Deliveroo plc (ROO) Earnings Call Transcript & Summary

All right. Thanks, Saskia. So good morning, everyone. Welcome to our Q4 '24 Trading Update. I'm Will Shu, Founder, CEO of Deliveroo. I'm joined by Scilla Grimble, our CFO. It's going to be a short call today. I'm going to cover over a few of the key takeaways from the trading statement, and then Scilla and I will jump into Q&A. So to get started, we closed out a really good year with GTV growth of 6% in constant currency. This is in line with our guidance range of 5% to 9%. And we expect adjusted EBITDA to land toward the top end of our GBP 110 million to GBP 130 million range. Looking at Q4 specifically. Group GTV growth was 7% with order growth of 3%. We continue to execute on our strategy significantly strengthening our CVP. We see encouraging signs for -- from our enhanced Plus loyalty program. We continue to see strong growth in grocery, and both the UKI and International GTV growth accelerated sequentially. I think in the UKI, we're particularly pleased. We saw GTV growth increase to 9% year-on-year, and that's contrasting 7% in the third quarter. And I think what's really great is we've seen continued momentum in order growth. So fourth quarter was 5% up year-on-year. Q1 was flat, Q2 was plus 1%, Q3 was plus 2%. And so we're seeing positive momentum in that. And I really think that's just due to strong execution on our initiatives, and we've seen improvements -- continued improvements in both frequency and retention. And I think we're going to take questions on this, obviously, but there's still a -- quite an uncertain consumer environment in the U.K. And so for the team to execute the way they did, we're proud of that performance. International GTV growth increased to 5%. We've had orders flat, GTV per order up 5%, and the main growth drivers there were the UAE and Italy. We continue to perform very strongly. France improved slightly after the temporary disruption of the Olympics in Q3, but we are seeing some continued markedness -- market softness there in our discussions with other companies that operate in France. I think it's a pretty familiar theme. We've also mentioned Hong Kong in previous trading updates. It is a difficult competitive environment there, and that's been a drag on growth. So excluding Hong Kong, International GTV growth was 10% in constant currency, and orders grew 6% year-on-year. And then finally, group revenue grew 6% in constant currency. Take rate decreased 40 bps year-on-year as expected. This is due to our planned CVP investments. And I guess before we start the Q&A, I know everyone is interested in what we're going to talk about for '25, but I just want to highlight this is a trading update. We're going to provide guidance with our full year results on the 13th of March, so pretty soon. So please hold off on any '25 questions and longer-term questions until then. So with that, let's open up the line.

[Operator Instructions] And first up, we have Chris Johnen from HSBC.

First, I was curious if you'd be able to give us a bit of a breakdown in terms of the growth between the quick commerce or growth rate in retail business and core food growth, if that was possible, maybe starting with the U.K., but also maybe a bit of international color. And then second question. On your thinking about the CVP, sort of the take rate impact is the sort of level that we've seen in Q4, maybe a good indication of, I would say, stable waters for you guys. Or do you see more need to do maybe a little bit more?

Chris, I'll take the first question, and Scilla can take your second one. I think we're continued to be just really amazed at the take-up of the -- you guys call it quick commerce, we call it grocery and, obviously, retail as well. And it just seems like there's just secular shifts happening to faster delivery, smaller baskets versus what we saw sort of 5 years ago. So that continues to be really strong. The sort of food segment is still growing nicely as well. But as we've said, the grocery segment for us is definitely driving significant growth for the overall company. Scilla, do you want to take the second one?

Sure. So as we've said, it's a trading statement, so I'm not going to give you anything explicit on '25. But I guess, a reminder of a few points, Chris, on take rate. So we've, I think, been clear consistently for the last few years that we see it as if like it's an output rather than input for us. So this is all about how do we maximize the quantum profit at the business. And clearly, some of the strategic moves that we've made are dilutive to take rates. So we've just talked about grocery and some of the moves that we -- the further push we made into Plus this year and -- but it's clearly advantageous to have that incremental quantum margin that we get from those lines of business. Q-on-Q is as expected. So there's nothing in the print today that's sort of a surprise again, as we flagged in the statement. But I suppose kind of one thing, we've been consistent, I think, throughout about the importance of price value, both to our growth and to the broader growth of the sector. And we think it's been the right thing to do to, if you like, invest into the CVP to support customers and just put some of that growth over recent quarters. We are -- we continue in the team. And again, we flagged it to work really hard to drive the efficiency of some of that investment. And over time, I expect that we will see some benefit of that come through into take rate. But at the moment, it has still been kind of very important, as I've said, to make sure that we're investing behind that price value equation.

And our next question now comes from Monique Pollard from Citi.

Just 2 questions from me. The first was just whether you could give us an update on the retail offering. And I was just interested, particularly during things like peak Christmas trading, whether those kind of big events saw a step change in terms of adoption or utilization of that on the platform. And the second question I had is just about the U.K. National Living Wage because it obviously increased in the budget. I'm just wondering sort of how to think about that in terms of U.K. gross margins and whether you like to try and sort of maintain a gap in terms of rider pay to National Living Wage.

Monique, I'll take the first one, and Scilla can take the second one. So I think on retail, really, really happy with the ramp-up and selection that the teams managed to accomplish in '24. And as we said before, the holidays are a set piece in terms of how you drive awareness and demand, which is a bit different than food. Like I said, this is a medium, long-term initiative, and we're most focused on DIY, which you guys will have seen B&Q and Screwfix on health and beauty, pet food. So those are the 3 categories we're really focused on. The business continues to scale nicely in the U.K. and UAE. But I didn't really view '24 as sort of the big bang in terms of contribution, let's say, to the business. Really, we view that as a multiyear initiative. I do think the team did a great job building awareness in '24 and adding merchants. We're going to continue to do that in '25 as well. So we've done some really cool stuff. So in Q4, we announced a partnership with wilko. And we added our first fashion brand partner, HURR, which was surprisingly, everyone I spoke to was really excited about that. I'm not a customer, but it was pretty cool. Accessorize, we added as well, and also people like not on the High Street. So I think we're building great momentum in that retail segment, and that's going to pay dividends in years to come.

