Delivery Hero Se Unsp/Adr

Hello and welcome everyone. Thank you very much for joining our Q1 2025 earnings call. Please note that this call is being webcast and a replay will be accessible later today on our website. Joining me on this call today are Niklas Oerstberg, our CEO, and Marianne Popp, our CFO at Delivery Hero. Together, they will present the key highlights of our Q1 2025 results at the full year 2024 performance. Following the presentation, we'll be delighted to address any questions you might have. Now over to you, Niklas.

Thanks, Christoph. And hey, everyone. Thank you for tuning in. We have just finished one of our best quarters in the last three years. Outside of Korea, we achieved 22% GMV growth in constant currency on a like-for-like basis. This marks the fastest growth we have seen since the early days of COVID, and it's faster than all global peers. Over the last three years, we've focused on driving growth while enhancing profitability through smart, long-term efficiency initiatives. We had to make many tough calls during the last years, ranging from closing down markets, shutting down DMARs, merging platforms, and reducing staff. However, our largest and most challenging efforts have been at automating every part of our business. While this transformation is still ongoing, I'm pleased to see both the GMV and revenue maintaining their growth trajectories, while costs across the business remain flat or even declining. These efforts have resulted in an annualized EBITDA and cash flow improvements of nearly 2 billion euro compared to three years ago. And this is pro forma including global. That being said, the journey has not been without its challenges. Over the last two years, we have faced several regulatory setbacks. I understand and I share the frustration surrounding these issues. It is often difficult to communicate clearly about various risk scenarios, binary outcomes, while simultaneously engaging with key stakeholders to find the best resolutions. I want to assure you that we are taking all necessary steps to proactively identify, manage, and resolve risks. We are confident that all known material risks are well documented and accounted for in our annual report. Additionally, we encountered performance challenges in our largest market Korea during 2023 and early 24. While or during 24, while we have not yet fully recovered, we are seeing promising trends in areas such as acquisition growth, custom satisfaction, subscription growth and improvements in our own delivery operations. These indicators gives us confidence that we will return to growth in Korea during 2025. What is particularly encouraging is that despite the decline of our largest market, the challenges to our rider model in Spain, intense competition and a number of other challenges, we have delivered one of the strongest quarters in our history with robust top and bottom line growth. This demonstrates the strength of our business model and highlights the significant untapped TAM potential ahead of us. It gives us confidence that we can continue to deliver consistent improvements to both top and bottom lines quarter after quarter for many years to come, regardless of market conditions, comparative pressures or operational adjustments like the rider model change. We remain optimistic that our sustained execution on both top and bottom line growth will in time also be reflected in our share price. So let's now move on to the financial highlights. Here we achieved GNV growth of 8% in constant currency and 9% on a like for like basis. Taking a historic perspective, over the last 11 quarters, GMV growth in constant currency, excluding hyperinflation accounting, has consistently ranged between 6.7% to 9.3%. Adjusting for one fewer day in February and the earlier Ramadan, we would have exceeded 10% growth in Q1, making this the strongest quarter in 11 quarters. Total revenue also increased a lot by 22%. We also deliver a solid quarter in terms of EBITDA and remain on track to meet our guidance of 975 million to 1.025 million. Our growth continues to be robust in Saudi Arabia and Hong Kong, and we have successfully returned the APAC region to growth. As we have already communicated in the past, cash generation and a strong balance sheet are of central importance to us alongside growth, leadership and investments in product and technology. Therefore, as previously announced, we repurchase convertible bonds totaling 896 million euros in the first quarter of this year. In addition to the anticipated organic cash flow generation we are targeting for this year, we also received an additional capital inflow of US$242 million in April. This was related to a negotiated termination fee as part of the Taiwan transaction. Moving from financial update to a more operational one. So we have made some great progress to our global tech stack. This slide shows only some of the many improvements over the last six months. Picking a few highlights from the slide. First one, we have seen a drastic improvement in efficiency as we moved the full global tech platform to our global tech stack. Some of the largest improvements have been in search algos, vendor portal, ad revenue, and logistic efficiency. We see the improvements as much in growth and customer experience as we do in cost. As you also know, VUVA is still 90% an independent platform. They're the only one who's not been rolled out on the global tech stack. But we have at least started to roll out our global logistic stack with some great early indications. This will still be a long process, but we believe we can significantly increase growth while generating cost and revenue improvements in the hundreds of millions per year once completed. If we move then to acquisitions on the slide here, we have made huge improvements in our global personalization and incentive stack, helping to drive an incremental 16% acquisitions, resulting in the highest year-on-year growth in acquisitions since early 2021, when COVID was at its peak. This is the best lead indicator of future growth. Also here on the slide, we have a few LLM topics around customer service, content generation, et cetera. But let's go to the vendor side. And here we can see on the vendor choice, we have been improving the algo for optimizing or optimization of our customer choice without increasing delivery times or fail rates. This has unlocked 400 million euro in incremental GMV. And this is obviously a huge improvement. Moving maybe to the last one here, we picked the picker app topic. Here we see a 10 million improvement, and it may look small with 10 million in total savings compared to other initiatives, but improvements in our global picker app is not only a reduction in cost, but also an improvement in customer experience. So this was some highlights. There are plenty of more, but keeping it short here. And today, the majority of these services are built out of Berlin, but going forward, we will increasingly leverage our regional tech hubs for improving our global tech stack. We expect incremental year savings will stay in the triple-digit million euro amounts per year for many years to come. These savings will partially go to the bottom line and partially be passed on to our customers to improve the flywheel. Now, let me hand over to Marianne, who will take us through the financials.

