Deliveroo plc

Good morning and welcome to our 24 results presentation. I'm Will Hsu, founder and CEO of Deliveroo, and I'm joined by Cilla, our CFO. I wanted to start off by touching on the news from earlier this week. We made the decision to exit the Hong Kong market. I want to thank our former colleagues in Hong Kong for their commitment. This was a very hard decision, but one that is right for the business. Overall, 24 was a really positive year for Deliveroo. We posted year-on-year GTV growth of 6% and adjusted EBITDA of 130 million pounds, up 52% year-on-year. We also hit two very important milestones. We delivered a full year of statutory profit and positive free cash flow for the first time. From a financial perspective, we are a very different company than the one that went public four years ago. We're proud of that transition. At Deliveroo, we focus relentlessly on the CVP and our verticals, and that's driving signs of positive consumer engagement. We are reconfirming our growth and profitability targets that we set out at the CME, albeit on a slightly longer timeline for profitability. We're going to go into more detail in the presentation and why we're confident in achieving these targets. But first, Cilla is going to cover the 24 financials.

Thanks, Will, and good morning, everyone. Just the point of housekeeping, as you know, we're in the process of exiting Hong Kong. All the numbers in the following slides are as reported, i.e. including Hong Kong, but we've provided some disclosure on an ex-Hong Kong basis where helpful. You'll find some performer numbers in the release and in the appendix to this presentation to help you understand the past performance of our continuing operation. And so, on to financial performance. 2024 was a positive year. We hit some important financial milestones, delivering statutory net profit and positive free cash flow for the year, whilst making progress across a number of our growth and profitability levers. GTV grew 6% in constant currency, and it was particularly pleasing to see orders returning to growth in the year and to see both segments contributing to growth. Revenue growth of 3% and constant currency continued to lag GTV growth, with our planned investments into the CVP having an impact on take rate, as we previously called out. These investments were enabled by efficiencies in our delivery network, meaning we kept gross profit margins stable year-on-year at 10.3%. Adjusted EBITDA was £130 million at the top end of our guidance range, with EBITDA margin expanding 50 basis points to 1.7%. We delivered a free cash inflow of £86 million. That does include a sizable timing benefit in working capital, but if we normalise for that, it was still £25 million inflow. And we closed the year with net cash of £668 million, and I'll come on to talk about capital allocation later. Now let's look at our top line metrics in more detail. GTV grew 6% in constant currency, improving from 3% in the prior year. And that acceleration has been supported by good execution as we continue to strengthen our CBP with strong growth in grocery and encouraging early signs from our Enhance Plus loyalty program. While the gap between food inflation and wage inflation narrowed in 24 in our major markets, GTV per order continued to be the bigger driver of GTV growth, up 4%, reflecting ongoing but lower food inflation. Encouragingly, orders returned to growth of 2% in the year, and that's been driven by improving retention and frequency trends, which Will's going to come on to shortly. While we remain cognizant of the continuing uncertainty in the consumer environment in our European markets, Q4 was our strongest quarter for group order growth for over two years. In the UKI, we've continued to perform well, with GTV up 7% year-on-year. We finished the year strongly, up 9% in Q4. And within that, a particular highlight was order growth, improving through the year, from flat in Q1 to 1% in Q2, 2% in Q3, and 5% in Q4, as we continued executing well on our initiatives. Excluding Hong Kong, 2024 group GTV growth was 8% in constant currency and 9% for international, and the UAE and Italy continued to be strong contributors to growth, and France was broadly flat in 2024. Moving on to revenue and gross profit, the message here is consistent with the half-year. We're striking the right balance between enhancing our CVP and driving profitable growth. During the year, we make good progress on levers such as advertising and delivery efficiency, enabling us to make investments into the CVP, be that plus or price value or grocery, while still holding gross margin flat, as I've said. Our advertising business continues to scale, representing 1.4% of GTV in Q4, up from 1% in Q4 23. And we've made further advancements on delivery network efficiencies, enabling us to reduce cost of sales as a percentage of GTV by 90 basis points year on year. And I'll come on to talk more about both advertising and delivery efficiencies later. Offsetting the positive impact of advertising was our decision to invest into pricing through targeted promotions to reinforce price perception. We've also invested further in plus and have seen higher penetration of grocery in the overall mix. Whilst these