And then, Monique, just on the kind of living wage point, so clearly, we've had to navigate increases in minimum wage and living wage over several years. And we will continue to keep driving efficiencies into the delivery network, as you've seen us do consistently again over the last several years. So whether or not that's continuing to reduce rider wait time at restaurants, continuing to improve in terms of getting smarter on stacking those things. So I would expect that we continue to drive those sort of efficiencies forward. Obviously, we do think about kind of where we pay versus other things in the market because we want to make sure that we are both kind of ensuring our rider supply, and we also think about things in relation to pay flow with the GMV. But as I said, nothing kind of new, if you like, in terms of having to manage those increases.

And up next, we have Sean Kealy from Panmure Liberum.

One just for me, if I can. So obviously, Ocado had some excellent figures yesterday with respect to acceleration in grocery. It's not quite the same proposition as Deliveroo. But I was wondering if there was any comment -- any further clarity you could give on grocery performance in particular over the festive season. And then secondly, just on Hong Kong. A couple of questions that you might be willing to share the answers on. So is that a cash flow positive business? And I guess, what I'm trying to get at here is, how do you see the future of that business given what looks like potentially fairly large declines in order volumes in the quarter? Just being very interested to hear a bit more commentary on that.

Sean, I can take both. Yes, in regards to the Ocado print, which look really good, I don't know if there's that much read across. We're just continuing to execute on what we're doing. The growth is really good. And it's been good for years, right? And I just think you do have the secular shift to more convenience, the sort of 30- to 60-minute window, kind of small or midsized baskets. And we're seeing that around the world, right? So I just think that trend is going to continue, and we're really well positioned there. In terms of Hong Kong, I'm not going to go into specifics on financials there, but here's what I'd say. If we take a step back, Hong Kong is obviously one of the densest places on Earth, but really dense in terms of merchants and consumers. And it's a place that historically has been steeped in convenience culture, right? And so we think it's a good market because of that. And as we flagged over various earnings calls, it's been a challenging situation for about a year now. And I think the team has done a great job holding the fort. And our focus on the higher end of the market, I think, is the right one, right? And that's what we've historically focused on. And what we do is we focus on the CVP, and we invest on where we can. But it's also just not a situation where we're going to run endless promotions and discounts. So we invest where we think we can drive true differentiation. We invest in the segment of the market who which we think actually wants that. And I think it's also worth saying that Hong Kong overall is the most discount-driven market we have by quite a margin, right? So there are some particular characteristics there. But overall, look, we continue to push in Hong Kong. The team is doing a great job. We think from a market standpoint, it's a really good market.

[Operator Instructions] And from Bernstein, we now have Annick Maas with our next question.

So my first question is on the U.K. order growth, which was really, really good. So I was just wondering if you could maybe split it up and telling us how much of that was maybe due to your new Plus initiative and how much was due to anything else. And the second one was on the relaunch of the Plus. I know it's quite early, but can you already tell us maybe how the different tiers have helped the frequency and order growth in the U.K., particularly?

I'll take the first part of that question. So I'd say this on U.K. performance. It's been really good, and it's been encouraging to see the output metrics move in the right direction for quite some time now. And I think that just comes down to execution, right? We spent a lot of time thinking about the CVP at the Capital Markets event. I guess, that was, what, 14 months ago, we laid out the strategy in the areas we're focused on, right? So what are those? Plus, we launched 2 new tiers last year, right? We have Plus Diamond, which I'm going to refrain from trying to sell to people on this call because Scilla told me that was not appropriate. But Plus Diamond is great. And you've got the new Plus Gold credit back offer. And those are performing really well, and Scilla can kind of go into that. We've also made really good progress in value for money that Deliveroo's choice part of the app. As you know, we are continually obsessed with reduction in defects, right? That is something that I personally spend a lot of time on. And this industry isn't perfect, right? There's a lot of things on a 3-sided marketplace that are outside of our control, and we always think can we get more in our control and drive a better user experience. And we also think those incremental changes compound to a much better user experience over time that is sort of subtle, but then you look year-on-year and you're like, "Wow, it's much better." And then I'd say grocery just continues to do really, really well. So I don't know that I'd call out anything specific other than the team is executing well. We've got the right strategy. And when you look at the output metrics of retention and frequency, they're just moving in the right direction, and you can see that sort of hit order growth and GTV growth. So kudos to the UKI team for executing so well.

And then Annick, just on Plus, so I can give you a bit of a sense of what we're seeing today, as you say. It's still relatively early days, but we are seeing some improvements in terms of frequency of those people effectively on the new program, even amongst users who've historically been already kind of high-frequency users. So one of the things clearly that we are hoping to see from the investment. So I think we touched on it in the half year results. What we're also seeing pleasingly is some good conversion from, if you like, the free trial proposition to the paid proposition. So pleased with what we're seeing there. And then clearly, what will play out over time is the impact that this has on retention. And I think we're still too early in the relaunch of the program to judge that. But we're both -- Will and I are very pleased with what we've seen from the relaunch of the proposition there.

And as there are currently no further questions in the queue, I would now like to hand the call back over to you, Will, for any additional or closing remarks.

Thanks for joining the call today. And I just want to thank our team here at Deliveroo for executing really well in '24 and in the fourth quarter. And we're really excited about the year ahead. Look forward to chatting March, whatever the date is, mid-March, yes. Thanks.