Key highlights from Zomato Ltd (ZOMATO) Q1 FY23 Earnings Concall
Q&A Highlights:
- Analyst asked about path to profitability for ZOMATO. Akshant Goyal CFO replied that on a cash flow basis, in 1Q23 the company was positive on cash flow. The next target is to get ZOMATO to adjusted EBITDA breakeven and expects internally to get there by 4Q23. Slipping on 4Q23, the goal should not go beyond 2Q24.
- An analyst also asked about Blinkit and quick-commerce path to profitability. Akshant Goyal CFO replied that on Blinkit, ZOMATO had given a budget of $400 million investment in next couple of years. ZOMATO now is reducing the overall budget guidance from $400 million to about $320 million, given where the business is today. Blinkit visibility is bleak to give timeline to profitability.
- Vijit Jain from Citi asked that on the food delivery business what’s driving the take rate on a reported revenue basis. Akshant Goyal CFO replied that it’s due to restaurant mix, loading more ads, higher negotiated commissions and higher customer delivery charges that’s driving take rate.
- Vijit Jain from Citi also asked about the timeline when the legacy infrastructure related expenses will be out of P&L for Blinkit. Akshant Goyal CFO answered that there is no legacy cost as of now in the system. Both the revenue and cost structures currently are aligned to the current business model.
- Vijit Jain from Citi also enquired if the burn rate would go down at an EBITDA level, even after integrating Blinkit into Zomato. Akshant Goyal CFO replied that losses are coming down which should continue post the transaction.
- Chirag Shah with CLSA asked about active delivery partner number, if ZOMATO is out of the network rollout phase and focusing more on productivity incrementally. Akshant Goyal CFO clarified that the number will go up as ZOMATO grows in terms of number of orders.
- Pranav Kshatriya of Edelweiss asked about the reduction of dark stores in Blinkit in last three months and where will it stabilize. Akshant Goyal CFO replied that the company is at a place where it might go up again as ZOMATO has churned out the stores that did not make sense. ZOMATO expects the number to stabilize now and post the deal closure there might be an increase.
- Pranav Kshatriya of Edelweiss also asked about the difference in delivery cost per order for Blinkit and ZOMATO. Akshant Goyal CFO answered that the delivery cost is similar to the levels seen in ZOMATO. And post integration, ZOMATO expects some benefits to accrue.
- Swapnil Potdukhe from JM Financial asked about the reason behind dining-out business revenue not moving significantly for last 3-4 quarters. Akshant Goyal CFO replied that ZOMATO is rebuilding the business and expects these numbers to stays at the current levels for the next 1-2 quarters. However added, that it’s going to be profitable and will not take capital.
- Aditya Suresh with Macquarie asked about employee expenses and share based payments. Akshant Goyal CFO answered that the ESOP expenses are expected to come down in future. The overall employee expense outside of share based compensation also is not expected to move beyond the 15-20% annual increase range.