Ozon Reports Positive Adjusted EBITDA and Free Cash Flow in Q3 2022

In Q3 2022, Ozon Marketplace (3P) GMV reached 78% as a percentage of GMV incl. services, compared to 66.7% in Q3 2021, due to rapid growth in the number of new sellers and a greater volume of sales by existing merchants.      

Ozon Global attracts new international sellers to the platform so that our customers can purchase goods from abroad. Ozon Global is currently actively working with more than 12,000 active sellers from 45 countries, including China, Turkey, India, South Korea, Kazakhstan, Belarus, Israel, and Thailand. In Q3 2022 we launched Ozon Partner Delivery for goods from Turkey and China, and our Marketplace introduced direct sales of popular clothing and footwear brands by merchants through the Ozon Global platform. In October 2022, we established a sales office in Turkey to attract new local sellers, further expand our product assortment and improve delivery time.        

On August 3, 2022, a fire broke out at the Company’s fulfillment center in the Moscow region, spreading to an area of 55,000 square meters and affecting two blocks of the three-block warehouse complex. In September 2022, Ozon paid the major portion of the total expected compensation to the sellers whose goods were damaged in the fire. Payments to the remaining sellers affected by the incident should be distributed before the year end.      

In connection with the incident, the Company incurred losses of RUB 10.8 billion, which included estimated damages to the Company’s merchandise, losses related to disposal, impairment and derecognition of the Company’s property and equipment, and an estimate of third parties’ claims and other expenses. 

The Company had insurance policies in place for the goods and other assets stored at the affected premises, as well as liability for death, injury, or third-party property damage. The Company is currently in discussions with insurance companies over compensation for sustained losses. Such compensation, if granted, may not be commensurate with the losses sustained. The Group did not recognize any insurance recoveries in the nine months ended September 30, 2022. 

The Company continued to accept goods from sellers and to ship customer orders to its clients from its other fulfillment facilities in an orderly fashion. To ensure uninterrupted supply, Ozon accelerated new warehouse launches in Moscow and Nizhny Novgorod. The Company also launched a drop-off / pickup service offering acceptance of seller's goods at any pickup point to further support its sellers. 

Ozon Financial Services continues to develop its B2B and B2C services to improve user engagement and customer loyalty while maintaining focus on product economics.     

Fintech B2B Initiatives 

Ozon Flexible Payment Plan enables sellers to improve working capital management and tailor their payment schedule to their individual business needs. More than 17,000 sellers adopted this tool as of September 30, 2022. Ozon Invest provides unique lending solutions to our sellers that enable them to obtain financing within two days. Ozon Invest leverages machine learning methods to facilitate more precise credit scoring and more accurate credit risk assessment.      

Ozon.Card offers customers higher cashback and facilitates instant refunds. In Q3 2022 it became one of the top two most popular payment methods on our platform with its turnover share in Ozon’s GMV incl. services exceeding 35% in Q3 2022. More than 10.7 million customers are active users of Ozon.Card. Ozon also offers BNPL service to its customers, thereby stimulating order frequency and sales growth.      

Our business in the CIS region continues to gain traction. To ensure uninterrupted supply of goods and better service, Ozon is actively developing its operations in Belarus and Kazakhstan. We have launched our own logistics and sorting facilities, as well as pick-up locations, and started to build a digital payment infrastructure in the region. In June 2022, Ozon opened a fulfillment center in Minsk. We believe that these steps will significantly reduce barriers to entry for local entrepreneurs planning to sell goods in Russia.  

Gross Profit increased substantially both in Ruble terms, growing 135% year-on-year to RUB 36.6 billion, and as a percentage of GMV incl. services, increasing by 5.1 p.p. to 19.5% in Q3 2022, driven by a significant increase in service revenue.   

Operating expenses grew by 15% year-on-year in Q3, excluding the one-off effect of the fire incident. For two consecutive quarters, operating expenses per order and as a percentage of GMV incl. services demonstrated a significant improvement year-on-year and quarter-on-quarter due to cost optimization and benefits of scale.      

Fulfillment and delivery expenses grew by 43% year-on-year in Q3 2022 due to GMV growth and the opening of new fulfilment centers in Moscow and Nizhny Novgorod, with this growth partially offset by lower acquiring fees up to September 2022. Fulfillment and delivery costs as a percentage of GMV incl. services declined by 3.0 p.p. year-on-year to 14.3% in Q3 2022, due to the higher utilization of previously launched warehouse facilities and savings from cost reduction projects aimed at more effective sorting and fulfilment processes, as well as optimization of last-mile delivery and pick-up points’ tariffs.       

The Company entered into lease contracts for offices, fulfillment and sorting centers that have not yet commenced as of September 30, 2022. Ozon’s lease commitments amounted to RUB 35.9 billion as of September 30, 2022, compared to RUB 87.4 billion as of December 31, 2021.  

Risk and Uncertainties Related to Current Environment      

The Company’s primary market of operations is Russia. As a result, the Company’s business and the results of its operations are dependent on the economic conditions in Russia. Over the last two decades, the Russian economy has experienced or continues to experience at various times significant volatility in its GDP, high levels of inflation, increases in, or high, interest rates, sudden price declines in oil and other natural resources and instability in the local currency market.    

The sanctions imposed on Russia and Russian persons by a number of countries in connection with the geopolitical crisis surrounding Ukraine, along with further regulatory counter-measures taken by the Russian Government, have had a significant, and in many cases unprecedented, impact on companies operating in Russia. In response to the geopolitical crisis surrounding Ukraine, the United States, the European Union, the United Kingdom and other countries imposed severe sanctions targeting Russian financial institutions, including a prohibition on transactions with the Central Bank of Russia, the blocking of assets and cutting off certain Russian banks from SWIFT; individual sanctions against businessmen and their assets; and sanctions targeting oil, defense and other state-owned companies, as well as export and import restrictions. In response, Russia identified a number of states, including the United States, all European Union member states and the United Kingdom, as “hostile” and introduced a number of economic measures in connection with their actions, as well as economic measures aimed at ensuring financial stability in Russia. 

Due to restrictions tied to recently enacted Russian capital controls and protection measures, the Company is currently restricted from upstreaming cash funds from the Company’s Russian subsidiaries to the Company. Further, the Company’s two banking legal entities were included in a list of entities for which a Russian Presidential Decree restricts transactions with equity instruments without specific permission from the President of the Russian Federation. As of September 30, 2022, net assets of these two banking entities amounted to RUB 4,014 million.   

As the potential global and economic impacts of the geopolitical crisis surrounding Ukraine continue to rapidly evolve, in a manner that is unpredictable and beyond the Company’s control, it is difficult to accurately predict the full impact of the sanctions that have been introduced, as well as that of any measures taken by the Russian Government in response to these sanctions. 

Ozon is a leading multi-category e-commerce platform and one of the largest internet companies in Russia. Its fulfillment infrastructure and delivery network have some of the widest coverage among e-commerce players in the country, enabling Ozon to provide Russian population with fast and convenient delivery via couriers, pick-up points or parcel lockers. Its extensive logistics footprint and fast-developing marketplace platform allow thousands of entrepreneurs to sell their products across Russia’s 11 time zones and offer millions of customers one of the widest selections of goods across multiple product categories. Ozon actively seeks to expand its value-added services such as fintech and other new verticals such as Ozon fresh online grocery delivery. For more information, please visit https://corp.ozon.com/.