Earnings call transcript: Delivery Hero sees strong revenue growth in 2024

Delivery Hero AG (ETR:DHER), with a market capitalization of €8.61 billion, reported robust financial results for 2024, with significant growth in revenue and a positive outlook for 2025. The company's stock surged by 9.3% following the announcement, reflecting investor confidence in its strategic initiatives and market performance. According to InvestingPro analysis, the company is currently trading below its Fair Value, suggesting potential upside opportunity.

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Key Takeaways

• Delivery Hero's full-year segment revenue grew by 22% to 13 billion euros.
• The company achieved an adjusted EBITDA of 750 million euros, improving by nearly 500 million euros.
• Free cash flow improved to 100 million euros, and net debt was reduced to 1.9 billion euros.
• The stock price increased by 9.3% following the earnings release.

Company Performance

Delivery Hero demonstrated strong financial performance in 2024, driven by strategic initiatives and market expansion. The company's full-year gross merchandise value (GMV) increased by 8% to 49 billion euros, and segment revenue grew by 22% to 13 billion euros. This growth was supported by the expansion of its global tech stack and a successful subscription program launch in Korea.

Financial Highlights

• Revenue: 13 billion euros, up 22% year-over-year
• Adjusted EBITDA: 750 million euros, an improvement of nearly 500 million euros
• Free cash flow: 100 million euros
• Net debt: Reduced to 1.9 billion euros

Market Reaction

Following the earnings announcement, Delivery Hero's stock price rose by 9.3%, closing at 26.25 euros. This increase reflects positive investor sentiment, driven by the company's strong financial performance and optimistic future guidance. The stock has shown strong momentum with a 42.61% return over the past year, despite trading significantly below its 52-week high of 42.05 euros.

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Outlook & Guidance

Looking ahead, Delivery Hero has set ambitious targets for 2025, including a GMV growth guidance of 8-10% and revenue growth of 17-19%. The company aims to achieve an adjusted EBITDA of 975 to 1,025 million euros and expects free cash flow to exceed 200 million euros. Delivery Hero also targets a long-term EBITDA margin of 5-8% of GMV by 2030.

Executive Commentary

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CEO Niklas Usberg highlighted the company's focus on delivering value for shareholders, stating, "Our focus is to really drive things that generates value for shareholders." He also emphasized the company's profit improvements over the last three years, saying, "Last three years, we managed to drive $2,000,000,000 in profit improvements."

Risks and Challenges

• Transitioning to a first-party delivery model may pose operational challenges.
• The cost impact of implementing an employment-based rider model in Spain is estimated at 100 million euros.
• Market competition, particularly in regions like Saudi Arabia, remains a potential risk.
• Macroeconomic pressures could affect consumer spending and growth projections.

Q&A

During the earnings call, analysts inquired about the company's growth prospects in Korea and the impact of new competitors in Saudi Arabia. Management expressed confidence in organic growth and emphasized a focus on bond repurchases over term loan repayments.

Full transcript - Delivery Hero AG (DHER) Q4 2024:

Moritz, Chorus Call Operator: Ladies and gentlemen, welcome to the Delivery Hero Q4 twenty twenty four training update conference call and live webcast. I'm Moritz, the Chorus Call operator. I would like to remind you that all participants will be in a listen only mode and the conference is being recorded. The presentation will be followed by a question and answer session. You can register for questions at any time by pressing and 1 on your telephone.

For operator assistance, please press and 0. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Christoph Bast, Head of Investor Relations. Please go ahead, sir.

Christoph Bast, Head of Investor Relations, Delivery Hero: Hello, and welcome, everyone. Thank you very much for joining our Q4 twenty twenty four earnings call. We would like to remind you again that this call is being webcast and a replay will be available later today on our website. Joining me today are Niklas Usberg, CEO and Marian Propp, CFO of Deliver Hero, who will walk us through the key highlights of our Q4 performance. Afterwards, we will be happy to answer your questions.

And now, let me hand it over to you, Niklas.

Niklas Usberg, CEO, Delivery Hero: Thanks, Christophe. And hey, everyone, and thanks for listening in. So let's jump straight into it. In Q4, we continued our strong momentum in line with the last quarters and grew our GMV by 8% in constant currency and excluding the effects from hyperinflation accounting. On a like for like basis, we had 8.6% GMV growth in Q4.

Even more exciting, growth outside of Asia accelerated further from 25% in Q3 to 27% year on year in Q4. This is growth far exceeding all our peers globally. As we already announced in November 2024, was a transition year for the Asia segment. And we soon will have all the fundamental pieces in place to grow sustainably. I'm very confident that we activated the right drivers to return to growth And a sign of that is that we are back in GMV growth in eight out of 12 countries in Q4 while having a parallel substantially improved profitability.

Total (EPA:TTEF) segment revenue continued to significantly outgrow GMV with a 23% year on year increase in the quarter. This puts our full year revenue growth to 22%, exceeding our already increased full year guidance, which was upper end of 18% to 21. This also had a positive impact on our profitability and led to a further increase of our adjusted EBITDA, both in year on year comparison as well as for quarter on quarter. Year on year EBITDA or adjusted EBITDA improved significantly by almost €500,000,000 and came in at around €750,000,000 thereby also exceeding our full year guidance, which was the lower end of €725,000,000 and €775,000,000 In line with the profitability improvements, free cash flow also improved considerably to around €100,000,000 and came in at the upper end of our already increased guidance of €50,000,000 to €100,000,000 Lastly, the recent Talabat IPO proceeds significantly reduced our net debt to €1,900,000,000 and the leverage ratio down to 2.5 times. Now on to the next slide for an actuals versus guidance comparison.

