Ozon Announces Its First Quarter 2022 Unaudited Financial Results
NEW YORK–(BUSINESS WIRE)–Ozon Holdings PLC (NASDAQ and MOEX: “OZON”, thereafter referred to as “we”, “us”, “our”, “Ozon” or the “Company”), an operator of the leading Russian e-commerce platform, announces its unaudited financial results for the first quarter ended March 31, 2022.
First Quarter 2022 Financial and Operating Highlights
Number of orders demonstrated substantial growth of 173% year-on-year to 93.0 million compared to 34.1 million orders in Q1 2021 driven by the customer base expansion and greater user engagement.
GMV incl. services reached RUB 177.5 billion in Q1 2022 with 139% year-on-year growth, compared to RUB 74.2 billion in Q1 2021, underpinned by the strong order growth.
Number of active buyers rose by 79% year-on-year to 28.7 million as of March 31, 2022, compared to 16.0 million as of March 31, 2021. Cohort performance improved with an annual order frequency of Ozon’s customers increasing by 66% year-on-year to 9.8 orders in Q1 2022, compared to 5.9 in Q1 2021. An uptick in the order frequency is attributable to higher customer loyalty and engagement.
The number of active sellers on the marketplace increased to more than 120 thousand merchants as of Q1 2022, which represents close to 3.5x growth compared to Q1 2021. Ozon platform provides sellers with a unique access to 28.7 million active users, a wide range of fulfillment and delivery services and a comprehensive suite of market intelligence and analytical tools, advertising solutions and financial services, all of which support merchant base expansion.
Assortment increased by more than 5x year-on-year and reached more than 100 million SKUs in Q1 2022, compared to 19 million SKUs in Q1 2021, driven by a substantial growth in the merchant base and smoother content creation process.
Share of Marketplace climbed to 70.4% as a percentage of GMV incl. services in Q1 2022, compared to 58.4% in Q1 2021, supported by the seller base more than tripling year-on-year and assortment expansion.
Total revenue demonstrated 90% year-on-year growth to RUB 63.6 billion in Q1 2022, compared to RUB 33.4 billion in Q1 2021, following significant GMV growth, solid 1P business performance as well as growth in service revenue due to an increase in marketplace commissions and advertising revenue.
Adjusted EBITDA was negative RUB 8.9 billion, which represents Adjusted EBITDA as a percentage of GMV incl. services of negative 5.0%, compared to negative 9.0% in Q4 2021 and to negative 6.5% in Q1 2021. This marks a notable improvement in Adjusted EBITDA as a percentage of GMV incl. services driven by higher gross profit as a percentage of GMV incl. services, and efficiency improvements in operating expenses due to economies of scale.
Net cash used in operating activities was RUB 29,767 million in Q1 2022 compared to net cash used in operating activities of RUB 12,118 million in Q1 2021. Free Cash Flow was negative RUB 46,919 million in Q1 2022, compared to negative RUB 14,753 million in Q1 2021, largely due to the fact that the Company accelerated purchases of equipment, including IT and warehouse equipment, to ensure uninterrupted supply.
Summary: Key Operating and Financial Metrics
The following table sets forth a summary of key operating and financial data for the quarter ended March 31, 2022. The unaudited quarterly information for the three months ended March 31, 2022 and the three months ended March 31, 2021 has not been audited by the Company’s auditors. The unaudited quarterly information includes all normal recurring adjustments that we consider necessary for a fair statement of the information shown.
(RUB in millions, unless indicated otherwise)
For the three months ended March 31
(unaudited),
2022
2021
YoY change, %
GMV incl. services
177,449
74,208
139
%
Number of orders, million
93.0
34.1
173
%
Number of active buyers, million
28.7
16.0
79
%
Share of Marketplace GMV, %
70.4
%
58.4
%
12.0pp
Total revenue
63,579
33,407
90
%
Gross profit
30,716
11,587
165
%
Gross profit as a percentage
of GMV incl. services, %
17.3
%
15.6
%
1.7pp
Contribution Profit / (Loss)
1,742
(134
)
—
Adjusted EBITDA
(8,946
)
(4,855
)
—
Adjusted EBITDA as a percentage
of GMV incl. services, %
(5.0
%)
(6.5
%)
1.5pp
Loss for the period
(19,055
)
(6,734
)
—
Net cash used in operating activities
(29,767
)
(12,118
)
—
Free Cash Flow
(46,919
)
(14,753
)
—
Note that Adjusted EBITDA and Free cash flow are non-IFRS financial measures. See “Presentation of Financial and Other Information” section of this press release for a definition of such non-IFRS measures, a discussion of the limitations on their use, and reconciliations of the non-IFRS measures to the applicable IFRS measures. See the definitions of metrics such as GMV incl. services, Gross Profit, 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.