Thank you, Niklas, and a warm welcome also from my side. As previously mentioned, the year has started off strong with growth of 8% in constant currency, excluding for the effects of hyperinflation. Adjusting the numbers for the deconsolidation effect of operations closed or sold in 2024, GMV growth reaches 9% on a like-for-like basis. Further adjustments due to this year's calendar effect and the earlier Ramadan would bring growth to over 10%. As Nicholas mentioned, this is the highest growth since early 2022. Total segment revenue growth outpaced the GMV development, fueled by the continual drawdown of own delivery, the expansion of our ad tech, increased revenue contributions from our DMART business, and strengthened monetization initiatives. In addition, we have made significant progress on profitability, highlighted by further increase in the adjusted EBITDA margin in Q1 2025 compared to the same quarter of the previous year. And this despite higher operating costs in Spain and rider provisions for Italy. Hence, the business is on track to meet the full year 2025 guidance. Now, let's take a quick look at the revenue development on the next slide. Thanks to the drivers mentioned earlier, we recorded revenue growth of 25 to 45% outside of Asia. And despite the high comparable numbers in Korea, even the Asia segment recorded almost double-digit revenue growth. Let's now dive into the Europe segment. A strong order growth in our leading category positions led to GMV growth of 12% year over year in constant currency during the first quarter. This growth was achieved despite significant portfolio rationalization during 2024, with a number of country disposals and shutdowns in Denmark, Slovakia, Slovenia and Ghana. Looking on a like-for-like basis, the Europe segment grew 19% year-over-year, another quarter where we significantly outpaced appears. Europe delivered solid performance across all brands, with Glovo standing out due to its sustained strong top-line growth. Revenue growth was even more impressive, rising by 25% year over year and 27% on a like-for-like basis. This accelerated revenue growth was partly driven by a continued focus on own delivery, with the OD share increasing by an additional 10 percentage points year over year to reach 80% in Q1 2025. The further progress we made in ad tech in Europe resulted in non-commissioned revenue already reaching more than 4% of GMV in the top performing countries. Let's now turn to our MENA segment. In the first quarter of 2025, we achieved strong GMV growth of 30% year over year, primarily driven by robust order development in an excellent category position across all countries. Saudi Arabia delivered outstanding performance again, achieving over 20% year-over-year order growth. The success was achieved despite the challenges of an earlier Ramadan this year and the implementation of previously announced transport authority guidelines for rider fleets. we sustained clear category leadership in the region through continued enhancements in customer experience, logistics quality, affordability, and a very successful subscription offering already contributing to more than 50% of orders. Not only have the top line and product offering improved significantly, but profitability has also shown an encouraging development coming in slightly above plan. Regarding Talabat, there isn't much to add at the moment. The business continues to perform exceptionally well with profitability on the rise and further details will be shared directly by the Talabat management when they release the quarterly results on May 12th. The overall strong top line development combined with the further increase in the EBITDA margin has resulted in a significant rise in earnings in the MENA segment. Now onto the Asia segment. The GMV development in Q1 2025 was impacted by the high comparable numbers we're facing in South Korea. However, the team has already implemented a lot of game changes to the business in the fields of customer experience, logistics quality, subscriptions and operations during the last months. Just to give you some examples, we fully implemented the new user interface, combining marketplace and own delivery in one place. This improved the user experience and accelerated the switch to own delivery, which led to a significant increase of the own delivery share in Q1, 2025. But we have not only increased our own delivery, we have also strengthened our logistics, which resulted in an improved operational performance. We have achieved this by almost doubling the size of our rider fleet since the beginning of last year, expanding the cooperation with third-party logistics providers while reducing our cost per order. We have successfully rolled out our subscription program, now contributing more than 40% of the total order volume, and already 87% of subscribers are paying customers. But we've also become more attractive in terms of affordability by increasing the share of vendor-funded deals. All this has already resulted in healthy growth of new customer acquisitions in Q1 and should lead to a stronger top line development in the coming quarters. We believe it is fair to say that the team has laid the foundation for growth during the last couple of quarters and we're seeing positive signs. Shifting our focus away from Korea to another part of our Asia business, the APAC region. We have seen a tremendous improvement in business performance since we merged the Foodpanda, Yamek, and Foodora teams. We now operate leaner, faster, and