And here GMV came in on target despite the discontinuation of free delivery for non subscribers in Korea. This encouraging news is based on all the changes we made in Korea. We have now also start to see good trends December. Total segment revenue exceeded our guidance even after the guidance increase in November. And adjusted EBITDA was clearly ahead of our guidance and driven by higher earnings in Korea based on improved efficiency in our own delivery service and strong ad revenues.

In addition, The Americas and MENA segment had very strong finishes to the year. This ultimately also drove better free cash flow, which came in at the upper end of our guidance. Now move to the next slide. Not much to say on this. Yeah, solid GMV and revenue growth.

Let's go to the next slide. So here, you can see that we recorded revenue growth rates of around 25% to 35% outside of Asia. And despite the challenges we had in Korea throughout 2024, even the Asia segment recorded double digit revenue growth rate. Now let me hand over to Mariam for more details. Mariam?

Marian Propp, CFO, Delivery Hero: Thank you, Niklas. And a warm welcome also from my side. Let's dive straight into the Europe segment, where strong order growth led to plus 17% year over year GMV growth in constant currency during the fourth quarter. This was a great achievement given that we exited several countries in Europe throughout 2024. On a like for like basis, this segment grew by 21% year over year.

This means that we again significantly outgrew our peers. Our revenue grew even faster with 24% growth. As already mentioned in November, during the Q3 update, the positive earnings trajectory continued further into 4Q, resulting in a positive adjusted EBITDA for the second half of twenty twenty four. This was also driven by Glovo, which has really delivered a remarkable performance and generated a positive adjusted EBITDA in the second half of the year as well. As a short reminder, Globus Spain is expected to generate a positive adjusted EBITDA also in 2025, even after the higher costs from the new employment based model.

Furthermore, the entire Europe segment is expected to be around breakeven in 2025. Now, let's have a look at our MENA segment. In MENA, GMV and revenue growth both accelerated to 34% respectively, both in constant currency and excluding the impact from hyperinflation. This was predominantly driven by a 30% year over year increase in order volumes and based on continued leadership across all markets. Saudi Arabia had again a standout quarter, much like in Q3.

The country generated strong GMV growth and maintained its clear category leadership while increasing profitability. Talabat was also nothing short of outstanding as GMV growth accelerated even further in the fourth quarter and continued to enhance profitability with an adjusted EBITDA margin of more than 6% for the full year 2024. In sum, the MENA segment recorded an adjusted EBITDA margin of around 3.7% for the full year and we expect further earnings growth in 2025. Now on to the Asia segment. For the Asia segment, GMV development was largely impacted by fading out free delivery for non subscribers in Korea.

However, while this had a negative short term impact on the top line, profitability has been improving. In addition, we recorded ongoing strong traction of Beimen's subscription program with a user penetration of around 35% at the end of the year. But also the APAC business, meaning Asia excluding Korea, continued its upward trajectory with sequential order growth for the third consecutive quarter and a positive adjusted EBITDA before group costs in the second half of the year. Moving on to Hong Kong, we've seen a clear recovery now with strong customer growth towards the end of the year, positioning the business for improving top line trends in 2025. Overall, the Asia segment recorded an adjusted EBITDA margin of around 1.6% in 2024.

For 2025, we expect stable to slightly higher earnings despite additional growth investments in Korea. Now continuing with the Americas segment. In Q4, GMV growth accelerated further to 25%, driven by double digit volume growth across most countries. After reaching breakeven in Q3 and further earnings growth in Q4, we successfully recorded a positive adjusted EBITDA for the full year. With ongoing improvements of the macroeconomic environment in Argentina, we anticipate an attractive top line development and further earnings increase throughout 2025.

Now, on to integrated verticals. In line with the previous quarter, our integrated verticals segment grew GMV and revenue by 3227%, driven by more daily orders per store and larger basket sizes, despite having reduced the demarts footprint throughout the year. As a result of increased store utilization, as well as improved supplier conditions and growing ad tech business, the gross profit margin continues to expand further. This shows that with increasing operational size as well as improved customer retention and frequency, scale benefits become more visible and significant on the path to segmental profitability. Consequently, the adjusted EBITDA of the Demarts business has improved by more than 80% throughout 2024, and the business generated a positive adjusted EBITDA in December, excluding the effects from hyperinflation accounting.

For 2025, we expect further dynamic growth in this segment and adjusted EBITDA at a breakeven level. Let's now have a closer look at the gross profit margin development on group level. We managed to accelerate gross profit margin in Q4 to new record levels. Especially MENA and the AmeriCars are are already within our long term gross profit margin target range of 10 to 13%. For Asia, you might recall that we stopped offering free delivery for non subscribers in Korea from September onwards, which helped gross profit margins to rebound throughout Q4.

As just mentioned before, our Demands business improved its gross profit margin significantly throughout 2024. With increasing scale benefits, we expect this positive trajectory to continue further into 2025. As a side note, we have started to include the gross profit margin of the integrated vertical business in this chart, within the group gross profit margin. For our full year financials, our GMV grew by 8% to almost €49,000,000,000 and segment revenue by 22% to almost €13,000,000,000. On an adjusted EBITDA level, we have shown a great performance with an uplift of almost €500,000,000 and recorded a full year result of around seven fifty million euro.

With ongoing profitability measures, we reached improvements in all segments. We posted a free cash flow of around €100,000,000 implying an uplift of around €466,000,000 reaching the top end of our previously increased guidance range. A great job by all teams across the company. I would now like to circle back on commitments we made to drive loss making markets and integrated verticals to profitability. As you can see, we have fully achieved our goals for the platform side and we are only €800,000 short from reaching the breakeven target for integrated verticals.

