Ozon Reports First Quarter 2023 Unaudited Results
First Quarter 2023 Operating and Financial Highlights
· GMV incl. services increased by 71% year-on-year to RUB 303 billion, primarily driven by the strong performance of the Ozon Marketplace (3P), while growth in 1P GMV remained broadly flat year-on-year in Q1 2023. Growth in the number of orders accelerated to 93% year-on-year, driven by a larger customer base and a rising order frequency. Number of active buyers expanded to 37 million as of March 31, 2023. Order frequency per active customer almost tripled in the last two years and reached 15 orders per annum.
· Total revenue increased by 47% year-on-year, underpinned by strong service revenue growth of 120% in Q1 2023.
· Adjusted EBITDA was positive for the fourth consecutive quarter, reaching RUB 8.0 billion in Q1 2023, compared to negative RUB 8.9 billion in Q1 2022. Adjusted EBITDA as a percentage of GMV incl. services amounted to 2.6% in Q1 2023, marking a significant improvement of 7.6 p.p. year-on-year.
· Profit for the period was RUB 10.7 billion in Q1 2023 compared to a loss of RUB 19.1 billion in Q1 2022, primarily as a result of a one-off gain related to the extinguishment of financial liabilities and solid revenue growth.
The above table sets forth a summary of the key operating and financial information for the quarter ended March 31, 2023. The quarterly information for the three months ended March 31, 2023 and 2022 has not been audited by the Company’s auditors. In Q1 2023, we revised the presentation of the statement of profit or loss and other comprehensive income as described in “Presentation of Financial and Other Information – Changes in presentation and reclassifications”. The comparative information for Q1 2022 has been reclassified to comply with the revised presentation. See also the “Presentation of Financial and Other Information – Other Key Operating Measures” section of this press release for a definition of non-IFRS measure, Adjusted EBITDA, and a discussion of the limitations on its use, and reconciliations of the non-IFRS measure to the applicable IFRS measure. See the definitions of metrics such as GMV incl. services, number of orders, number of active buyers, number of active sellers and share of Marketplace GMV in the “Other Key Operating Measures” section of this press release.
Total revenue grew by 47% year-on-year, driven by a 120% increase in service revenue in Q1 2023. The increase in service revenue was a result of rapid growth in advertising revenue as well as greater marketplace commissions due to the positive mix effect and the growing scale of our 3P business.
From January 1, 2023, as further described in the “Presentation of Financial and Other Information – Changes in presentation and reclassifications”, “fulfilment and delivery expenses” and “cost of sales” have been presented as “cost of revenue”, following continuing fast growth in our marketplace operations. Accordingly, we changed the definition of gross profit from total revenue less cost of sales in a given period to total revenue less cost of revenue in a given period.
Gross profit increased more than 9-fold year-on-year to RUB 15.6 billion. Gross profit as a percentage of GMV incl. services was up by 4.1 p.p. year-on-year to 5.1% in Q1 2023, largely due to growth in service revenue and efficiency gains in fulfilment and delivery.
Operating expenses decreased to 5.1% as a percentage of GMV incl. services in Q1 2023. Growing scale and cost optimization led to a significant improvement in unit economics, as operating expenses declined significantly on a per order basis in Q1 2023. In the aggregate, Sales and Marketing, Technology and Content and General and Administrative expenses per order declined by 54% to RUB 87 in Q1 2023 from RUB 187 in Q1 2022.
Profit for the period improved to RUB 10.7 billion in Q1 2023 compared to a loss of RUB 19.1 billion in Q1 2022, primarily due to a one-time financial gain from the extinguishment of financial liabilities.
Net Cash Used in Operating Activities decreased to RUB 1.5 billion in Q1 2023 versus RUB 29.8 billion in Q1 2022, as a result of changes in working capital as well as an improvement in operating profitability.
Net Cash Used in Investing activities was RUB 4.5 billion in Q1 2023 compared to RUB 3.7 billion net cash generated from investing activities in Q1 2022, as the release of bank deposits fully offset higher capital expenditures in Q1 2022.
Capital Expenditures amounted to RUB 4.5 billion in Q1 2023 and were significantly lower compared to RUB 15.4 billion in Q1 2022, when capital expenditures were elevated by the accelerated purchasing of IT equipment.
Net Cash Used in Financing activities increased to RUB 4.9 billion compared to RUB 0.7 billion in Q1 2022, due to the impact of the convertible bond restructuring in Q1 2023 and higher proceeds from borrowings in Q1 2022.
Cash, cash equivalents and short-term bank deposits amounted to RUB 82.4 billion (an equivalent of 1.1 billion in USD terms1) as of March 31, 2023, compared to RUB 90.5 billion (an equivalent of 1.3 billion in USD terms2) as of December 31, 2022.