are dilutive to take rate, they drive what we're ultimately solving for, which is growth in users, GTV, absolute revenue and gross profit. Looking now at marketing and overheads, in 24 we made good headway on operating leverage, with marketing and overheads improving by 50 basis points as a percentage of GTV. Marketing was up 1% year-on-year, reflecting our investment into retail, which was partially offset by continued improvements to the targeting of our campaigns and performance marketing optimization signals. Overheads were down 1% year-on-year, and within that, total people costs, including staff costs and contractors, were flat, with lower average headcount offset by wage inflation. Our non-people costs were down 4% as we reduced our office-related expenses and RIT costs. Looking now at our net cash bridge, I've already mentioned it, but I'm delighted that we've delivered positive free cash flow this year, in fact, £86 million. And remember, our definition is pre-interest income and post-exceptionals. This did include a sizeable working capital inflow, as I've mentioned. About £60 million of that was due to the timing of year-end within the week. Free cash flow, once normalised for working capital and excluding exceptionals, was £72 million. Looking at some of the component parts of cash flow then, spend on capital items was broadly in line with the prior year, with higher cap dev as we invested in key growth initiatives such as the enhancement of our plus programs and the scaling of retail offset by lower capex. Lease payments was 18 million in line with the prior year. Cash tax has increased as profitability has grown, particularly internationally. In addition, as we move to profitability, there are restrictions, as I've said before, about how much of the taxable profits can be offset with carried forward losses. So cash tax payments in the future will continue to increase as we grow profits. It can be difficult to correlate the timing of tax payments with the timing of profitability, but we do expect cash tax next year to be in the region of two to three times that this year. The £48 million outflow for exceptionals relates to the cash settlement of some of our legal and regulatory provisions. And cash interest income was £27 million, marginally lower than the prior year, reflecting the reduced average cash balance following our returns of capital to shareholders over the last two years. Finally, we bought back shares amounting to £120 million in 2024. Within this, we had the £30 million EBT buyback in the first half and about £90 million of the £150 million buyback we announced with interims in August. As of this week, we're about 95% complete on that £150 million buyback. Moving on to look at our capital position, our framework for capital allocation is unchanged. Investing for future growth remains our priority, so we'll continue to ensure we have sufficient capital for our operational and strategic needs. We also need to make sure we have appropriate headroom to deal with unforeseen events and any potential crystallization of liabilities, and anything above and beyond that we consider to be surplus capital. Since 23, we've announced the return of £450 million through a combination of the £250 million tender offer and a further £200 million of on-market buybacks. So, that's the framework and how we've applied it so far. To reflect our confidence in ongoing cash generation, we're today announcing a further return of £100 million by way of an on-market share buyback programme. Announcing this return will leave the group with a robust performer cash position of just over £500 million. Moving on now to 2025 guidance. For GTV, we anticipate high single-digit percentage growth in constant currency excluding Hong Kong. We remain confident in the growth levers we have in our control, and Will's going to take you through these in detail next. As you've seen, GTV growth in Q4 was 9% ex-Hong Kong. So you may ask, why are we only guiding to high single digits for 2025? The answer is that whilst Q1 trading to date has been good, we recognise that there may be some macro volatility and geopolitical uncertainty in Europe this year. Specifically in the UK, we're also waiting to see if our partners pass through increases in both the national living wage and national insurance to consumers. For adjusted EBITDA, again excluding Hong Kong, we expect to be in the range of £170 to £190 million. We see exciting opportunities to accelerate growth going forwards. And in 25, we're making some targeted investments to capture this growth. Again, Will's going to go into these in more detail later, but they include pushing harder in geographic areas where we believe we can develop a big CVP differential and unlocking new occasions to expand our existing categories. So that means our in-year margin progression will be slower than in future years. Finally, for your models, it's worth mentioning that our progress on profitability means we're now fully in scope for UK digital services tax in 2025. That's treated as an offset to revenue, and we expect it to be a drag of about 15 basis points to take rate and margin in 2025. And with that, I'll hand you over to Will to talk you through those growth plans.