Going forward, we will therefore discontinue this illustration. As you can see on the next slide, we have been growing EBITDA by almost EUR 2,000,000,000 in the last three years. This was achieved despite low growth from COVID size. Looking three years forward, we expect to achieve higher growth, making it easier to drive profitability and cash generation. In 2025, we will continue to grow EBITDA, while at the same time making some extra growth investments into Korea and incurring around €100,000,000 cost associated with the change in the rider model in Spain.

Beyond 2025, we expect to further expand our adjusted EBITDA margin until it reaches our adjusted EBITDA margin target of five-eight percent of GMV by 02/1930. Now, let's take a look at how the improvements in profitability have impacted our cash development. As you can see, in 2024, we achieved a positive cash flow after interest even without capital increase in IPO proceeds. The main driver for this was of course the significant EBITDA increase, which covers CapEx, leasing and taxes. Excluding the Talabat IPO proceeds and the capital increase related to our planned Taiwan divestment, our cash position was already fairly stable.

Including these two events, we benefited from a combined cash inflow of more than EUR 2,000,000,000, which resulted in a year end cash position of €3,800,000,000, up from 1,700,000,000 at the December 2023. This puts us in a strong financial position. Let's have a look at how this large cash balance combines with a debt maturity profile. On the one hand, the cash position more than doubled to €3,800,000,000 and in addition, we upsized the revolving credit facility to €600,000,000 to ensure ongoing flexibility if needed. On the other hand, we have EUR 3,800,000,000.0 convertible bonds outstanding at a weighted average coupon of 1.8% as well as a EUR 1,800,000,000.0 term loan due 2029.

As we announced this morning, we aim to use approximately EUR 1,000,000,000 for convertible bond repurchases in order to further optimize our balance sheet. Talabat IPO resulted in a cash inflow of €1,800,000,000, boosting our cash position and ultimately reducing the net debt position by around 55% to €1,900,000,000. Consequently, the leverage ratio drops to 2.5 times net debt to adjusted EBITDA. Let me now hand back to Niklas, who will take you through our case studies.

Niklas Usberg, CEO, Delivery Hero: Thanks, Marianne. So a quick update on our side of business as we received some questions on this. As you can see on this slide, this is a very comparative market, but we maintain a strong leadership position. Looking at the middle part of the chart or middle part of the slide, you can see an acceleration in growth all through or during the year. And this was happening while having new entrants coming into the market.

What's even more impressive is that we did this at record profitability. So record profitability while competing here. This was achieved by allocating extra engineering capacity to push affordability initiatives combined with selective profit drivers. We've also paid close attention to customer behaviors as one of our competitors spent huge amounts on discounts and vouchers. What we saw was at less than 0.5% churn of our high and medium value customers.

And for reference, this is the large majority of our customers. We had approximately 4% to 5% churn within our lowest value customer segment group. These are customers driving negative unit economics and we are fine to rent these customers away and we'll do nothing to try to retain these customers. This makes us very confident in our business in Saudi and across the major region. Our focus will remain to build superior experience.

We have allocated some extra budget to ensure the best experience in Saudi, But so far we didn't have to use any of this budget. Let's now move to our advertisement business, which is already generating more than a billion euro. And what you can see here is that we had a 36% increase in advertisement revenue to more than 1,200,000,000.0 in 2024. And we are confident to increase our long term target from previously 3% to 5% to now more than 4%. In Q4, advertisement revenue already accounted for almost 3% of total GMV with ongoing growth rates outpacing company GMV growth.

Margins in our ad tech products are around 70% and therefore highly margin accretive for the group as a whole. With increased sales automation, we expect margins for these products to increase further. On the back of strong 2024, we expect advertisement revenue for 2025 to reach more than €1,500,000,000. 2 main growth drivers for this will be Korea and global as they are moving over to our global tech stack. You may recall that we initially planned for more than €2,000,000,000 for '25.

However, due to the change in competitive landscape in Korea, our focus in recent quarters has shifted away from the development and distribution of advertising products for the time being. Now I'll turn it back to Marianne again to give you an overview of the new free cash flow definition as well as 2025 full year guidance.

Marian Propp, CFO, Delivery Hero: Thank you, Niklas. So to increase comparability with our external IFRS reporting and to better align with industry standards, we have revised our free cash flow definition. Going forward, readers will be able to fully reconcile the free cash flow from operating activity per our consolidated statements of cash flows to the guided and disclosed free cash flows. On the left hand side, you can see the previous free cash flow definition, which excluded working capital changes from payment service providers and restaurant liabilities as well as extraordinary effects below the adjusted EBITDA. We have adjusted this in the new definition.

Free cash flow, according to the new definition, is calculated as cash flow from operating activities as stated in the IFRS statement of cash flows, less net capital expenditures and payment of lease liabilities. For 2024, the revised definition shows free cash flow amounting to approximately €200,000,000 The increase from the former definition is largely due to favorable movements in working capital, specifically payment service provider and restaurant liabilities. Let's now turn to the full year 2025 guidance. For 2025, we're confident to accelerate our GMV growth again. With GMV trends in Korea expected to improve throughout the year, we expect GMV growth of 8% to 10% on group level.

Also revenue growth of 17% to 19% year over year. As always, both growth rates are in constant currency and excluding hyperinflation accounting. The 2025 adjusted EBITDA is expected to come in between €975,000,000 and €1,025,000,000 This step up already includes the additional investments into our Korea business as well as the EUR 100,000,000 EBITDA headwind resulting from this switch to the employment based model in Spain. Free cash flow is expected to be more than €200,000,000 for 2025. This guidance excludes extraordinary cash in and outflows such as M and A break fees and ongoing larger legal disputes.

