Break-even for Meesho in Q3FY24 as profit dropped sequentially: Report

Moneycontrol reported, citing internal documents, that the decline in profits stemmed from increased operational expenses. In Q2FY24, Meesho had earned a profit of $5 million.

The performance was impacted by expenditures on Employee Stock Options (ESOPs) during this period.

Although achieving break-even is positive for a growing startup, investors in the public market prioritize consistent earnings.

This aspect will be pivotal for Meesho, as it undergoes fundraising to relocate from the US to India and subsequently list on Indian markets, the report said.

Meesho is currently in the process of fundraising, with the potential round size reaching up to $500 million, the report added.

The most recent figures available, Q3FY24, coincided with Meesho's initiation of fundraising plans in March, occurring before the conclusion of the previous fiscal year's fourth quarter. Meesho opted not to provide comments, said the report.

Interestingly, Q3 (October-December) aligns with India's festive season, a lucrative period for e-commerce companies like Meesho, Amazon, and Flipkart. During this time, marketing expenditures typically escalate as firms roll out special promotions to attract more customers.

According to the Moneycontrol report, in the three months ending in December, Meesho incurred a total expenditure of $80 million ($48 million indirectly and $32 million directly). This total derived from a gross profit of $78 million, resulting in a negative EBITDA of $2 million for Meesho in Q3FY24.

After deducting depreciation and amortization (D&A) expenses of another $2 million, Meesho reported a negative EBIT of $4 million. Following adjustments for one-time expenses/ESOPs ($4 million) and other income ($8 million), Meesho achieved a profit after tax (PAT) of 0, according to the report.

Notably, Meesho has not attained operational profitability (EBITDA positive) in any quarter since at least the conclusion of 2022.

The break-even quarter means that Meesho hasn't sustained a consistent streak of profitability, which it first achieved in Q2FY24.

While sequentially it might seem that Meesho still has progress to make, from a year-on-year (YoY) perspective, Meesho's profit after tax (PAT) transitioned from negative $21 million in Q3FY23 to 0 in Q3FY24. This underscores the company's evident improvement in its financial well-being.