Thanks, Zilla. Now let's move on to how we're continuing to grow the business profitably. I want to start reminding you of how we think about growth at Deliveroo. So mathematically, it's really simple. You've got new customers and you've got existing customers that you're retaining and you want to increase their engagement by increasing frequency and growing GTV per order. Why has it been hard? I think primarily the reason for that is things got way too expensive in Europe and the UK. And secondly, the industry suffers from too many defects. And consumer trust is ultimately undermined when things cost too much and deliveries go wrong. So we methodically focus on fixing these things. If you look at the middle column, these are our verticals. So in 2013, we started as a company that worked solely with independent restaurants. Today, we bring the entire high street to your door. And on the right, that's how we improve the experience for our consumers. This is our CVP. So we think about how do we add great selection? How do we drive good value? How do we engender loyalty? And how do we methodically aim for that flawless delivery experience? So we focus on what we can control. And as we said at the CME, the macro wasn't straightforward. The consumer recovery has been a bit slower than what we had hoped for back then. But in spite of that, we've continued to grow across all of our verticals. Growth in particular orders accelerated in 2024 as we focused on things that we can control. So these are our growth initiatives across our CVP and the verticals. So let's look at some of our initiatives and we'll start with price value. All right. So if we look at the slide, and this is the framework for the next few slides as well, we're going to talk a bit about our initiative on the left. In the middle, we're going to talk about the outcomes for consumers and merchants. And then on the right, we're going to talk about the focus in 25 and into the future. So price value has always been central to the CVP. And as I just said, things got really expensive in the UK and Europe, especially in the restaurant segment. So we've been working hard to fix that with merchants. One key initiative, this is our value program. It's active in the UK and France where we aim to reduce restaurant markups. We align our interests by offering merchants a better commercial deal and more visibility in exchange for fair prices and great operations. So we've had thousands of restaurant partners reducing markups. And being more specific, if you look in the middle here, sales-weighted markups in the UK reduced from around 10% to 8%. So you had 200 basis points decline in menu prices since the program's launch. That may not sound like a big number to you, but it's actually really important because of how it actually translates in the consumer behavior. Obviously, food delivery consumers are price elastic. And our own internal analysis shows that for every 100 basis points increase in menu prices on the platform, we tend to lose about 50 basis points of order volume. So You can see how bringing down prices by 200 basis points on the platform has a very positive impact on order volume. Now, that's an average number. We're actually very proud of the impact this has had for consumers. But, you know, if you look below the hood, there's an interesting distribution. We've got a quarter of GTV going through sites with zero markups and half of them going through sites between zero to 10. And our top brands are really embracing it because it's really great for partners too. And in fact, for restaurants that have zero markups and great service levels, they're in a program called Deliveroo's Choice, and they see a 15% uplift in GMV when they do that. We've also taken some direct actions too. As I said, lately, consumer behavior has looked a bit better. So we've invested in some targeted promotions, and we funded this through delivery efficiencies. Going forward, we don't expect investment to continue at this level in the long term as we improve our promotional efficiency. So we're going to get into that in a bit. But I guess at a high level, making sure that fair prices is prevalent. It's a multi-year endeavor. We still have a long way to go, but we think it's a win-win for everyone. And then, of course, one thing we're going to continue to do is to invest in another one of our direct levers, PLUS. So let's talk about PLUS now. 24 was a giant year for Plus. We had two really big innovations, both launched in May. So first, we relaunched our gold proposition in the UK and France. We added a 10% credit back features on orders with a minimum order value. We also launched an on-time promise. And second, we launched our top tier diamond. So let me first talk about gold. This is our flagship program. The program got a lot better, as I talked about, but what was the output of what happened? Well, paying gold subscribers in the UK and France increased by 30%. And these users have doubled the frequency of our