Ozon Operational and Financial Results
The following table sets forth financial data for the quarter ended March 31, 2022. The unaudited quarterly information for the three months ended March 31, 2022 and the three months ended March 31, 2021 has not been audited by the Company’s auditors. The unaudited quarterly information includes all normal recurring adjustments that we consider necessary for a fair statement of the information shown.
(RUB in millions)
For the three months ended March 31
(unaudited),
2022
2021
YoY change, %
Sales of goods
39,267
24,364
61
%
Service revenue
24,312
9,043
169
%
Marketplace commissions
18,797
6,985
169
%
Advertising revenue
3,642
1,360
168
%
Delivery services
1,518
481
216
%
Travel commissions
127
113
12
%
Other revenue
228
104
119
%
Total revenue
63,579
33,407
90
%
Cost of sales
(32,863
)
(21,820
)
51
%
Gross profit
30,716
11,587
165
%
Gross profit as a percentage
of GMV incl. services, %
17.3
%
15.6
%
1.7pp
Revenue
Ozon’s total revenue grew by 90% year-on-year and reached RUB 63.6 billion in Q1 2022, compared to RUB 33.4 billion in Q1 2021. The growth was attributable to a 61% increase in sales of goods and a 169% increase in service revenue due to a notable inflow from marketplace commissions and advertising revenue.
Sales of goods
Sales of goods reached RUB 39.3 billion in Q1 2022, compared to RUB 24.4 billion in Q1 2021, increasing by 61% year-on-year due to an expanded active customer base of 28.7 million users and a higher order frequency.
Service revenue
Ozon service revenue grew by 169% year-on-year to RUB 24.3 billion in Q1 2022 from RUB 9.0 billion in Q1 2021 due to an increase in revenues from advertising services and marketplace commissions driven by strong order growth and an expanding merchant base on Ozon Marketplace.
Marketplace commissions
Marketplace commissions increased by 169% year-on-year to RUB 18.8 billion in Q1 2022, compared to RUB 7.0 billion in Q1 2021, due to strong GMV performance, higher share of marketplace, significant order growth and approximately 3.5х higher merchant base.
Advertising revenue
Advertising revenue reached RUB 3.6 billion in Q1 2022, compared to RUB 1.4 billion in Q1 2021, growing by 168% year-on-year on the back of growth and greater adoption of advertising services, as a result of enhanced advertising tools offered by Ozon to its seller base, as well as a significantly higher number of merchants engaging with the platform.
Cost of sales
Cost of sales increased by 51% year-on-year in Q1 2022. This was attributed to growth in Direct Sales (1P operations) due to customer base expansion and rising order frequency resulting in higher order growth.
Gross Profit
Gross profit increased by 165% year-on-year in Q1 2022, surpassing GMV growth of 139%, and reaching RUB 30.7 billion, compared to RUB 11.6 billion in Q1 2021. The growth in gross profit is primarily attributed to greater order volume and an increase in revenue from sales of goods. As a percentage of GMV incl. services gross profit increased by 1.7 p.p. to 17.3% in Q1 2022, compared to 15.6% in Q1 2021, which is mainly attributable to changes in the Marketplace commission structure.
Contribution Profit / (Loss)
Contribution profit amounted to RUB 1,742 million in Q1 2022, compared to loss RUB 134 million in Q1 2021 due to an increase in gross profit.
