Unpacking Carousell’s 2019 financial numbers

Terence Lee co-reported this story.

Singapore classifieds marketplace Carousell’s prominent acquisition of 701Search last year brought much promise. Many believed that the combined entity would become the top classifieds player in Southeast Asia.

Carousell co-founders (from left) Quek Siu Rui, Marcus Tan, and Lucas Ngoo / Photo credit: Carousell

The union also propelled Carousell – which counts Singapore, Hong Kong, Malaysia, Vietnam and the Philippines as its key markets – to an eye-popping valuation of US$850 million, though the number is a simple addition of the combined entities’ valuations. The merger with 701Search will “fortify our leadership in Southeast Asia,” CEO Siu Rui Quek said in a statement last November.

Nine months on, the impact of the acquisition on Carousell’s financials is becoming clearer, though the full picture isn’t apparent yet. While its consolidated revenue for 2019 has grown as a result of 701Search’s contributions, the group’s net loss swelled by over 60% to US$40 million, driven by increased operating expenses, Carousell’s latest financial statement shows.

The filing also reveals that its revenue more than doubled to US$15.7 million in 2019. However, a Carousell spokesperson clarified that the figure mostly consists of the company’s standalone revenue last year. 701Search’s revenue for the majority of the year was not included.

It’s a common accounting practice for holding companies to consolidate financial numbers from a new entity only starting from the date when it was acquired. In this case, because the acquisition only happened on November 20, Carousell probably only added just over a month’s worth of 701Search’s numbers.

The implication here is that if we include 701Search’s numbers for the entire 2019, then Carousell’s real revenue is likely much higher than the reported figures. The company’s former chief financial officer Rakesh Malani hinted as much: After the deal was announced, he said that Carousell was seeing an annualized US$40 million in revenue. We can safely assume that the actual revenue was close to the annualized figure, given that Malani’s guidance was provided near the end of the year.

With these facts on hand, we estimate that 701Search contributed over two-thirds of the consolidated Carousell group’s revenue:

The trickier part is figuring out the combined bottom line of the new entity, as 701Search’s numbers for its regional subsidiaries aren’t readily available. A Carousell spokesperson clarified that its revenue filing for 2019 only accounts for its local operations. 701Search’s financial statement confirms this, and the company says its finances are consolidated within its parent firm, Carousell Pte Ltd.

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