As shown in our cash bridge, 2024 cash flow included net working capital inflows of around €180,000,000, of which over €100,000,000 were attributable to payment service provider and restaurant liabilities. Due to calendar day of year end in 2023 versus 2024. In 2025, we expect a small net working capital inflow in line with our guidance. The lower working capital inflows in 2025 would be compensated by an adjusted EBITDA improvement of around EUR $250,000,000, which after taxes paid, CapEx and leases will result in a small free cash flow improvement year over year. Mid term, we expect the adjusted EBITDA to cash flow conversion to reach over 60% and long term around 70%.

That's it from my side. Thank you for listening. And we're now looking forward to taking your questions. Christoph?

Christoph Bast, Head of Investor Relations, Delivery Hero: Thank you very much, Marian. Before we start with the Q and A, I would kindly ask you to limit your questions to one panelist. So this way we can ensure that everyone has the opportunity to ask a question. Operator, please go ahead.

Moritz, Chorus Call Operator: If you wish to remove yourself from the question queue, you may press star followed by two. Questions on the phone are requested to disable the loudspeaker mode and eventually turn off the volume from the webcast while asking a question. In the interest of time, please limit yourself to one question. And the first question comes from Andrew Ross from Barclays (LON:BARC). Please go ahead.

Andrew Ross, Analyst, Barclays: Great. Good afternoon, everyone. Thanks for taking my question. I wanted to ask about Korea, and I guess a few parts. But can you give us a bit more color about the growth trajectory towards the end of Q4 and into Q1?

It sounds like it's improving,

Unidentified: but it

Andrew Ross, Analyst, Barclays: would be good to get more color. And then can you give us more about how the product is evolving? So you said 35% of users are on the club. Like what percent of GMV is that? And how is the shift going from 3p to 1p as you enrich the value of the club and kind of evolve the proposition more broadly?

It would be good just to get a bit more in terms of what you're actually changing in Korea and what you're seeing on the ground. Thanks.

Niklas Usberg, CEO, Delivery Hero: Sure. Hey there, Andrew. So, yes, as mentioned, already back in Q3 trading update, we expected Q4 GMV development to be below Q3 levels as we discontinued the free delivery for non subscribers in September. And since non subscribers still represent the majority of our customer base, these changes had a short term impact on our top line growth as you mentioned. What we also said is that this will drive profitability.

And we also think that the change in pushing subscription and becoming club, we expect this to have a positive mid to long term improvement into both customer experience and entire growth. And this is also what I I don't know what happened then in starting, let's say, maybe end November, beginning of December, and then start taking more effect to us end December as we we did a few other changes in parallel. Yeah, on the product roadmap, there are so many exciting good things in there. A few things we already spoke about. I mean, we have done some work on this integrated list, but it's it's by by no means completed.

It takes a long time. It's very a little bit frustrating, but but it is where it is. It's it's, so so that is, of course, one big improvement, also improvements in how we we show and and and on on the logistics side and the time side on the, yeah, the whole logistic tech stack, which is also then leveraging, I don't know what we're building in in in Berlin, so a global tech stack. So that should improve logistic experience as well as, yeah, the the experience for for both the riders and consumers. Yeah.

There there there are literally hundred things I could speak about in terms of product improvement that we are doing. Some of them have happened. Most of them happen in q one, towards the end of q one. Some of them are happening in q two and some even start happening in q three and q four. So this is really a year's project, but you will start seeing effect of all these changes sooner rather than later, possibly already.

And as I said or as you said or we said, yeah, we had a good ending to Q4. Yeah. 30% of subscription, we don't disclose exactly what on how many users and so on, but this is the disclosure that we give. This is gonna go higher. We have said before, we kinda wanna target towards at least 50.

So you you would expect that we'll probably drive it towards towards 50 or so, possibly higher. 3p to 1p, that is happening quite fast and I would expect an acceleration in this towards say beginning of Q4, end of Q3, beginning of Q4 should be a further rapid expansion of this. But already today, it's we're moving as fast as we humanly can and long term. And we will go towards 70% to 100%, long term, I guess, 100%.

Marco Stiebel, Analyst, JPMorgan: Thank you.

Moritz, Chorus Call Operator: And the next question comes from Marco Stiebel from JPMorgan. Please go ahead.

Marco Stiebel, Analyst, JPMorgan: Nikas, unfortunately, also another question on Korea. I think previously you commented that you think we're going to get order growth in Korea in 2025. I mean, is that something that you still defend sort of as of today from the data that you can see? And then if that is the case, could you maybe elaborate a bit more what the scenario is? Is it that you need some macro help?

Is it that you feel the players or the market is increasingly moving towards a sort of two player market given that you are suffering? Or is it just really all about the better product and the changes that you have made? I'm sure you might say it's all of it a little bit, but what would be the key driver for the scenario that we see order growth in Korea in 2025?

Niklas Usberg, CEO, Delivery Hero: Yes. So we will turn on positive growth in 2029. So we stand by that. I don't think we are dependent on macro. I think anyone who is dependent on macro, I think it's, yeah.

And we will never blame or take credit for macro. I also don't think it has anything to do with competition. I know a lot of people try to or think so or try to, somehow expect that. I don't think our growth is in any way dependent on competition. It has never been and never will be neither in Korea nor in any other market.

If we don't grow, it is purely poor execution of us, nothing else. So growth is 100% driven by us and not our competitors. And I think we could have done a better job in end twenty twenty three, beginning 2024. I think we started to execute a little bit better mid twenty twenty four, but a lot of heavy lifting. And I think 2025 should be, I think, a decent year, but it's all driven by general execution and in particular product execution.

And a lot is happening and is moving fast. The team is working incredibly hard. It's very, very hard. It's all nighters all the time and it's going to show effect.

Marco Stiebel, Analyst, JPMorgan: Perfect. But you would think as of today, you think with these tools, orders will grow in 25% just to your head was breaking a little bit.