more efficiently. Speaking of efficiency and focus, as announced yesterday, we have decided to close our Thailand operations. This decision follows a comprehensive analysis of the current market structure and projected business trends. While the business has been operating at breakeven over the past few quarters, we see far more promising opportunities to concentrate our efforts. Although Thailand generates a substantial order of volume and contributes only a low single-digit percentage to Foodpanda's GMV. In Hong Kong, we've significantly strengthened the competitive edge in terms of selection, affordability, customer experience, and quick commerce, which has resulted in a stabilization of our category position throughout H2 2024. As a result, year over year GMV growth in Hong Kong has improved by more than 20 percentage points in the last two quarters. As announced several weeks ago, We successfully acquired selected assets from Deliveroo in Hong Kong following their decision to exit the market. The onboarding of vendors and customers has proceeded smoothly and we anticipate some additional momentum from this. Now continuing with the Americas segment. Americas delivered another exceptionally strong quarter with GMV growth of 45% year over year. This performance was fueled by the macroeconomic recovery in Argentina and robust growth across other Latin American countries. While we anticipate continued strong growth in the Americas over the long term, the exceptional Q1 growth is partially attributable to a softer comparison base in Q1 2024. In addition, we're working on further expanding the quick commerce business and rollout of our subscription programs throughout the region while ad tech revenues continue to accelerate with more untapped potential for future growth. Now onto integrated verticals. Top-line momentum in our integrated vertical segment continues to be incredibly strong with GMV and revenue growing by 31% and 26% respectively. This should be seen in context of significant store and market closures mid-2024. Local shops, which are also part of our quick commerce business and reported in the platform business, were growing even stronger by 45% year-over-year and surpassed 1 billion GMV for the first time in Q1 2025. We are still only scratching the very surface of this opportunity and the TAM potential is in The gross profit margin of the integrated vertical segment continues to strengthen on the back of higher store utilization, better supply attempts, and the expansion of the ad tech business. Profitability has again significantly improved year over year and we're on track to reach adjusted EBITDA breakeven in 2025 on a full year basis. As you know, building over 800 stores with tens of thousands of SKUs, highly automated fulfillment centers, warehouse tools, et cetera, is capital intensive and difficult. We're therefore excited about the prospect of bringing this business to profitability in the near future. We also believe it adds a very strong USP to our customers. Let's now have a closer look at the gross profit margin development on group level, which requires a bit more explanation this quarter. Looking at the red line, it is evident that the gross profit margin is on a steady upward trajectory, progressing towards our target range of 10% to 13%, with Median Americas already falling within that range. In Q4 2024, the gross profit margin increased significantly compared to previous quarters. This improvement was driven by higher margins in Asia, primarily due to the introduction of our subscription program and the subsequent phasing out of free delivery for non-subscribers. In Q1 2025, the gross profit margin experienced a decline. This was partly due to general seasonality and more notably the new vendor commission rate in Korea. As you may recall, we initially raised a commission rate from 6.8% to 9.8%. Following discussions with the Cooperation Council, the entire food delivery sector agreed in November to transition to a tiered commission model that aims to ease the financial burden on smaller restaurants. This came into effect during Q1 2025. Additionally, we significantly increased the own delivery share in Korea and pushed subscription adoption. Looking ahead to Q2 2025, we anticipate a slight recovery in the gross profit margin in Asia, despite a significant scale-up of own delivery. This improvement is expected to be driven by increased paces driver-based, newly implemented logistics tools, alongside additional optimizations in delivery costs. Europe has been affected by the legal provisions in Italy, which we announced two weeks ago and which had been booked in Q4, 2024. Furthermore, the transition to an employment-based model in Spain will weigh on the GP margins during the next couple of quarters. Nevertheless, margins in Europe are expected to start recovering during the second half of 2025, driven by efficiency gains from improvements in the own rider fleet. Let's now have a look at our annual results for the financial year 2024. As announced with Q4 results, GMV growth for 2024 amounted to 8% in constant currency and excluding the effects from hyperinflation accounting. Total segment revenue for 2024 exceeded expectations by achieving a 22% increase, surpassing our full-year guidance, which was set at the upper end of 18% to 21%. Our adjusted EBITDA showcased strong operational performance with an increase of approximately €440 million, leading to a full-year result of €693 million. This reflects the impact of the legal