Home services platform Urban Company reported a bigger-than-expected loss for the March quarter, as it continued to invest aggressively into its recently launched vertical, Insta Help, that provides professionals for daily cleaning services in 15 minutes. Net loss for the quarter widened to Rs 161 crore from Rs 2.8 crore in the year-ago period, much higher than analysts’ estimate of Rs 80 crore.
The company said losses will stay elevated for the coming quarters as these investments continue, with consolidated Adjusted EBITDA breakeven only by Q3 FY28. “Q4 Adjusted EBITDA loss was Rs 119 crore, reflecting two-sided subsidies to densify the network, supply onboarding, and marketing for new trials,” the management said in the shareholder letter.
Insta Help, which is in a fierce competition with rival platforms Snabbit and Pronto, lost Rs 447 per order in Q4, higher than Rs 381 it lost on every order in Q3. The largest contributor to losses are the subsidies the company gives to both the user, in the form of discounts, and the service partner as incentives.
“Three factors drove this: higher new-user acquisition spend as we pushed category penetration; a step-up in absolute partner onboarding and related costs as we built supply capacity; and lower AOV, reflecting a higher mix of trial orders (which carry lower realisation),” the company noted.
The investments resulted in 2.7 million orders worth Rs 40 crore in Q4, up from 1.6 million orders worth Rs 27.6 crore in the December quarter. But as more new users tried the service, average order value declined to Rs 150 from Rs 172. New trials typically have lower AOV realizations. Moreover, scaling up value packs, which have a lower price per service versus standalone orders, also pressured AOV.
Despite attracting new users, the competition in the quick services space continues to intensify, keeping marketing costs high for Insta Help. In the letter, the management also noted that the competitive environment has been irrational at times. Both Snabbit and Pronto are well-funded players, backed by institutional investors. Lightspeed-backed Snabbit raised a $56 million round last month, while Pronto, which slashed prices for its services to as low as Rs 50 for 30 mins, raised $20 million earlier this week.
Besides Insta Help, the company has posted healthy improvements across its older businesses. On a consolidated basis, revenue jumped 43% year-on-year to Rs 426 crore, beating analyst estimates of Rs 397 crore. Excluding Insta Help, it resulted in an adjusted EBITDA of Rs 22 crore.
Revenue from its India consumer business, excluding Insta Help, rose 27% on year to Rs 288 crore, with an adjusted EBITDA of Rs 26 crore. Meanwhile, its international business revenue rose 89% to Rs 58 crore and that from its hardware business rose 67% to Rs 89 crore. The consolidated loss of Rs 161 crore included a Rs 61 crore non-cash Deferred Tax Asset (DTA) charge, the company said. Excluding this, underlying loss before tax was Rs 100 crore.