pay-as-you-go users, and they're more profitable for us on a CLV basis. So having 30% more of these subscribers in less than a year after relaunch is terrific. On Diamond, I think on previous earnings calls, I've actually tried to sell the Diamond program, so I'm not going to actually do that today. But what it is, is it's just an amazing program that retains and boosts the engagement of our top, top customers. So these customers will get special restaurants available only to them. They'll always get their order faster. They get a dedicated customer service agent program, and they'll get their money back if something goes wrong. It's a really great program for users. What we've seen here is that these users have more than double the frequency of gold, and they've increased their frequency since joining Diamond, which is really impressive because a lot of these guys are ordering 15, 20 times a month as it is. And the program is really driving, I'd say, brand love. We've seen Diamond customers post an MPS score 24 points higher than the overall group average. So some really positive early signs there. So what are we going to do in 2025? We're going to refine our proposition even more. We're going to introduce some more sophisticated subscriber acquisition targeting. We're going to increase some partner-funded benefits. And we're going to be looking to expand what we built on through some new partnerships. Plus is, you know, you guys have heard me talk about it a lot. It's really critical to our success as a company. I'm really proud of what the team built in 24, but even more excited about what we're going to do into the future. Let's now go on to delivery experience. So I think the key to unlocking growth in this industry, as we said before, is really building that consumer trust. So we talked about price value. And the second piece of that is just the flawless delivery experience. And of course, overwhelming number of orders go smoothly, but this is an imperfect industry. Things can go wrong. And I think often people just say, well, Hey, it was out of our control. But as a company, we methodically focus on taking more under our control, making sure we drive a better experience for the user. Because, you know, at the end of the day, let's face it, your pizza's cold, your order got canceled, something like that, or just huge kind of trust busting experiences. And the way we think about it is, as a user, you start off with a trust pot. And good experiences will add to that pot. And then these really bad experiences can deplete it in one go, right? So how do we make sure that that trust pot's always filled up? 24, our focus was fixing defects that merchants and riders directly cause or at least contribute to. So these are things that are, you know, orders that have missing items or things that are canceled by merchants, right? But let me give you a sense of how important this is. So 50% of customers who have an order canceled, okay, so the restaurant says, I'm not going to do it. They don't actually place another order that day. So those are just like lost orders. And then, you know, when an order arrives and it's inaccurate, this obviously costs us money to make it right for the customer. But much more than that, you know, it just significantly depletes the trust pod. And then for those users who have orders canceled as well, they're much more likely never to order again, right? So you've got just a whole bunch of bad stuff happening there. I'm not going to go into all the details on the left. There's a lot of technical detail in there, but I wanted to give you a few examples. But the point is that we're methodically chipping away at defects. Obviously, these reduce costs for us, but they also build up the trust pot and retain users. All right, so what was the impact of what we did? Well, we reduced canceled or rejected orders by 12%. We reduced inaccurate orders by 5%. The benefits to the consumer are very obvious, as I talked about. Oh, and then one more thing, which is the thing we talked about at the CME a lot on the last earnings call, which is this incident of consumers not receiving their food at all. We continue to make progress on that, and every day is an all-time low on that, and really proud of the work the team's done. And if you look on the right, what are some of the things that we're going to be doing this year? So one of them is extending receipt scanning to the consumer handover process. This helps reduce mix-ups with stocked orders. We're launching auto-accept for large scale grocery partners. And this is a really cool one. I don't know if some of you have seen at restaurants, there's an NFC sticker with the Deliveroo logo. We now have riders check in through that when they get to a merchant. So a lot of good stuff happening. It's one of my favorite areas to talk about. And now let's talk about grocery. So our grocery business continued to do really well in 24. It's 16% of group GTV in the second half. Strong double-digit growth