Risk and Uncertainties Related to Current Environment
The Company’s primary market of operations is Russia. The Company’s business and the results of its operations are therefore 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 regulatory counter-measures taken by the Russian Government, have had a significant, and in many cases unprecedented, impact on companies operating in Russia. The United States, the European Union, the United Kingdom and other countries imposed severe sanctions targeting Russian financial institutions, oil, defense and other state-owned companies and other Russian companies and businesspersons, 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.
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.
As a result of a “Delisting Event” in March 2022, the holders of our USD 750 million 1.875% senior unsecured convertible bonds due 2026 (the “Bonds”) were entitled to require the Company to redeem the Bonds at the principal amount together with accrued interest on the redemption date, which was May 31, 2022. In October 2022, holders of over 90% in principal amount of the Bonds outstanding voted in favor of early redemption of the Bonds (the “Restructuring”). The terms of the Restructuring can be found in the consent solicitation memorandum dated September 23, 2022. By December 31, 2022, the Company obtained U.S. and Cyprus sanctions licenses regarding the Restructuring, and in March 2023 the UK sanctions authority published a general license the scope of which covers the Restructuring and its implementation. As of the date of this press release, the Company has paid Cash Redemption Amount to Bondholders holding approximately 94% in principal amount of the Bonds. As of the date of this press release, all of the Bonds outstanding are deemed cancelled. For further disclosure related to the Restructuring, please refer to the Company’s website https://ir.ozon.com/restructuring.
Consolidated Financial Statements are available here.
Ozon is a multi-category e-commerce platform operating in Russia, Belarus and Kazakhstan. Its country-wide fulfillment infrastructure and delivery network enables Ozon to provide its customers with fast and convenient delivery via couriers, pick-up points or parcel lockers. Its extensive logistics footprint and fast-developing marketplace platform allow entrepreneurs to sell their products across Russia’s 11 time zones and offer customers wide 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/.
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that reflect the current views of Ozon Holdings PLC (“we”, “our” or “us”, or the “Company”) about future events and financial performance. All statements contained in this press release that do not relate to matters of historical fact should be considered forward-looking statements.
These forward-looking statements are based on management’s current expectations. However, it is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. These statements are neither promises nor guarantees but involve known and unknown risks, uncertainties and other important factors and circumstances that may cause Ozon’s actual results, performance or achievements to be materially different from its expectations expressed or implied by the forward-looking statements, including conditions in the U.S. capital markets, negative global economic conditions, the geopolitical crisis surrounding Ukraine and sanctions and governmental measures imposed in response, other negative developments in Ozon’s business or unfavorable legislative or regulatory developments. We caution you therefore against relying on these forward-looking statements, and we qualify all of our forward-looking statements by these cautionary statements. Please refer to our Annual Report on Form 20-F for the year ended December 31, 2022 and other filings with the SEC concerning factors that could cause actual results to differ materially from those described in our forward-looking statements.
These and other important factors could cause actual results to differ materially from those indicated by the forward-looking statements made in this press release. Any such forward-looking statements represent management’s estimates as of the date of this press release. While Ozon may elect to update such forward-looking statements at some point in the future, Ozon disclaims any obligation to do so, even if subsequent events cause its views to change. These forward-looking statements should not be relied upon as representing Ozon’s views as of any date subsequent to the date of this press release.
This press release includes “Adjusted EBITDA”, a non-IFRS financial measure not presented in accordance with IFRS. These financial measures are not measures of financial performance or liquidity in accordance with IFRS and may exclude items that are significant in understanding and assessing our financial results. Therefore, these measures should not be considered in isolation or as an alternative to loss for the period or other measures of profitability, liquidity or performance under IFRS. You should be aware that the Company’s presentation of these measures may not be comparable to similarly titled measures used by other companies, which may be defined and calculated differently. See “Presentation of Financial and Other Information” in this press release for a reconciliation of certain of these non-IFRS measures from the most directly comparable IFRS measure.
This press release includes interim financial information for the three months ended March 31, 2023 and 2022. The quarterly information has not been audited by the Company’s auditors.
The trademarks included herein are the property of the owners thereof and are used for reference purposes only. Such use should not be construed as an endorsement of the products or services of the Company.
1 In Q1 2023, we revised the presentation of the statement of profit or loss and other comprehensive income as described in “Presentation of Financial and Other Information – Changes in presentation and reclassifications”. The comparative information for Q1 2022 has been reclassified to comply with the revised presentation.
2 The USD equivalent was calculated as RUB amounts of cash, cash equivalents and short-term deposits converted from RUB using the exchange rate as of March 31, 2023: RUB 77.0863 per 1 USD (source: the Central Bank of the Russian Federation).
3 The USD equivalent was calculated as RUB amounts of cash, cash equivalents and short-term deposits converted from RUB using the exchange rate as of December 31, 2022: RUB 70.3375 per 1 USD (source: the Central Bank of the Russian Federation).