Niklas Usberg, CEO, Delivery Hero: It will go from a negative growth to a positive growth. That's what I'm saying.

Marco Stiebel, Analyst, JPMorgan: Yes, fantastic. Very clear. Thank you.

Moritz, Chorus Call Operator: And the next question comes from Luke Holbrook from Morgan Stanley (NYSE:MS). Please go ahead.

Luke Holbrook, Analyst, Morgan Stanley: Yes. Thank you for taking my question. I want to change tack a little bit and talk on Saudi. You've given some very helpful disclosure in the presentation on Slide 23, but I'm just trying to understand that with the new entrant having expanded into more towns and cities over the past couple of months, your chart suggesting that their access are flat. How do I square that with your commentary that you're also channeling potentially more investment back into that market?

I'm just trying to understand as well the source of that data. Thank you.

Niklas Usberg, CEO, Delivery Hero: Can you repeat? I didn't fully connect on the investing a little bit more, but sorry, it was something there.

Luke Holbrook, Analyst, Morgan Stanley: Your data suggests that their access have been flat since the November, but you were also discussing, making more opportunistic investments into the market. So I'm just trying to square both commentaries together with the data that we're seeing on the slide.

Niklas Usberg, CEO, Delivery Hero: Got it. Okay. Maybe the first starting off a little bit on the premise of the question. So, look, I'm incredibly comparative and I think no other company has been forced to compete as much as Deliveroo (OTC:DROOF) has. We have also ended up on top in more than 90% of our business despite competitors having spent far exceeding around $10,000,000,000 probably a multiple of that in our markets.

So I think we're freaking good at competing. But the question people have is how it impacts growth and profits and all of that. And I do think it matters in the early stage of a market if you have a tough competitor because it clearly impacts a customer acquisition cost. But as a company reaches scale in a market, it doesn't really make much of a difference if your competitors are big or small, whatever size they have. More relevant is if you have scale or not.

Our experience is also that competition is rarely a problem if the growth is weak as I mentioned before, it's way more about how we execute if growth is weak or strong. So then also look at the last three years, if you think about this profitability growth and what happens when you have strong competition, does it impact and how much does it impact? Because I think there's an exaggeration in how much it actually does impact. So if you look at last few years, we have been in intense competition across so many markets. And despite this, we increased profits with almost €2,000,000,000 and this is despite and coming from the COVID highs.

So therefore, despite not having the growth that you would have expected from those levels, we still managed to drive 2,000,000,000 profitability. And this is despite very tough competition over these years. So I think that again shows that it doesn't really matter what your competitor do. It might weigh more what we do. And I think now as growth is start to accelerate, I believe we should have an easier path to drive profits going forward and not harder.

So then coming to your question on Saudi specifically, I'm a little bit squaring the numbers here. So the main reason why we grow faster is looking at our data. And we should be clear that when we look at external data, and this graph shows that we are more or less flat, even slightly declining, while reality is not. I mean, reality is that we grew faster. So that again kind of invalidates those external data points that are rarely correct.

It might be directionally right, but obviously it's not right here as we were growing our customer base and we're growing our orders while the graph indicates that we were not. And the reason why we managed to grow in Saudi, and while delivering record profitability, is that we did allocate both a lot of tech and private resources as well as a lot of focus, to make sure that we have the, that that we cover any weaknesses in our product as as new entrants are coming on board because that's the scary part. If you're losing share when a competitor come in, it just means that you're doing something wrong. That could be we are not on par on logistics. I think I can give one or two examples like Korea where we were not on par.

We didn't have full on delivery. There have been examples where we have had a no multi vertical offering and comparative did, and that also impacted us. As long as you don't have any product weakness, your good customers do not leave for a voucher discount. Your voucher hunters and your fraud customers do, but but generally not good customers as long as you deliver. So that's what we focused on.

And this then also grew on a both, profitability and and profit and growth. When I look at what was interesting coming to your question, I'm sorry I'm making this very long here, but what's interesting is that, I don't know, Kita probably reached something like 150,000 daily orders, our estimate. And and yeah, it hasn't impacted us at all, or at least not the good part of the customer. What I mentioned before is that our medium to good customers, we had less than 0.5% loss of those customers. So literally nothing, and this was in Riyadh only.

So this was not on a Saudi basis, it was in Riyadh where they had been focusing. But we did lose some low value or negative value customers in 4% to 5%. And as I said, that's that's nothing that we'll be focusing on on retaining. We we we're actually, yeah. We we we yeah.

There is no value in maintaining those customers. As to the increased investment, well, we still see that it's probably a big market and we want to capture most of that market while someone else is coming in and and and fight for the new customers. And therefore, we we kind of plan on maybe we need to spend a little bit more in in marketing and a few other things to to keep acquisition rates up. So far, we haven't had to spend anything there. So so but but maybe we'll do if you see opportunity to acquire user cheaper than than we will do.

Most important is that we're delivering a good experience and and then then we make those potential or potentially not those those optimistic investments. So, yeah. So so in terms of that external data, I wouldn't take it as matching it month by month. Does it match up to your question? But rather see directionally is that we are doing okay.

There are six, seven other competitors being significantly smaller than us, five and four are number two position in the market. It doesn't really matter what they do. What matters is what we do.

Luke Holbrook, Analyst, Morgan Stanley: Thank you. Very helpful.

Niklas Usberg, CEO, Delivery Hero: Thanks, Luke.

Moritz, Chorus Call Operator: And the next question comes from Gillette Tonnier from Jefferies. Please go ahead.

Gillette Tonnier, Analyst, Jefferies: Thank you. Best pronunciation of my name I've heard in a while. It was one question please, inevitably back on Korea. And Nicholas, it would be useful to hear you talking about what it was about Austin Kim's time at Trendyol that made you think he was the right fit for the Biman role here? Thanks.