risk provisions for Glovo Italy announced last week. Free cash flow remained unaffected by these provisions. With an increase of €465 million, free cash flow for the full year turned positive for the first time in Delivery Heroes history, reaching nearly €100 million in 2024. The next slide provides an overview of the transition from adjusted EBITDA to net income. Starting on the left side of the slide with the adjusted EBITDA of 693 million euro. Management adjustments totaling 512 million euro include expenses for services related to corporate transactions and financing measures in the amount of 81 million euro. These obviously include expenses related to the Talabat IPO. Furthermore, there are expenses for certain legal matters totaling 392 million euro. These include rider-related provisions for Glovo Italy, which we announced two weeks ago, and the increase of provision for antitrust risks, which we already announced in July last year. Other expenses cover reorganization and other restructuring measures, like, for example, the announced reorganization of Yemeksepeti, Foodora, and Foodpanda under one new Pandora leadership. In addition, there are lease payments, which in alignment with IFRS 16, are below adjusted EBITDA, and then interest and taxes paid are self-explanatory. Then we have share-based compensation of €171 million, which is considerably lower than last year. There are some goodwill impairments related to certain countries in the APAC segment in the amount of 90 million euro and depreciation and amortization of 365 million euro. The rest sums up to a positive 197 million euro, which includes a derivative for the breakup fee related to the Taiwan deal. net fair value gains from public and private assets, and FX gains, which are partially offset by amortization of financial liabilities in connection with the convertible bonds. Let's review how this has evolved compared to last year on the next slide. As already mentioned, in 2024, the adjusted EBITDA has improved by €439 million compared to 2023. Management adjustments increased by €364 million. They now account for 1% of GMV. The three main items were antitrust, rider-related provisions and costs related to the Taliban IPO. Excluding these three extraordinary items, the management adjustments would have dropped further to only 0.2% of GMV. Share-based compensation has declined further by 31% year-over-year to 0.4% of GMV, and we expect this ratio to remain broadly stable in 2025. Without any meaningful impairments like in previous years, also other reconciliation items, as well as depreciation and amortization, have further declined as percentage of GMV. The financial result improved as last year was affected by fair value losses of public and private investments, which did not recur this year. Since we're generating higher taxable income in our profitable countries, taxes continue to increase in line with our expectations. Let us now have a look at our debt maturity profile on the next slide. Following the successful Talabat IPO and accounting for the tender offer in February this year, when we brought back convertible bonds maturing in 2025, 2026 and 2027 in the amount of 896 million euro, the group had cash and cash equivalents on a pro forma basis of 2.9 billion euro at the end of December. At the same time, the amount of convertible bonds outstanding declined from 3.8 billion euro to 2.9 billion euro at a weighted average coupon of 2.1%, with the next larger maturity due only in 2027. Additionally, we continue having a 1.8 billion euro term loan denominated in Korean won and US dollars outstanding and due in 2029. Earlier this month, we also upsized our revolving credit facility by another €190 million to now €790 million and extended the maturity from May 2027 to May 2028 to ensure further financial flexibility. With the Talabat IPO boosting our cash position by a comfortable 1.8 billion euro, we managed to reduce our net debt by around 55% to 1.9 billion euro by the end of December 2024. Consequently, the leverage ratio drops to 2.7 times net debt to adjusted EBITDA. Together with the aforementioned convertible bond buybacks in February and March, and the substantial cash flow generation over the coming years, we are expecting further net debt reduction going forward. And the next slide provide the clear understanding of why we are so confident in this regard. As you can see, we have grown adjusted EBITDA by nearly 2 billion euros over the past three years, despite the low growth observed following the COVID-19 highs. Looking ahead over the next three years, we anticipate stronger growth, which will facilitate driving profitability and cash generation. This positions us well to achieve our targets of a 5% to 8% adjusted EBITDA margin and 3% to 6% free cash flow as a percent of GMV by 2030. As already announced in February, we expect GMV growth of 8% to 10% on group level, as well as revenue growth of 17% to 19% year-over-year, both growth rates and constant currency accounting. For adjusted EBITDA, we maintain our expectations within the range of 975 million to 1.025 billion. This guidance accounts for the provisions stemming from the Glovo Italy announcement made two weeks ago. We are also able to mitigate current FX headwinds with a weaker dollar and Korean won, but we monitor the FX situation actively as it has a direct impact on our EBITDA and euro currency. Free 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. That's it from my side. Thank you for your questions. Christoph?