Delivery Hero Se Unsp/Adr

Welcome to the Delivery Hero Q4 2024 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 star and one on your telephone. For operator assistance, please press star and zero. The conference must not be recorded for publication or broadcast. At this time, it's a pleasure to hand over to Christoph Bust, Head of Investor Relations. Please go ahead.

Hello and welcome everyone. Thank you very much for joining our Q4 2024 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 Oerstberg, CEO, and Marianne Popp, CFO of DeliverHero, 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.

Thanks, Christoph. 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 quarter's 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 backing GMV growth in eight out of 12 countries in Q4 while having a parallel substantially improved profitability. Total 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 million euro and came in at around 750 million euro. thereby also exceeding our full year guidance, which was the lower end of 725 and 775 million euros. In line with the profitability improvements, free cash flow also improved considerably to around 100 million euro and came in at the upper end of our already increased guidance of 50 to 100 million euro. Lastly, the recent Talabat IPO proceeds significantly reduced our net debt to 1.9 billion euro and the leverage ratio down to 2.5 times. Now on to the next slide for an actual 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 end of 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 then ultimately also drove a 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 a double-digit revenue growth rate. Now, let me hand over to Marianne for more details. Marianne.

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, the 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 2024. 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, global 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 break-even 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. Halabat 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 onto 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 Baemin'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. I'm continuing with the America 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 vertical segment grew GMV and revenue by 32% and 27%, driven by more daily orders per store and larger basket sizes, despite having reduced the DMART's 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 DMART's business have 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 the segment and adjusted EBITDA at a break-even 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 Americas 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 DMATS business improved its gross profit margins 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 billion euro and segment revenue by 22% to almost 13 billion euro. On an adjusted EBITDA level, we reached improvements in all segments. We posted a free cash flow of around 100 million Euro, implying an uplift of around 466 million Euro, 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're only 0.8 million euros short from reaching the break-even target for integrated verticals. Going forward, we will therefore discontinue this illustration. As you can see on the next slide, we've been growing EBITDA by almost 2 billion euro 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 dive profitability and cash generation. In 2025, we will continue to grow EBITDA while at the same time making some extra gross investments into Korea and incurring around 100 million euro cost associated with a 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 5% to 8% of DMV by 2030. 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 €2 billion, which resulted in a year-end cash position of €3.8 billion, up from 1.7 billion euro at the end of 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 3.8 billion euro, and in addition, we upsized the revolving credit facility to 600 million euro to ensure ongoing flexibility if needed. On the other hand, we have 3.8 billion euro convertible bonds outstanding at a weighted average coupon of 1.8%, as well as a 1.8 billion euro term loan due 2029. As we announced this morning, we aim to use approximately 1 billion euro for convertible bond repurchases in order to further optimize our balance sheet. Calabat IPO resulted in a cash inflow of 1.8 billion euro, boosting our cash position and ultimately reducing the net debt position by around 55% to 1.9 billion euro. 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.

Thanks, Marianne. So a quick update on our Saudi business as we receive 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 selected profit drivers. We've also paid close attention to customer behaviors as one of our comparators spent huge amounts on discounts and vouchers. What we saw was that 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 META 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 1.2 billion 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 1.5 billion euro. Two 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 billion euros for 2025. However, due to the changing 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.

Thank you, Nicholas. 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 million euros. 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 million and 1.025 billion euro. This step up already includes the additional investments into our career business as well as the 100 million euro EBITDA headwind resulting from this switch to the employment-based model in Spain. Pre-cash flow is expected to be more than 200 million euro for 2025. This guidance excludes extraordinary cash in and out flows such as M&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 million euro. of which over €100 million 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 will be compensated by an adjusted EBITDA improvement of around €250 million which after taxes paid, capex and leases will result in a small free cash flow improvement year over year. Midterm, 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?

Thank you very much, Marianne. Before we start with the Q&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.

Ladies and gentlemen, we will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their telephone. You will hear a tone to confirm that you have entered the queue. If you wish to remove yourself from the question queue, you may press star followed by two. Questionnaires 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. Anyone who has a question may press star and one at this time. One moment for the first question. And the first question comes from Andrew Ross from Barclays. Please go ahead.

