Analyst Group Comments on OrderYOYO’s H1-23 Report

OrderYOYO published today, August 22, its half year report of 2023. The following are some key points that we have chosen to highlight in connection with the report:

  • Strong financial performance – ARR, revenue and EBITDA in line with trading update
  • Fixed subscription contributes to a more stable cash flow and less seasonality in ARR
  • Cash EBITDA positive in June – an important milestone to deliver positive cash flow

ARR, Net Revenue and EBITDA in line with Trading Update

OrderYOYO announced on Tuesday, July 18, the company’s financial performance during Q2-23 in a trading update, which showed a continued strong development. The ARR amounted to DKK 246m (167), corresponding to a growth of 47% compared to consolidated Q2-22 proforma results. Net revenue amounted to DKK 62m (45), corresponding to a growth of 38% Y-Y compared to proforma figures for Q2-22. Moreover, EBITDA before extraordinary items amounted to DKK 6.3m compared to a loss of DKK -3.3m in Q2-22, corresponding to a margin of 10%. OrderYOYO also raised its guidance for the full year 2023 regarding ARR, net revenue and EBITDA before other extraordinary items, where the biggest change is in EBITDA, which according to Analyst Group is mostly attributable to further efficiency and synergies from mergers, where the merger with app smart has entailed cost synergies that are now showing in the figures, as well as the acquisition of Kingfood, which was completed on April 28th 2023 and is expected to contribute to improved profitability. Read our comment on OrderYOYO’s trading update here.

ARR Grew Both Through Existing and new Customers

OrderYOYO showed a growth of DKK 79m in ARR compared to June 2022, which was driven by both new and existing customers. Compared to ARR in December 2022, existing customers showed a decrease in ARR of DKK -2m which is attributable to a seasonality pattern where the average activity from restaurant partners is normally lower than in December. However, the development can be compared to the same period last year, when ARR from existing customers decreased by DKK 16m from December 2021 to June 2022. The improvement from last year is a result of a larger part of OrderYOYO’s ARR coming from fixed subscription rather than the usage-based subscription. In Q2-23 fixed subscription stood for 38% of the total ARR, compared to 36% at the end of December 2022, which results in a more stable recuring cash flow against more volatility in the usage-based subscription. However, as we have mentioned in previous updates, we see benefits with the usage-based revenue model, for instance the built-in incentive structure of a falling commission rate in return for higher order volumes are beneficial for both OrderYOYO and the Restaurant Partner as increased usage is far more powerful under the usage-based subscription model. Moreover, churn fell to 7.7%, compared to 8.8% in the full year 2022, despite a continued challenging market for OrderYOYO’s restaurant partners with challenging inflation and rising interest rates.

Positive Cash EBITDA in June – Positive Free Cash Flow Around the Corner

EBITDA before other extraordinary items amounted to DKK 9m in H1-23, compared to DKK -6m in H1-22, corresponding to an EBITDA margin of 8%. The positive development in profitability is, according to Analyst Group, a result of economies of scale through mergers, cost management as well as the acquisition of Kingfood. The general staff costs represented 36% of net revenue in H1-23, compared to 45% in the same period last year and external costs amounted to 37% compared to 51% in H1-22, which shows the underlying scalability in the business model and indicates that margins can continue to improve from these levels.

OrderYOYO’s cash flow from operations amounted to DKK -0.5m in H1-23 compared to DKK -21.7m in H1-22 and free cash flow, excluding the acquisition of Kingfood, amounted to DKK -15.2m compared to DKK -35.0m in the same period last year, which shows that the improvement in EBITDA also translates into improved cash flow. Furthermore, in the month of June OrderYOYO showed a positive cash EBITDA, defined as EBITDA before extraordinary items minus capitalized R&D expenditures, which means the organic operation before extraordinary items and costs related to M&A activities was cash flow positive in June. This development indicates that OrderYOYO are close to delivering positive free cash flow, which we expect in H2-23, and that the organic operations are self-sustaining, something that should be rewarded by investors.

In conclusion, OrderYOYO delivered a report with a strong ARR growth of 47% as well as revenue growth of 38%. Moreover, the company delivered an increased profitability and cash flow as a result of the underlying scalability in the business model, which is now materializing in the figures and expected to continue in the coming quarters.

We will return with an updated equity research report of OrderYOYO.