Niklas Usberg, CEO, Delivery Hero: So you mentioned Trendyol here and I didn't capture the connection to Korea.

Marco Stiebel, Analyst, JPMorgan: So just picking up

Gillette Tonnier, Analyst, Jefferies: on the new CEO at WeWaa and his time

Marco Stiebel, Analyst, JPMorgan: yes, yes. What was it

Gillette Tonnier, Analyst, Jefferies: about Austin's time in Turkey that made you think he was the best fit for Baimin here?

Niklas Usberg, CEO, Delivery Hero: Thank you. I forgot that Austin actually had a time at the building twenty years ago. Yeah, of course, and he came in with an enormous amount of experience in building food and quick commerce. And, there was a great hire. He is one of the toughest competitors that we had, to be honest.

I I I yeah. Trendy Oil in Turkey, they they were very good. And, we we we yeah. We obviously want to have the best people in our business. And and Austin was a very logical choice for us and, grateful that he wanted to join us.

And since he he joined, he's been fantastic. It's it's, it's it's super exciting working with him. It is moving in light speed exactly like we we we want in Delivery Hero. He has that drive and passion that we have in Delivery Hero. The whatever, yes, focus on impact and getting stuff done today, not in tomorrow, not in a week, not in a month, but he has that drive.

So far it's been fantastic working with Austin.

Gillette Tonnier, Analyst, Jefferies: Just by way of follow-up, as you look at the product roadmap you spoke about a couple of questions ago, do you see any white space between what Beimen is offering and what Coupang is offering within six months? So the story of the past two, three years has been they've been able to differentiate themselves. Is it going to be white space still in six months' time?

Niklas Usberg, CEO, Delivery Hero: There is still some white space as I said. They have 100% on delivery and we do not yet have that. So that's of course a little bit white space and the experience is better when we deliver. Then of course there's a lot of white space or a lot of things that we do a lot better than them. Mainly because, understandably so, as this is our main focus and we can get all learnings from international markets and pour them in there.

So I think that helps us to move faster than them. And overall, I think we have a a clear advantage, but, we we also have to cover probably the biggest disadvantage, which is known delivery. Going forward, I think that the unique goods that we have are likely gonna increase. I cannot imagine that anyone will move as fast as we will do when it comes to our product roadmap and what we're rolling out. So I think, yeah, I'm I'm I'm pretty excited.

I don't think there's anything that we where where we will lack. Potentially, we will not have % on delivery by that time, but but the the difference there will be smaller at least. So yes.

Gillette Tonnier, Analyst, Jefferies: Thank you very much.

Niklas Usberg, CEO, Delivery Hero: Thank you.

Moritz, Chorus Call Operator: And the next question comes from Annick Maas from Bernstein. Please go ahead.

Annick Maas, Analyst, Bernstein: Hi there. You seem to have highlighted that Hong Kong has been doing well, that you have seen customer growth, which seems to be the first since really Kita has launched it. So can you just tell us what has driven that? Has there been an inflection point now and Hong Kong is going to go better from here? Thank you.

Niklas Usberg, CEO, Delivery Hero: Yes, I think we're doing pretty well. Of course, there's always a little bit of a year over year effect. So as Kieta went in, we did take an initial hit, I think for two reasons. Firstly, when someone come and offer big discount, some low value customers will switch, the same what I told you about in Saudi. Some of the low value customers will go to the competitor, at least as long as they have offers which are better than what the competitor has.

Secondly, I think we left a clear opening for Kita to enter the low value basket segment. We didn't have an offer that covered that low value baskets. I think here, unfortunately, we also lost a little bit extra because they came in and capture a piece that we didn't have. And that's why we moved in light speed when we heard that they would come into Saudi to cover those weaknesses. And that's also what you see in our growth.

You can definitely see there's been a larger focus on Saudi over the last six months. And, yeah, so cover any weaknesses, and we had one weakness in Hong Kong, and that's what's been covered now. Yeah, now we're seeing recoveries. So we see numbers being pretty okay. And we expect to be back to growth in the next quarter or two.

We are not very far away from growth again. And it's a big market, it's still early stage. So I expect we'll get into good growth and it will be a good market long term for us.

Unidentified: Got it. Thank you.

Moritz, Chorus Call Operator: And the next question comes from Christopher Jonan from HSBC. Please go ahead.

Marco Stiebel, Analyst, JPMorgan: Yes, perfect. Thanks for taking my question.

Christoph Bast, Head of Investor Relations, Delivery Hero0: I wanted to inquire about your cash position and how what we should read into that. So all of the 1,800,000,000.0 proceeds from Talabat, you are taking 1,000,000,000 tables, so to speak. But at the same time, the RCF is up by 600,000,000. So that begs the question around signaling. What does it tell us about your ambitions on M and A?

Would you say that you are rather on the buying or still on the selling side of M and A? Any sort of update on that, please? Thank you.

Niklas Usberg, CEO, Delivery Hero: And anything still to be answered on the cash flow side or was it more on the M and A side otherwise?

Christoph Bast, Head of Investor Relations, Delivery Hero0: I mean more on the M and A side. I'm just curious why

Niklas Usberg, CEO, Delivery Hero: you Then I'll cover. Then otherwise, I'll let Mariana cover. But look, yes, we have a good cash position. We have a good balance sheet. It's low leverage.

But I think we are we we we also like to keep it that way. So I and and right now, we have so much good momentum in our own business and we have super good focus and clarity and we we we are very optimistic when we look at the next three years, seeing how much we improve profitability of the last three years despite having all the challenges that we had. That that that makes us very excited about the next three years. So I think we just wanna keep that momentum and not be distracted by by by m and a and so on. So I I yeah, I think our focus will rather be organically growing our business at this point in time.