Great. Good afternoon, everyone. Thanks for taking my question. I wanted to ask about career 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, but would it be good to get more color? I mean, 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 career and what you're seeing on the ground. Thanks.

Sure. Hey there, Andrew. 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 BMI Club, we expect this to have a positive mid to long-term improvement into both customer experience and into our growth. And this is also what happened then in starting, let's say, maybe end November, beginning of December, and then start taking more effect towards end December as we did a few other changes in parallel. um yeah on the product roadmap there are so many exciting good things in there um a few things we already spoke about and we have done some work on this integrated list but it's 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 uh so so that is of course one big improvement also improvements in how we we show on the logistic side and the time estimate side on the whole logistic tech stack, which is also then leveraging what we're building in Berlin. So a global tech stack. So that should improve logistic experience as well as the experience for both riders and consumers. Yeah, there are literally, I don't know, 100 things I could speak about in terms of product improvement that we are doing. Some of them have happened. Most of them are happening in Q1, towards the end of Q1. Some of them are happening in Q2, and some even start happening in Q3 and Q4. 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 how many users and so on, but this is the disclosure that we give. This is going to go higher. We have said before, we kind of want to target towards at least 50. So you would expect that we probably drive it towards 50 or so, possibly higher. 3P to 1P, that is happening quite fast. And I would expect an acceleration in this towards the beginning of Q4, end of Q3, beginning of Q4. Should be a further rapid expansion of this. But already today, 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%.

Thank you. The next question comes from Markus Diebel from JP Morgan. Please go ahead.

Hi, everyone. You guys, unfortunately, answered 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 25?

Yes. So we will turn on positive growth in 29. So we stand by that. I don't think we are dependent on macro. I think anyone who's dependent on macro, I think it's... 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 N23, beginning 24. I think we started to execute a little bit better mid 24, but a lot of heavy lifting. And I think 25 should be, I think a, decent year but it's all driven by general execution in particular product execution and a lot is happening and is moving fast the team is working incredibly hard it's it's very very hard it's all nighters all the time and it's gonna show effect

Perfect. But as of today, you think with these tools, orders will grow in 25?

We will go from a negative growth to a positive growth. That's what I'm saying.

Yeah, fantastic. Very clear. Thank you.

And the next question comes from Luke Holbrook from Mong Stanley. Please go ahead.

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 axes 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.

I didn't fully connect on the investing a little bit more, but sorry, it was something there.

Your data suggests that their axes have been flat since the start of November, but you're 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.

Okay. Maybe the first starting off a little bit on the premise of the question. So Look, I'm incredibly competitive, and I think no other company has been forced to compete as much as Deliveroo has. We have also ended up on top in more than 90% of our business, despite comparators having spent far exceeding around 10 billion, probably a multiple of that in our markets. So I think we're freaking good at competing. 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... If... If you 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 the last three years, we have been in intense competition across so many markets. And despite this, we increased profits with almost 2 billion euros. And this is despite then coming from the COVID highs. um so so therefore despite not having the growth that you would have expected from those levels we still managed to drive 2 billion 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 comparator do it matter way more what what we do and 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 come to your question on Saudi specifically, and I'll be 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, this graph shows that we are more or less flat, even slightly declining, while reality is not. And the reality is that we grew faster So that, again, kind of invalidates those external data points that are rarely correct. And while delivering record profitability is that we did allocate both a lot of tech and pride resources as well as a lot of focus to make sure that we have, that we cover any weaknesses in our product 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 loan delivery. There have been examples where we have had no multivertical offering and comparator did and that also impacted us. But 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 generally not good customers as long as you deliver. So that's what we focused on. And this then also grew both profitability 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 Kita probably reached something like 150,000 daily orders, our estimate. 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, negative value customers in the 4% to 5%. And as I said, that's nothing that we'll be focusing on retaining. We actually, yeah, we, yeah. There is no value in maintaining those customers. As to the increased investment, well, we still see that Sprout is a big market and we want to capture most of that market while someone else is coming in and fight for the new customers. And therefore, we kind of plan on maybe we need to spend a little bit more in marketing and a few other things to keep acquisition rates up. So far, we haven't had to spend anything there. But maybe we will do. If we see opportunity to acquire a user cheaper, then we will do. Most important is that we're delivering a good experience. And then we make this potentially or potentially not this optimistic investment. 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, fighting for a number two position in the market. It doesn't really matter what they do. What matters is what we do.