throughout the year. How did we do that? Well, that's primarily increased partners and products. We also drove a better consumer experience in the app. There's greater awareness of our offering. So on the left, you can see kind of what we've done. We've taken some sites up to 15,000 SKUs, which is big. Now, what's been the impact of all this stuff? Well, I think really excitingly, we saw grocery max increase 20% year on year. And I think there's this clear societal shift on how people are consuming groceries, right? On-demand delivery is a very mainstream product now. It's not a niche like it was four or five years ago. And it's not just young urban people. It's all types of people. So we see similar levels of of grocery GTV penetration for all of our consumer segments at this point. And I think when you think about the platform itself, there's a lot of benefits, right? So the vast, vast majority of grocery orders are incremental to our restaurant channel. So when you see that a customer starts buying groceries on Deliveroo, their frequency overall is up 15%. And what's really interesting is when you look at our top customers placing their first grocery orders, we actually see that restaurant order frequency also increase. I think they just take advantage more and more of the platform becomes more habitual. And then also really interestingly, when you see that people start using grocery, they love it and spend more each year. And that might sound kind of obvious, but when we look at our oldest grocery cohorts, we've seen that they have spent 15% more in 24 than they did in 23, right? Which I think is really encouraging. And despite all that, it's a huge opportunity because 70% of our users haven't yet placed a grocery order. So the next few years, we're going to be continuing to improve that selection and coverage. We're going to be pushing midsize baskets, as we talked about, and then we're going to do that to range expansion and better tech on the consumer and merchant side. We'll continue to deliver value for money. We're going to continue to improve service. Delivering groceries is a bit different than delivering restaurant food in many ways a bit easier. But packages are definitely bigger. And then we've got a whole new bunch of capabilities to drive further growth. We've got better scheduled orders. We've got Deliveroo Express. This is our new white label proposition for grocers and retailers, which we're excited about. So now we're going to talk about retail. So our grocery, you know, we've been doing this for about, you know, kind of five to six years. Retail is something we launched really at the CME. And so that was a little over a year ago. We're continuing to scale this. We're continuing to be excited about this. But 24 was really about awareness, right? So getting merchants on, sorry, it's about driving awareness and selection, right? So, you know, driving new merchants in DIY, flowers, health and beauty and pets, expanding to new markets. And on the selection side, you know, we've doubled the number of retail sites on the platform. So, you know, we've launched new partnerships with people like Wilco, B&Q, Perfume Shop, Holland & Barrett, Toys R Us, and Lush. And we've expanded the number of sites with partners like Screwfix and Boots. And the pipeline is really strong of retailers that we're talking to. And of course, I talked about awareness. The thing with retail is these things are, I would say, more seasonal in nature. So figuring out the muscle memory on how do you advertise on Valentine's Day and Black Friday to raise awareness of that proposition, that's something I think the team made a lot of effort and progress on in 24. So I think if you take a step back, I think within five years, we've profoundly shifted the landscape of grocery, right? And it's now, like I said, a mainstream product. I'm not a niche product. And I have every confidence that retail will be the same. And so we're going to continue to build this business. All right, so let's bring this all together. What's been the output of these initiatives, if we think about it from a cohort perspective? Well, first of all, we returned to order growth in 24. You saw GTV growth accelerating. But let's look at the cohorts. Let's look at retention and frequency for a second. And what you can see is that each annual cohort has continued to increase frequency in 24. You can see the inflection point in 23. And when you look at the year-on-year average frequency growth for the more mature cohort, so call it the 15 to 22, that's around 4% year-on-year growth. Now, that's definitely below the average of the 10% plus year-on-year per annum, which was, of course, also before COVID. But it is back to growth. It's improving on a year-on-year trend. So the output metrics on this look good. And if you look at retention, kind of similar story, we've got the quarterly numbers there. So every quarter that continues to improve. So mathematically, the user base is just far healthier than it was