It is to be noted that Adjusted EBITDA Margins improved by 2300 bps QoQ despite the overall EBITDA taking a hit, driven by increased platform fees and other cost optimizations.
- The company has outperformed their Store Count targets and are aiming to get to 2000 stores by December 2025.
- GOV for Going out business grew by a staggering 119% YoY(15% QoQ) on a like-for-like basis, followed by Quick Commerce which grew by 120%YoY(27% QoQ).
- The company incurred Capex of 370 crore in the last 2 quarters for setting up 368 new stores, which is about 37% of their total store count of 1007. As the company’s guidance they expect similar elevated Capex in the forthcoming quarters.
- Customer attrition is negligible which depicts strong customer and brand loyalty, ensuring the company's? moat in the long run.?
- Food delivery segment has experienced tailwinds causing the company to miss it’s YoY GOV growth target by 3%. It also came out as the worst performer among the company's various businesses.
- The company expects their Going Out business to perform extremely well and grow at 40% YoY for the next couple of years, given their perfect positioning and the improvements they have made in the District app recently by investing in Tech and Marketing. GOV from Going Out already stands at 5600 crore, which is very well in line with their Annual Guidance of 10,000 crore for the FY26.