Thank you. Very helpful.

Thanks, Luke. And the next question comes from from Jefferies. Please go ahead.

Thank you. Best pronunciation of my name I've heard in a while. It was one question, please, inevitably back on career. And Nicholas, it'd 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 byman role here.

Thanks. So you mentioned Trendyol here, and I didn't capture the connection to Korea.

So just picking up on the new CEO at Wuwa. Yeah, yeah. What was it about Austin's time in Turkey that made you think he was, you know, the best fit for Baiman here?

Thank you. I forgot that Austin actually had a time at the building Trendyol ago. Yeah, of course. 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 Yeah, we obviously want to have the best people in our business and And Austin was a very logical choice for us. And I'm grateful that he wanted to join us. And since he joined, it's been fantastic. It's super exciting working with him. He's moving in light speed, exactly like we want in Delivery Hero. He has that drive and passion that we have in Delivery Hero. Whatever, yeah. 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 work with Austin.

And 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 Byman's offering and what Coupang is offering?

um within six months so the story of the past two three years has been they've been able to differentiate themselves is there going to be white space still in six months time there's still some white space as i said they they 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 um 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 clear advantage, but we also have to cover probably the biggest disadvantage, which is known delivery. There, going forward, I think, I think that the unique goods that we have are likely going to 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 pretty excited. I don't think there's anything where we will lack. Potentially, we will not have 100% on delivery by that time, but... the difference there will be smaller at least.

Thank you very much.

Thank you. And the next question comes from Annick Maas from Bernstein. Please go ahead.

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.

Yeah, I think we're doing pretty well. Of course, there's always a little bit of a year over year effect. So as Kita went in, we did take an initial hit, I think for two reasons. Firstly, when someone comes and offers a 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 comparator, at least as long as they have offers which are better than what the comparator 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 basket. I think here, unfortunately, we also lost a little bit extra because they came in and captured a piece that we didn't have. And that's why we moved in light speed when we heard that they were coming to Saudi to cover those weaknesses. And that's also what you see in our growth. in Hong Kong, and that's what's being covered now. Yeah, now we're seeing recovery, 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'll be a good market long-term for us. Got it. Thank you.

And the next question comes from Christopher Yonen from HSBC. Please go ahead.

Yes, perfect. Thanks for taking my question. I wanted to inquire about your cash position and how, you know, what we should read into that. So all of the 1.8 proceeds from Talabad, you are taking a billion tables, so to speak, but at the same time, the RCF is up by 600 million. So that begs the question, around signaling. What does that tell us about your ambitions on M&A? Would you say that you are rather on the buying or still on the selling side of M&A? Any sort of update on that, please? Thank you.

And anything still to be answered on the cash flow side or was it more on the M&A side?

I mean, more on the M&A side. I'm just curious why you... Then I'll cover.

Otherwise, I'll let Marianne then cover. But... Look, yes, we have a good cash position. We have a good balance sheet is low leverage, but I think we are, we, we, we also like to keep it that way. So, and right now we have so much good momentum in our own business and we have super good focus and clarity and, and, We are very optimistic when we look at the next three years, seeing how much we improved profitability of the last three years despite having all the challenges that we had. That makes us very excited about the next three years. So I think we just want to keep that momentum and not be distracted by M&A and so on. Yeah, I think our focus would rather be organically growing our business at this point in time.

That's clear. Thank you.

And the next question comes from Monique Pollard from Citi. Please go ahead.

Hi. Afternoon. Thank you for taking my 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 overtime, et cetera, for couriers. I'm just hoping you could provide us any color you could give on that would be helpful.

Thank you. I actually haven't read that article and have not heard anything internally. Marianne, have you heard about this?

No, I haven't.

Sorry, we are not able to comment on that. I guess our Romania team is working hard to make sure that this is getting solved, but nothing that we have heard of. I'll read the article after this.

Perfect, thank you.

Thanks.

Then the next question comes from Silvia Cuneo from Deutsche Bank. Please go ahead.