Operating Expenses(RUB in millions)
For the three months ended March 31
(unaudited),
2022
20211
YoY change, %
Cost of sales
32,863
21,820
51
%
as % of GMV incl. services
18.5
%
29.4
%
(10.9pp)
Fulfillment and delivery
28,974
11,721
147
%
as % of GMV incl. services
16.3
%
15.8
%
0.5pp
Sales and marketing
7,461
3,677
103
%
as % of GMV incl. services
4.2
%
5.0
%
(0.8pp)
Technology and content
5,310
1,757
202
%
as % of GMV incl. services
3.0
%
2.4
%
0.6pp
General and administrative
4,658
1,776
162
%
as % of GMV incl. services
2.6
%
2.4
%
0.2pp
Total operating expenses
79,266
40,751
95
%
as % of GMV incl. services
44.7
%
54.9
%
(10.2pp)
Operating expenses
Operating expenses increased by 95% year-on-year in Q1 2022 relative to Q1 2021 due to growth in order volumes, infrastructure expansion and the effect of investments in product and talent acquisition from Q2 2021 until the end of 2021. As a percentage of GMV incl. services, operating expenses decreased significantly to negative 44.7% in Q1 2022 compared to negative 54.9% in Q1 2021. Unit economics per order demonstrated a notable improvement both year-on-year and quarter-on-quarter due to operating leverage and benefits of scale.
Fulfillment and delivery
The 147% increase year-on-year in fulfillment and delivery costs in Q1 2022 was driven by a higher number of orders processed through Ozon’s infrastructure and temporary cost pressure arising from underutilization of the recently launched warehouse facilities. This was also reflected in fulfillment and delivery costs rising by 0.5 p.p. to 16.3% as a percentage of GMV incl. services in Q1 2022, compared to 15.8% in Q1 2021. However, sequentially fulfillment and delivery costs decreased as a percentage of GMV incl. services to 16.3% in Q1 2022, compared to 17.8% in Q4 2021, due to Ozon’s strong focus on cost optimization and increasing utilization of the recently launched fulfillment facilities.
Sales and marketing
Sales and marketing expenses increased by 103% year-on-year in Q1 2022. As a percentage of GMV incl. services, sales and marketing expenses decreased by 0.8 p.p. to 4.2%, compared to 5.0% in Q1 2021 due to marketing expenditure optimization to achieve greater efficiency.
Technology and content
The 202% year-on-year increase in the technology and content costs in Q1 2022 was driven by continued IT talent acquisition and investments in product development. As a percentage of GMV incl. services, technology and content costs increased by 0.6 p.p. to 3.0% in Q1 2022, compared to 2.4% in Q1 2021.
General and administrative
General and administrative costs increased by 162% year-on-year in Q1 2022 relative to Q1 2021 due to higher employee expenses primarily related to talent acquisition aimed at supporting platform development, which accelerated from Q2 2021 through to the end of the year in 2021. As a percentage of GMV incl. services general and administrative costs increased by 0.2 p.p. to 2.6% in Q1 2022 compared to 2.4% in Q1 2021, but edged down versus 2.7% in Q4 2021 due to our concerted efforts around cost optimization.
Adjusted EBITDA
Adjusted EBITDA was negative RUB 8.9 billion in Q1 2022, which corresponds to Adjusted EBITDA as a percentage of GMV incl. services of negative 5.0%, compared to negative 6.5% in Q1 2021 and to 9.0% in Q4 2021. The improvement of Adjusted EBITDA as a percentage of GMV incl. services both year-on-year and quarter-on-quarter resulted from the operating leverage, benefits of the economies of scale and gross profit margin enhancement, as well as ongoing efforts to improve cost controls.
Interest expense
Interest expense was RUB 2,416 million in Q1 2022, compared to RUB 914 million in Q1 2021, driven by an increase in outstanding borrowings and greater lease liabilities.
Interest income
Ozon interest income was RUB 994 million in Q1 2022, compared to RUB 212 million in Q1 2021, due to higher deposit levels.
Foreign currency exchange gain, net
Foreign exchange gain was RUB 6,422 million in Q1 2022, compared to a gain of RUB 1,791 million in Q1 2021, driven by a change in foreign currency holdings and U.S. dollar exchange rate fluctuations.