two years ago. We're not back to where we want to be, that's for sure. But, you know, we look at our initiatives and how this has resulted in just much healthier cohorts. I think that's encouraging. And obviously, these improvements don't just happen, right? They're the result of all these things we just talked about, as well as potentially some macro improvement as well. So We're going to continue to just relentlessly improve the CVP. We're going to be looking at different future growth opportunities as well. So on that note, before I finish here, I'm going to talk about one of our really cool initiatives for 25. And that's how we reignite restaurant growth. Okay, so let's look at the slide for a second. I think sometimes in all the talk about retail and grocery, we forget that the vast majority of our business is restaurants. And if you look at the left side of the slide, the restaurant delivery market in the U.K., has been in decline right and and 24 you know was i think a better year generally um we we actually need this category to grow faster to deliver on our growth ambitions right grocery is obviously big retail is going to be big but but this is you know predominantly a restaurant marketplace So why has growth stagnated? Talked about this a lot. You've got prices that were too high. I think that's the number one reason. So we talked about what we've done on price value, right? So you look at the middle part, what did we do in 24 to help really grow that restaurant segment? So we achieved a lot on the selection side. We signed and renewed many restaurant partners on an exclusive basis. So you have beloved brands like You know, Nando's, Wingstop, Joe and the Juice. At the same time, we increase selection by extending delivery AI delivery radii to customers. Right. So that shows the more selection in the app that generally improves conversion and order frequency as well. And then looking ahead, we're also excited about something a little bit different. So we're excited about pushing harder in geographic areas where we think we can develop a big CVP differential. And that's specifically in UK, France and Italy. In these areas, this is typically outside of major metropolitan areas. We think we have an advantage on service and selection and we have our loyalty program. So we're going to invest behind this. So I guess on a summary, if you look at the middle slide, we're going to continue to take share where it makes sense, as we've done. But then if we look at the bit to the left, we also think the restaurant market itself could be a lot bigger. So let me maybe go into a little more detail. So if you take the UK, there's about 50 billion in-home meal occasions a year. But only 2% of them are fulfilled by restaurant takeaway. And if you look at the distribution of demand, no surprise to anyone, they're super concentrated as a treat towards the end of the week or on the weekends. That's just how the industry is set up. So if you think about it this way, people are very happy to go home on a Friday evening after a long week at work. They treat themselves to a delivery takeaway. But why aren't families ordering dinner together on a Wednesday night? Why is that? Well, I think the answer is actually pretty straightforward. I think the answer is we don't have the right types of meals available on the platform at the right price. So in order to unlock, let's say, this type of opportunity, we need to change our proposition by working with our partners to adapt menus to get to the right selection. We need to make sure customers are aware of some of this. And so our partners are very engaged with this. They see it as broadening their business space, opening up incremental volume, improving kitchen utilization, improving labor utilization when times are also tough for them. So I think this can be good for the whole industry. Now, this is an investment that we have a lot of confidence in. We're going to continue to gain shares, as we've always done. But taking a step back, we think growing the market itself is even more exciting. All right, to conclude my section here, we see multiple opportunities ahead to accelerate growth. We remain confident in that mid-teens target in the medium term. As I've talked through today, we've actually made a lot of progress across our growth levers that we outlined at the CME. So we talked about loyalty, price value, service selection. Grocery business continues to grow really quickly, made a lot of improvements there. Retail's got real solid foundations. And then we talked a bit about some of the future growth opportunities ahead. So Further growing share, what does that mean? That really means going harder in geographic areas where we think there is or we can develop a large CBP differential. And then secondly, just growing the entire market a bit. I think I highlighted a specific kind of use case in the restaurant segment as an example. So with that, I'll hand back to Cilla. She's going to talk about profit levers. Thanks.