Marco Stiebel, Analyst, JPMorgan: Sounds clear. Thank you.

Moritz, Chorus Call Operator: And the next question comes from Monique Pollard from Citi. Please go ahead.

Christoph Bast, Head of Investor Relations, Delivery Hero1: Hi. Afternoon. Thank you for

Unidentified: taking the question. On a slightly different topic, I've seen some press articles that there was a Glovo employee in Romania who's being externally investigated for corruption accused of taking bribes to modify modify overtime etc for couriers I'm just hoping you could provide us any color you could give on that would be helpful.

Niklas Usberg, CEO, Delivery Hero: I think I I actually haven't read that article and have not heard anything internally. Marianne, have you heard about this?

Marian Propp, CFO, Delivery Hero: I don't have.

Niklas Usberg, CEO, Delivery Hero: Sorry then. We are not able to comment on that. I I guess our Romania team is is working harder to to make sure that this is getting sold, but nothing that we have heard of. I'll read the article after this.

Christoph Bast, Head of Investor Relations, Delivery Hero1: Perfect. Thank you.

Niklas Usberg, CEO, Delivery Hero: Thanks.

Moritz, Chorus Call Operator: And the next question comes from Silvia Cuneo from Deutsche Bank (ETR:DBKGn). Please go ahead.

Christoph Bast, Head of Investor Relations, Delivery Hero1: My question is on the take rates. We observed sequential improvement in Q4 compared to Q3. And I wanted to ask if you could provide more detail on the underlying trends driving the improvement. Is it specifically coming more from commissions paid by restaurants? Or on the other end, is it more driven by revenues coming from consumers like the delivery fees, service fees or subscriptions?

Or perhaps it is still a mix effect from including deliveries at higher take rates? Thanks. This would be helpful also for thinking about the drivers of faster than GMV revenue growth in your 2025 guidance.

Niklas Usberg, CEO, Delivery Hero: Marianne, do you want to cover?

Marian Propp, CFO, Delivery Hero: So I'll start and then you can add Nicholas. I I think, the improvement and take rate is is indeed a mix. So I think it's it's a bit of several elements that you mentioned there. Right? So there there is certainly an element that we are improving subscriptions and or increasing subscription rates in a number of the markets, right?

There's something around deliveries. I mean, I think it's really a mix effect that you see here.

Christoph Bast, Head of Investor Relations, Delivery Hero1: Okay. If I might ask another quick one then, just regarding the changes upcoming in Spain with the riders' employment model. Can you perhaps outline what are the key steps involved in the process and do you have any views about how many riders will you need to employ? Thank you.

Niklas Usberg, CEO, Delivery Hero: Marianne, do you cover this or shall I?

Marian Propp, CFO, Delivery Hero: Yeah. I'll I'll do. I mean, we we've basically, as as we have announced, right, started moving to the employment based model in Spain. And and that's really ongoing. Right?

So the details of the model are currently being finalized and Global has started to pay social security contributions for the riders, and therefore satisfies, you know, the the request of the authorities. And, so that's that's really, you know, work in progress as we, as we speak. Right? And and will be a a transition over the next month with the focus really being on making it a a smooth transition. Right?

Safeguarding the customer experience and then obviously, you know, the cost side of it we spoke about already. So that's a hundred million that we have already announced for the new model.

Christoph Bast, Head of Investor Relations, Delivery Hero1: Okay. Thank you.

Moritz, Chorus Call Operator: And we do have a follow-up question from Andrew Ross from Barclays. Please go ahead.

Andrew Ross, Analyst, Barclays: Great. Thanks for squeezing me in. I thought I'd jump back in the queue if I was space. I guess mine's a bigger picture one. So the implied market cap of Delivery Hero kind of excluding your 80% stake in Telebat is not much, as I'm sure you're keenly aware.

Can you just give us like a bigger picture view as to how the company realizes more value to shareholders in the next couple of years? Clearly, there's a story of kind of accelerating GMV growth and free cash flow improvement, but we'd really like to get your take on things like more asset sales, closure of markets, thinking around Matalabad state when the lockup expires? Just like what can you do to help that situation? Thanks.

Niklas Usberg, CEO, Delivery Hero: Thanks, Andrew. So, well, we are not the ones setting the share price, but we do try to focus on delivering on both profit and growth. And kind of it that's really also what we want to focus on, rather than short term try to make something that take the share price up, but we rather wanna see this long term and keep delivering on that strategy. And if we deliver well, then share price is gonna be up. So that's our main priority.

And as I mentioned before, last three years, we managed to drive $2,000,000,000 in profit improvements and this despite a low growth coming out of COVID. So we feel pretty good about the next three years. It definitely feels much easier to drive the profit now than what has done in the last three years. Yeah, and then hopefully that will be reflected in the share price and the value of the business, underlying value of the business. So that's our focus.

Yeah, we love Talabat. I I I I wanna have as much as I can on Talbot. And we we are we are happy with the we we we also understood that there's a value for us to take some local investors on board and all of that. But I want to have every single share I can hold of that company. So no intention there.

Andrew Ross, Analyst, Barclays: Cool. Thanks.

Niklas Usberg, CEO, Delivery Hero: And look, as Joao said, look, we are focusing on driving value for shareholder, online value. That doesn't mean that we will not engage on transactions. And we surely will if you think that it enhances shareholder value and is accretive for shareholders, and for the long term shareholders. But it's not our business to try to drive share price up short term by doing one or another thing. That's not our focus.

But our focus is to really drive things that generates value for shareholders. If that also drives share price, then that's great. But that's the focus.

Moritz, Chorus Call Operator: And we have one more follow-up question from Markus Stebe from JPMorgan. Please go ahead.