Income tax expense
Income tax expense was RUB 361 million in Q1 2022, compared to expense RUB 56 million in Q1 2021.
Loss for the period
Loss for the period amounted to RUB 19,055 million in Q1 2022, compared to loss RUB 6,734 million in Q1 2021, as a result of the greater operating loss, higher interest expense, as well as the negative impact of the remeasurement of convertible bonds which was partly offset by the foreign exchange gain.
Shares Issued
The total number of shares issued and outstanding as of March 31, 2022 was 216,413,735 (comprised of 216,413,733 ordinary shares and two Class A shares).
Share-Based Compensation
Share-based compensation expense amounted to RUB 2,729 million in Q1 2022, compared to RUB 750 million in Q1 2021, partly due to a greater number of participants in the Employee Stock Ownership Plan.
Net Cash Used in Operating Activities
Net cash used in operating activities was RUB 29,767 million in Q1 2022 compared to net cash used in operating activities of RUB 12,118 million in Q1 2021, due to greater cash outflow on the back of higher trade payables and an increase in operating costs.
Working Capital
The Company’s working capital is mainly comprised of trade and other payables and inventory. The accounts payable mainly include trade payables for the products purchased from suppliers and payables to the third-party sellers on Ozon Marketplace. As of March 31, 2022, accounts payable amounted to RUB 63,743 million, compared to RUB 89,273 million as of December 31, 2021 reflecting business seasonality.
The Company’s inventories mainly include merchandise held for resale and goods in transit, associated with our Direct (1P) Sales. As of March 31, 2022 Ozon recorded RUB 23,541 million of inventories, compared to RUB 26,362 million as of December 31, 2021.
Capital Expenditures
Company’s capital expenditures amounted to RUB 15,415 million in Q1 2022, compared to RUB 1,955 million in Q1 2021, which included payments for fulfillment facilities and computer equipment and hardware.
Free Cash Flow
Free Cash Flow was negative RUB 46,919 million in Q1 2022, compared to negative RUB 14,753 million in Q1 2021 due to a higher level of outflows associated with the settlement of trade payables, increase in operating expenses, as well as accelerated purchases of IT, warehouse and other equipment to ensure uninterrupted supply.
Convertible Bonds
As a result of the suspension of the ADS trading on Nasdaq, a Delisting Event under the Bonds occurred following the close of trading on March 8, 2022. Therefore, the holders of the Bonds became entitled to require the Company to redeem their Bonds at the principal amount together with accrued interest on the redemption date, which is May 31, 2022. Accordingly, the Company revised the schedule of cash flows underlying the amortized cost of the bonds to reflect the revised contractual maturity. This revision resulted in a remeasurement of the convertible bonds’ liability and a reclassification of the revised carrying amount to short-term borrowings. The effect of the remeasurement of RUB 8,567 million was included in non-operating expenses. For further disclosure regarding the Delisting Event, please refer to the Company’s press release dated March 9, 2022.
Lease Liabilities and Commitments
The Group has lease contracts of office premises, fulfillment and sorting centers, vehicles and pickup points. The increase in right-of-use assets and lease liabilities as at March 31, 2022 as compared to December 31, 2021 was primarily related to recognition of RUB 12,943 million of right-of-use assets and RUB 12,494 million of lease liabilities as a result of commencement of new leases as well as modification of existing leases during the period. The lease liabilities amounted to RUB 52,832 million as of March 31, 2022.
Cash and Cash Equivalents
Cash, cash equivalents and short-term bank deposits amounted to RUB 92,461 million as of March 31, 2022, compared to RUB 125,991 million as of December 31, 2021.
Risk and uncertainties related to current environment
The sanctions imposed on Russia and Russian persons by a number of countries in connection with the geopolitical crisis surrounding Ukraine and 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 the prohibition on transactions with the Central Bank of Russia, blocking of assets and cutting off certain Russian banks from SWIFT; businessmen and their assets; and oil, defense and other state-owned companies, as well as export and import restrictions. In response, Russia identified a number of states, including all European Union member states, the United 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 of Russia.
