When it comes to scale and profit, bootstrapped tech companies seem to be showing the way. Over the years, Zerodha, Zoho, Noise, and Gameberry among others managed huge scale with real profits. Business software provider Zoho Corporation continues to lead the pack in terms of scale as well as profit.
Zoho’s revenue from operations climbed 28.3% to Rs 6,711 crore in FY22 from Rs 5,230 crore in FY21, according to its consolidated annual financial statements with the Registrar of Companies (RoC).
The Sridhar Vembu-led firm generates revenue through the sale of its cloud software suite licenses and software subscription fee collected from its clients across the world.
Its business application software Zoho One formed around 52.6% of the total collections. This income grew 62% to Rs 3,533 crore in the last fiscal year from Rs 2,181 crore in FY21.
Revenue from enterprise IT management software grew marginally by 4.1% to Rs 3,158 crore in FY22 from Rs 3,033 crore in FY21. Notably, this vertical was the largest revenue generator followed by Zoho One in FY21.
Income from software updates and maintenance and support license also contributed Rs 20 crore to operating revenue during FY22.
The company’s financial income (mainly from interest on investment and deposits) surged 34% to Rs 288 crore in FY22, taking the overall income to nearly Rs 7,000 crore.
North America remains the largest market for Zoho, generating 47.7% of total collection i.e Rs 3,198 crore followed by Europe, which accounted for 22.4% of the total sale. Other markets Asia, Latin America, Africa, and Australia contributed 13.2%, 5.5%, 7.5%, and 3.7% of the revenue.
When it comes to cost, employee benefit expenditure was the largest cost center for the company, accounting for 51.1% of the total expenditure. This cost surged 5.9% to Rs 1,827 crore in FY22 from Rs 1,725 crore in FY21.
Advertising promotional costs turned out to be the second largest expenditure, which zoomed over 2X to Rs 715 crore in FY22.
Zoho’s legal and professional costs increased 23.2% to Rs 175 crore in FY22. It also incurred Rs 125 crore on information technology, which pushed its overall cost by 18% to Rs 3,572 crore during FY22.
With a decent growth in its scale, Zoho’s profit spiked 43.3% to Rs 2,749 crore in FY22 as compared to Rs 1,918 crore in FY21.
On the ratios side, ROCE and EBITDA margins for Zoho remained positive with 31.27% and 43.38% respectively. On a unit level, it spent only Re 0.53 to earn a single unit of operating revenue in FY22.
Zoho, which has a presence in more than 150 countries and employs over 11,000 people, recently claimed to have surpassed $1 billion (around Rs 7,600 crore) in annual revenue. However, the firm expects a slowdown in 2022. The Chennai-based company was also planning to hire 2,000 people for further expansion in India and overseas.
Zoho’s direct competitor Freshworks (NASDAQ listed) registered a 37% growth in its revenue to $128 million (Rs 1,000 crore approximately) in September quarter while operating losses stood at $3.1 million. Freshworks expects to clock $494 million to 496 million (Rs 4,000 crore approx.) in revenue for CY22 compared to $493 million to 497 million (Rs 3,700 crore approx.) in CY21.