Marco Stiebel, Analyst, JPMorgan: Yes, perfect. Thanks for the answer on portfolio. I have two financial questions for Marianne. The first one is on the free cash flow. Clearly, you sort of like made changes to the working capital management.

What are actually your tools to kind of like smoothen out, smoothening the working capital, I. E, the restaurant payments can be assumed that it will be sort of like always done before the quarter ends? Or is there now a risk that we will have different free cash flow numbers in different quarters only because of the date of restaurant payments? That will be very interesting how you manage this. And then secondly, on the bond repurchases, What is the drive of buying the bonds over repaying the senior notes?

Is it just math? Is it just really better when you take into account potential extra fees in it, the bond is obviously not trading at par. Is it just this or are there other considerations why you prioritize the bonds over the senior notes? Just if you can just give me at least a high level answer on this, that would be great. Thank you.

Marian Propp, CFO, Delivery Hero: Yeah. Sure. I'll start with the second one, actually. I think in terms of prioritizing the bonds versus the term loan, it's, you know, it it aligns with the long standing practice we've had of addressing the nearer term maturities first. And we felt this was a good opportunity to to address maturities that come up in in '25, '20 '6 and '27, you know, also to buy back those bonds at an attractive price rather than repaying them at client maturity.

So that that was a primary, consideration with maybe another consideration that for the TAM loan, we can only, at the moment, repay it at a premium to pass as a 1% prepayment penalty. So I think the the mix of that, but mostly the fact that we we have historically, addressed near term maturities first, things that's still the right approach and therefore, made that kind of the instrument of choice at this stage.

Marco Stiebel, Analyst, JPMorgan: Just so that I understand prioritization of maturities, but obviously, we have very different interest rates. But still, all in all, the priority is just the maturity.

Marian Propp, CFO, Delivery Hero: Yes. All in all, the priority is the maturity as a first step. And I think we think it does result for us in a much much better and much more optimized balance sheet and obviously, it's something we're gonna continue to have a look at regularly, because we're, you know, keenly aware that that's something that we have to, you know, we we have to improve and get right.

Unidentified: Okay.

Marian Propp, CFO, Delivery Hero: With this, you know, first step, we certainly have improved and gotten right.

Niklas Usberg, CEO, Delivery Hero: As you mentioned, yes, the the term loan has a higher interest rate than the bonds, but we are also buying the bonds at a discount.

Gillette Tonnier, Analyst, Jefferies: So Yeah. Understood.

Niklas Usberg, CEO, Delivery Hero: That means that's implied interest rate in there that that we're gaining. And and as Marianne also said, there is also a prepayment fee right now. But but there is I don't know. We we don't exclude the possibility that we're also gonna do single on the term loan. But but, yes, Marianne said now we focus on this first.

Marian Propp, CFO, Delivery Hero: Yeah. And then regarding your your second question on on working capital, so, I would say there's there's two elements to this. Right? I think one is, you know, more more generally, having better and more efficient working capital management by also having more more focus on it, and that's something we've certainly introduced over the last last year. And then there's obviously that very specific element, of it relating to to PSP and and restaurant debt.

Right? And I think that's something where, you know, indeed, and I think you also see it across the industry and with our competitors, right, that, you know, there is certainly a timing effect there potentially, due to calendar days at year end, right, or at quarter end. And and that's probably not something we would then very actively manage, but we could definitely explain, right? But, overall, I think, certainly, there will be also with a new definition of working capital, of free cash flow, much more focus on working capital and of explaining those movements.

Marco Stiebel, Analyst, JPMorgan: Okay. Thank you.

Niklas Usberg, CEO, Delivery Hero: I think we are up on time.

Moritz, Chorus Call Operator: We have one more question coming from Jurgen Coop from Kepler Cheuvreux. Please go ahead.

Unidentified: Thanks very much. And on Slide 12, where you're showing the gross profit margin improvements and trends by the individual regions, and we can see obviously that MENA and America is already at your target level. Which of the other two regions, Asia and Europe, you think will be the next to get back to this 9% or so level? And specifically on Europe, maybe what's the share of AdTech that you have in Europe, just a little bit of an indication? Thank you.

Niklas Usberg, CEO, Delivery Hero: Sure. I can cover and you can pitch in and Marianne. So I think if you look at Asia that's of course Korea and APAC. APAC is already fairly high on that graph but Korea is pulling down the data. As you know we do have lower take rate there at the point in time, because we have a marketplace business with a bit low, but as we move to own delivery, and as we improve efficiency of that, and as well as driving ad tech, ad tech is still very low there, that that will that will move things up as well.

So I think we we will I don't know. That one should come there. It will take will take a few years, maybe a couple of years, a few years. And maybe we will get into 8% will be probably fast, get into the other markets and other markets are probably also increased from that point, will maybe take a little bit longer. Europe, yeah, this it's, yeah, that's I don't want to say a time line here or give any additional guidance.

Which one will be first there. It depends a little bit how we prioritize and some markets are already there, other markets are not there. Europe is also a segment where a lot of early stage markets. So it also some markets that have lower take rates because we're used very early. As I also mentioned, global is also very early when it comes to ad tech.

So we are replacing their ad tech engine with delivery ad tech engine. That's a substantial increase amount of ad tech in global. So that will also drive the graph up. But I can't really say which one will get first to that kind of MENA, LATAM level. It's a little bit how we prioritize.

I can't say it. APAC is definitely their version.

Unidentified: Okay. The race is on, that's for sure. Thank you very much.

Moritz, Chorus Call Operator: Thank you very much, Juergen. Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to Niklas Ousberg for any closing remarks.

Niklas Usberg, CEO, Delivery Hero: Just thank you everyone for your support and for listening in. And in particular, big thanks for all heroes who know how much you're working. And yeah, keep it up. Thank you everyone.

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