In April 2022, we set a target for achieving EBITDA before ESOP cost breakeven by the September 2023 quarter. We have achieved this milestone significantly ahead of our guided timeline as we focus on sustained growth, monetization opportunities and discipline in cost management.
Our Founder and CEO Vijay Shekhar Sharma said in the earnings call that over the last two years, we have pruned many line items. “The best part I can tell you is that I believe that this trend of generating sustained profit will continue. Our profitability is expected to grow even further. We expect to grow, to become a free cash flow generating machine,” he said.
In Q3 FY2023 our EBITDA before ESOP cost was ₹31 Cr as compared to (₹393 Cr) in Q3 FY 2022 and (₹166 Cr) in Q2 FY 2023. EBITDA before ESOP cost margin improved to 2% of revenues in Q3 FY 2023 from (27%) of revenues in Q3 FY 2022 and (9%) of revenues in Q2 FY 2023. “I should call out that this is sustainable and this has been done without sort of cutting down on investments that we believe generate value for us,” President and Group CFO Madhur Deora said.
“We are quite proud of the discipline that we have built into the business and this is driven by strong revenue growth across businesses, disciplined cost management and our strong business model which has a ton of operating leverage,” Mr Deora added.
In Q3 FY 2023, our contribution profit showed a YoY growth of 131% and QoQ growth of 24% at ₹1,048 Cr. Contribution Profit improved to 51% of revenue in Q3 FY 2023 from 31% in Q3 FY 2022 and 44% in Q2 FY 2023, driven by improvement in payments profitability, and growth of high-margin businesses, such as loan distribution. Our strong operating leverage is demonstrated by the reduction in indirect expenses (as a % of revenues), down to 49% in Q3 FY 2023 from 58% YoY. Indirect Expenses (excluding ESOP cost) have remained flat over the past three quarters and were ₹1,016 Cr in the quarter, growing 20% YoY.
“We are definitely making sure that we have sustained and growing profitability. We would have lots of investments coming up in growth and market opportunity. The important thing is disciplined growth in profitability, disciplined contribution in growth and marketing. Our profitability will continue to grow consistently along with the investments that we are looking at,” said CEO Vijay Shekhar Sharma
We continue to make investments in areas where we see attractive growth and monetization opportunities, such as in marketing for user acquisition, and sales team to increase merchant base and subscription services.