As potential global and economic impacts of the geopolitical crisis surrounding Ukraine continue to evolve rapidly, unpredictable and outside the control of the Group it is difficult to accurately predict the full impact of the sanctions that were introduced or any measures taken by the Russian government in response to such sanctions.
Sanctions imposed by the United States, the European Union, the United Kingdom have had, and are expected to continue to have, a material adverse effect on our business, financial condition and results of operations and on the value and trading of the ADSs. We may also face greater difficulties raising capital in the future, which could potentially reduce the level of future investment into infrastructure expansion and operations. We also cannot provide any assurance that any further development in sanctions, or escalation of the Ukraine situation more generally, will not have a significant impact on our business, financial condition or results of operations. The imposed sanctions in response to the ongoing geopolitical crisis surrounding Ukraine and their impact on the Russian economy may prevent us from achieving our financial, operational and strategic objectives, including those described in the Company’s Annual Report (Form 20-F) for the year ended December 31, 2021. See Item 3.D “Key Information—Risk Factors—Risks Relating to Our Business and Industry—Sanctions imposed by the United States, the European Union, the United Kingdom and other countries in response to the geopolitical crisis surrounding Ukraine are likely to have a material adverse effect on our business, financial condition and results of operations and on the value and trading of the ADSs” of the Annual Report for the year ended December 31, 2021.
Ozon Bank
On March 31, 2022, Ozon Bank was removed from the SDN List by OFAC. For more details, please refer to the Company’s press releases dated March 31, 2022 and February 25, 2022.
Convertible Bonds
Following the occurrence of a Delisting Event, we have entered into discussions with an Ad Hoc Committee of Bondholders and their advisers in connection with a proposed consensual restructuring of our financial indebtedness under the Bonds and aim to be in a position to enter into a standstill agreement with a significant number of holders of the Bonds in the near term with a view to continue such discussions and to reach an agreement on the long-term restructuring of the Bonds within the current financial year.
As disclosed in the Company’s press release dated March 9, 2022, following the Delisting Event a group of Bondholders has formed the Ad Hoc Committee and appointed Houlihan Lokey, as its financial adviser, and Akin Gump Strauss Hauer & Feld LLP, as its legal adviser, to conduct an orderly discussion process with the Company with a view to finding a fair and sustainable solution for all stakeholders. To the extent any of the Bondholders are interested in joining the Ad Hoc Committee or join the coordinated effort we invite them to make inquiries to Houlihan Lokey at projectondohl@hl.com.
Throughout the date of this press-release, substantial portion of bondholders have exercised the rights to require redemption and are entitled to receive principal amount together with accrued interest on the redemption date, which is May 31, 2022. Due to, among other things, the restrictions under the recently enacted Russian capital controls and protection measures and continuing multiple changes to the regulatory backdrop, the Company is currently restricted from upstreaming cash funds from the Company’s Russian subsidiaries to the Company. Therefore, there is a risk that the Company will not have sufficient liquidity available at the relevant time to fund the payments required for the redemption. A failure to pay the amounts due under the redemption within 14 calendar days (i.e. by June 14, 2022) would result in an event of default under the terms of the Bonds and would trigger a cross-default on other Group’s liabilities. If the Group provided to the Company the liquidity necessary to fund the early redemption, such a redemption would result in a significant reduction in the amount of liquidity available to fund operations and would have a significant effect on our operations and growth outlook.
Also, on May 9, 2022 BNY Mellon Corporate Trustee Services Limited (the trustee under the Bonds) has notified the Company that, as a result of adoption by the European Union of Council Regulation (EU) 2022/576 of 8 April 2022 amending Regulation (EU) No 833/2014, prohibiting the provision of services to trust arrangements involving Russian nationals or Russian entities, from 10 May 2022 it would not be capable of acting as trustee under the Bonds without exposure to the risk of financial or criminal liability. The Company is currently evaluating possible implications of the trustee’s determination, including in connection with ongoing negotiations with an ad hoc group of Bondholders.
Disclaimer
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. Contacts
Investor RelationsMaryia Berasneva-McNamara, Head of Investor Relations, OZON
ir@ozon.ru
Press OfficeMaria Zaikina, Director of Public & Industry Relations, OZON
pr@ozon.ru
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