Zoho Reports INR 2,800 Crore Profit in FY23, with 30% Revenue Growth
Three points you will get to know in this article:
- Zoho excelled in FY2023, achieving a nearly 300% surge in operating revenue.
- Notable expenses, including employee benefits, led to a 90% decline in cash inflows.
- Freshworks, a Zoho rival, exhibited a 19% revenue surge and aims for $1 billion by 2026.
Zoho stands out as a rare gem in the tech industry, successfully unraveling the secrets to achieving both expansive growth and a robust financial standing. Remarkably, this feat was accomplished without relying on external capital. In the fiscal year 2023, Zoho witnessed an astounding surge of almost 300% in its operating revenue, surpassing Rs 2,800 crore in profits.
Revenue Sources and Geographic Distribution
Under the leadership of Sridhar Vembu, Zoho experienced a noteworthy 29.7% increase in its revenue from operations, reaching an impressive Rs 8,703.6 crore during the fiscal year concluding in March 2023. This marked a significant rise from the Rs 6,711 crore recorded in FY22, as outlined in the company’s consolidated financial statements submitted to the Registrar of Companies.
Zoho primarily earned its income by successfully marketing its in-house created enterprise IT management software and business application software, which includes popular products like Manage Engine and Zoho. Additionally, in the fiscal year 2023, Zoho accumulated Rs 16.6 crore from various operational endeavors beyond its core software offerings.
Furthermore, a substantial contribution of Rs 455 crore was garnered through interest and gains on financial assets during the fiscal year 2023, elevating the overall revenue to an impressive Rs 9,158.9 crore. Breaking down the geographical revenue distribution, North America emerged as the leader, contributing Rs 3,988.8 crore, trailed by Europe, Asia, and Latin America with Rs 1,952.5 crore, Rs 2,283.5 crore, and Rs 121.8 crore, respectively. The remaining Rs 357 crore was derived from Africa, Australia, and New Zealand in the same fiscal year.
Expenditure Breakdown
Noteworthy to mention is that employee benefit expenses constituted a significant portion, comprising 50.5% of the total expenditure. This expense category experienced a substantial increase, surging by 49% to reach Rs 2,722 crore in FY23, compared to Rs 1,827 crore in FY22. Additionally, advertising and promotional expenses emerged as another substantial cost, witnessing an 89.4% surge to Rs 1,354 crore in FY23 from Rs 714.8 crore in FY22.
Throughout the fiscal year, Zoho faced various expenditures, including those related to web hosting, data centers, legal matters, and other operational costs. Consequently, the company experienced a notable surge in total expenses, witnessing a 51% increase from Rs 3,572 crore in FY22 to Rs 5,393 crore in FY23. Delving into the financial outcome, Zoho’s profits reached Rs 2,836 crore in FY23, surpassing the Rs 2,749 crore recorded in FY22. Despite the upward trajectory in expenses, the cash inflows from operations witnessed a 90% decline, settling at Rs 2,986 crore for the last fiscal year.
Examining the financial metrics, the EBITDA margin and ROCE of the company were reported at 44.5% and 31.61%, respectively, during the year. At a unit level, Zoho invested Re 0.62 to generate a rupee of operating revenue in FY23.
Freshworks, a direct rival of Zoho, experienced a robust 19% surge in revenue, reaching $153.6 million (approximately Rs 1,274 crore) during the September quarter of the current calendar year. Operating losses for this quarter amounted to $38.7 million (Rs 321 crore), a notable improvement compared to the third quarter of 2022 when losses were at $58.3 million (Rs 483 crore). Looking ahead to the entirety of 2023, the publicly-listed company on NASDAQ anticipates revenues in the range of $595-5 million. Furthermore, Freshworks has set an ambitious target of achieving $1 billion in revenue by the year 2026.
In the fiscal year 2023, Zoho demonstrated remarkable financial performance, achieving a nearly 300% surge in operating revenue to surpass Rs 2,800 crore in profits. Led by Sridhar Vembu, the company experienced substantial revenue growth, primarily driven by in-house software products and interest gains. However, escalating expenses resulted in a 90% decline in cash inflows from operations, despite an increase in profits. Zoho’s EBITDA margin and ROCE stood at 44.5% and 31.61%, respectively. Meanwhile, Freshworks, a competitor, also exhibited strong revenue growth, aiming for $1 billion in revenue by 2026.
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