Thanks. Good afternoon, everyone. 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 hand, is it more driven by revenues coming from consumers, like the delivery fees, service fees, or subscriptions? Or perhaps there is still a mixed effect from increasing delivery share at higher take rates. Thanks. This would be helpful also for thinking about the drivers of faster than GMB revenue growth in your 2025 guidance.

Marianne, do you want to comment?

meant that we are improving subscriptions or increasing subscription rates in a number of the markets, right? There's something around deliveries. I mean, I think it's really a mixed effect that you see here.

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.

Marianne, do you cover this or should I?

Yeah, I'll do. I mean, we've basically, as we have announced, right, started moving to the employment-based model in Spain. And that's really ongoing, right? So the details of the model are currently being finalized and Glovo has started to pay social security contributions for the riders and therefore satisfies the requests of the authorities. And so that's really, you know, work in progress as we... as we speak, right, and will be a transition over the next month. With a focus really being on making it 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 100 million that we have already announced for the new model.

Okay, thank you.

And we do have a follow-up question from Andrew Ross from Barclays. Please go ahead.

Great. Thanks for squeezing me in. I thought I'd jump back in the queue if there 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 Talabat is not much, as I'm sure you're keenly aware. Can you just give us like a bigger picture view of 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 I would really like to get your take on things like, you know, more asset sales, closure of markets, thinking around the Taliban stake when the lockup expires. Just like, what can you do to help that situation? Thanks.

Thanks, Andrew. So, well, we are not the ones setting the share price, but But we do try to focus on delivering both profit and growth. And 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 want to see this long term and keep delivering on that strategy. And if we deliver well, then share price is going to be up. So that's our main priority. And as I mentioned before, last three years, we managed to drive 2 billion 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 a profit now than what it 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, the underlying value of the business. So that's our focus. Yeah, we love Talabat. I want to have as much as I can of Talabat and we are happy with that. 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. Cool, thanks. And look, as you said, 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 we think that it enhances shareholder value and is accretive for shareholders, for the long term shareholders. But it's not our business to try to drive share price up short term by 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.

Very good.

Thank you. And we have one more follow-up question from Marco Stiebel from JP Mongs. Please go ahead.

Yeah, perfect. Thanks for the answer on portfolio. I have two financial questions for Marianne. The first one is on the pre-cash flow. Clearly, you sort of like the 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 we assume 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 would 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 bonds obviously not trading at par. Is it just this or are there other considerations why you prioritize the bonds over the senior notes? If you can just give me at least a high-level answer on this, that would be great. Thank you.

Yeah, sure. I'll start with the second one, actually. I think in terms of prioritizing the bonds versus a term loan, 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 address maturities that come up in in 25 26 and 27 um you know also to buy back those bonds at an attractive price rather than repaying them at part maturity so that that was a primary um consideration was maybe another consideration that for the term loan um we can only at the moment repay it at a premium to pass as a 1% prepayment penalty. So I think the mix of that, but mostly the fact that we have historically addressed near-term maturities first, I think that's still the right approach and therefore made that kind of the instrument of choice at this stage.

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.

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 better and much more optimized balance sheet. And obviously, it's something we're going to continue to have a look at regularly because we're keenly aware that that's something that we have to improve and get right. With this first step, we certainly have improved and gotten right.

As you mentioned, yes, the term loan has a higher interest rate than the bonds, but we are also buying the bonds at a discount. So that means that's an implied interest rate in there that we're gaining. And as Marianne also said, there is also a prepayment fee, right?

this right i think one is you know more more generally um 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 um 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... ...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.

Okay, thank you.

I think we're up on time.

We have one more question coming from Jürgen Kolb from Kepler Schifrö. Please go ahead.

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 in 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 ad tech have in Europe, just a little bit of an indication. Thank you.

Sure, I can cover and you can pitch in then, 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 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 will move things up as well. So I think we will, that one should come there. It 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 the other markets will probably also increase from that point. It will maybe take a little bit longer. Europe, yeah, that's, I don't want to say a timeline here or give any additional guidance on 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 with 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, Glovo 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 there very soon.

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

Thank you very much, Jürgen. Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to Niklas Oesberg for any closing remarks.

Just thank you, everyone, for your support and for listening in. And a particular big thanks for all heroes. I know how much you're working. And yeah, keep it up. Thank you, everyone.