Inside IPO-bound Udaan’s 2022 numbers

In The Checkout this week, we dive into Udaan’s latest financials and examine whether the worst has passed for Shopee. [Read from your browser]( The Checkout 🛒 --------------------------------------------------------------- Welcome to The Checkout! Delivered every Thursday, this free newsletter breaks down the biggest stories and trends in ecommerce. You can find past issues [here]( or [sign up here]( to receive future newsletters. Also, If you’re not a subscriber, get access by [registering here](. Written by Putra Muskita Journalist Hello {NAME} Like other tech giants, Udaan, arguably India’s largest B2B ecommerce unicorn, has conducted layoffs this year as part of its efforts to be more “prudent economically.” Prudence has become a common refrain in what has been one of the toughest years particularly for the tech industry worldwide. Udaan reportedly wants to go public in 12 to 18 months. But it needs some hard convincing first. In this week’s Big Story, my colleague Samreen dives into Udaan’s financials for FYE March 2022, where the firm’s revenue grew 67% (though short of its 100% goal) and losses widened 23%. But the company’s cash and cash equivalents also saw a 3x drop year on year - not the most welcome metric for a company preparing for an IPO. Back in Southeast Asia, Shopee perhaps has been under the most scrutiny. It has done some painful cost-cutting measures, and the latest Q3 results from Sea Group appears to show some positive signs. But will Shopee be able to break even in 2023 as promised to investors? My Hot Take this week attempts to see whether there really is light for Shopee at the end of the tunnel. – Putra  --------------------------------------------------------------- THE BIG STORY [Udaan logs 67% rise in revenue even as losses widen by 23%]( The India-based B2B ecommerce unicorn is conducting a spate of layoffs as it eyes sustainable profitability.  ---------------------------------------------------------------  THE HOT TAKE  Encouraging signs ahead for Shopee? Here’s what happened: - Sea Group just announced its Q3 2022 financial results, in which Shopee posted overall [GAAP]( revenue of US$1.9 billion with a US$496 million [EBITDA]( loss. - Both metrics, however, represent an improvement year on year as well as quarter on quarter. Sea attributes this to “strong topline growth” and “efficiency improvements.” - These are Shopee’s first financial results since it closed operations in [four Latin American markets]( and conducted [further rounds of layoffs](. Here’s our take: In the press release accompanying its Q3 results announcement, Sea Group touted the “faster growth” of Shopee’s core marketplace revenue (up 54.1% year on year). It outpaced even the growth in gross merchandise value, which increased 13.5% year on year to US$19.1 billion for the quarter. Meanwhile, in a sign of its tightened belt, sales and marketing expenses decreased by 16.4% year on year to US$575.7 million. But logistics may be something to watch out for in the coming months. The firm’s revenue from this segment (which falls under value-added services revenue) rose to around US$600 million - still a tiny amount in the grand scheme of things, but is still a 20.3% year-on-year increase. Indeed, in his remarks, Sea chair and group CEO Forrest Li noted that this quarter’s capital expenditures of US$232 million included logistics-related spending, which perhaps implies a greater investment into this business line. See also: [Does the dawn of in-house ecommerce delivery threaten third-party logistics firms?]( Could this signal a potential new revenue stream for Shopee? For now, its in-house logistics service, Shopee Xpress, only services Shopee transactions with the aim of filling in gaps that are unfulfilled by third-party services. Could it eventually open up to become a full-fledged logistics player? That’s the strategy that Alibaba seems to be [eyeing]( - albeit in Latin America - as ecommerce growth in China slows. Cainiao, the Chinese giant’s ecommerce arm, recently launched a parcel distribution center in Brazil and is slated to further boost its presence there. Speaking of Brazil, Shopee’s unit economics in that country continues to “improve significantly,” noted Li, with GAAP revenue rising by 225% year on year. In [a call with investors]( Li reaffirms that Shopee is committed to stay in Brazil, which the group considers an important growth market. Ultimately, though, the question is whether these improvements are enough to reverse Shopee’s recent lows. As we [previously wrote]( the scrapping of Shopee’s revenue guidance was a surprise to investors, which may have led to a 22% stock plunge right after its Q2 results came out. While Shopee remains the biggest contributor to Sea Group’s topline revenue, its cumulative revenue of US$5.1 billion is still just 60% of US$8.5 billion - the low-end of its initial revenue guidance. The EBITDA breakeven point is also likely to be some time away, with the company’s management targeting the end of 2023. Minju Song, the director of the Sea Group COO Office, also notes in the call with investors that the company has to “increase the take rates across various service offerings” to strengthen its core marketplace revenue. While she said that responses from sellers have been mostly positive, it’s undeniable that Shopee has been facing strong competition from TikTok Shop. See also: [TikTok Shop has set SEA on fire within months]( For now at least, retail investors are welcoming the latest numbers: Sea’s stock price jumped from US$45.82 at the end of November 14 before peaking just below US$65 after the next day’s announcement. – Putra  ---------------------------------------------------------------  NEWS YOU SHOULD KNOW Check out Tech in Asia’s coverage of the ecommerce scene [here](. 1️⃣ Sea Group [cut 7,000 jobs]( over the last six months, Bloomberg reported. The layoffs affected roughly 10% of the company’s total workforce, including about 100 from its ecommerce arm, Shopee. 2️⃣ US private equity firm Bain Capital will acquire Japanese apparel maker Mash Holdings for 200 billion yen (US$1.4 billion), Nikkei Asia reported. 3️⃣ Thailand-based Beam, which builds a one-click checkout payment solution for ecommerce and social platforms, [raised]( US$2.5 million in a seed round led by Sequoia India’s Surge. 4️⃣ Carousell’s advertising arm has launched a [digital advertising service]( for brands called Shopping Ads. 5️⃣ Singapore-born ecommerce enabler AnyMind Group has received approval from the Tokyo Stock Exchange to [list on the latter’s growth market](. The IPO, which was previously delayed, is set for December 15.  --------------------------------------------------------------- That’s it for this edition - we hope you liked it! Do also check out previous issues of the newsletter [here](. Not your cup of tea? 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