Delivery Hero SE (DHER) Earnings Call Transcript & Summary

Dear ladies and gentlemen, welcome to the Q3 trading update of Delivery Hero SE. At our customers' request, this conference will be recorded. [Operator Instructions] May I now hand you over to Daniel Fard-Yazdani, Head of IR. Please go ahead.

Yes. Hi, good morning, everyone, and welcome to today's conference call. We trust you have all seen the press release this morning and have also received the quarterly statement and also the slide deck for this call by e-mail. If not, our documents are, of course, available on our IR website. Niklas will start the call with a strategic overview and also a summary of the most important milestones we have achieved in the past quarter. And after this, Emmanuel will present the key financials and the case study on the underlying profitability. After that, as always, there's time for your questions. And already now, let me say it would be greatly appreciated if you could limit yourself to 2 questions per person so that we get a chance to take questions from everyone. With that, thank you, and let me hand over to you, Niklas.

Hey, everyone, and welcome to our call today. Hope you're staying safe and healthy. I opened the call at end of August by saying that we had a good start into Q3. It turned out that the quarter actually was a fantastic quarter for Delivery Hero. And we are really happy and proud to present this result and also shed some more light on the profitability of our business, which is an area of interest for all of us. Before going into the business and financial update, let me reiterate our vision on Slide 2 as this is really the bottom of why we're doing things the way we do. So we always aim to deliver an amazing experience, fast and easy to your door. This has defined our focus over the last few years, and we now see it in accelerating growth in areas such as grocery delivery. We think it's humbling to see that several of our competitors now following our lead while we still believe that we are far ahead in this development. Big thanks here to all the heroes doing a tremendous job pushing the experience every day, especially in these challenging times. So thank you very much. We continue to pursue the targets we set out during our IPO in 2017. We promised growth, and we are very confident we'll deliver on these promises. After having raised our guidance for the current business year, already in July, we are today, already confident to reach the upper end of that increased guidance and are, therefore, narrowing the guidance to the upper end of the range. And Emmanuel will talk more about that in a moment. Secondly, we go for leadership positions in the markets we operate in. We have been very committed to this, and we will do what it takes. I'll share more on this next slide. To achieve leadership, our third commitment was to build tech and product leadership for a third-generation on-demand platform. During the last years, we went from decent to a clear leader in most tech and price areas. I believe our tech architecture has been a clear advantage to achieve this. And finally, you know that we are believers in driving profitability for scale and automation. We are thankful for the trust of our shareholders who already believe in our ability to make own delivery also economical. Today, we are providing some more details on where we stand and give some visibility to our way to truly profit from economies of scale. We continue therefore also to target a long-term EBITDA margin of 5% to 8% of gross merchandise value. Then Slide 5 gives you an update on where we stand regarding not only our global footprint, but also the strength of our position. In more than 9 out of 10 markets we operate in, we are the #1 player. And we have further strengthened our position by gaining new leadership position in more markets this year. We are, as you know, still waiting for regulatory approval for a transaction in South Korea. I know this is something that you all are eagerly waiting for. I can't give you any news on this today, but can just repeat that we're very confident to get the needed approval by year-end. Closing will then take another couple of weeks until we can finally start truly working together for the benefit of the ecosystem in South Korea. We are determined to support the restaurants and the local stores we serve as much as our customers. Having said in the past that we consider ourselves a rational consolidator, and I believe that the past quarter has proven that again. I will briefly touch upon some of the M&A we have concluded in the past quarter on the next slides. But before that, let me summarize the key highlights of Q3 on Slide 6. Firstly, and most importantly, we are truly happy to let everyone know, and in particular, the skeptics around own delivery that our own delivery business is now providing a positive contribution margin as a percent of GMV in all our regions. Emmanuel would give you more detail a bit later. After many years of investing time and resources into the execution of this part of the business, we are now really seeing the fruits of our investments. This is a step change for us as now every order we receive helps to scale our business towards profitability. We are still in growth mode, and I think it's still not the time to aggressively push for margin expansion, but it is clear that we are now entering a new phase of our development. Beyond this, we also had a great quarter as far as growth was concerned. We doubled our orders year-on-year, and we had a record sequential order growth of 81 million orders, partially also driven by a little bit Q2 COVID impact. Nevertheless, a big record. As announced at the end of July, we launched in Japan and had a very encouraging start there. In the important MENA region, we have not only strengthened our footprint with the acquisition of InstaShop but also signed a deal with MasterCard. There will be a significant relevance for our development and our economic success in the next years in the MENA region. In the Americas, we have used the opportunity to acquire Glovo's operation thereby strengthening some of our existing footprint further but also added 5 new countries. And finally, we have also executed on our ambition to have 400 Dmarts up and running by the end of the year. We have added another 106 of these stores in the quarter, bringing the total number to 254 by the end of September. In October, we added another 100 stores. And I think as you've learned over the years, we stayed firm on our targets and commitments, and this won't be an exception. Now some of the financial highlights. We achieved another quarter with around 100% order growth. Our GMV was up by 7% year-on-year to EUR 3.4 billion. On the back of the strength of the euro, growth on constant currency was 81%. These numbers do not include Woowa. With Woowa, it would have been around EUR 2.6 billion -- EUR 6.2 billion, my apologies -- EUR 6.2 billion, including Woowa. Revenue is in line with order growth with an increase of 99%. This was a slight acceleration from Q1 to Q2. On a constant currency basis, revenue growth was even stronger, 110%. Before handing it over to Emmanuel, let me give you a recap of our M&A activities in Q3. In September, we signed a deal with Glovo for the Lat Am operations with Peru, Ecuador, Costa Rica, Honduras, Guatemala. We added 5 new countries to our business. We now have a good starting point there and are looking forward to developing these markets further and keep on driving market share next year and beyond. As part of our transaction, we have also been able to do some in-market consolidation in Argentina, Panama and the Dominican Republic, which obviously helps to strengthen our footprint in these markets. Based on July GMV run rate of around EUR 330 million, the purchase price of up to EUR 230 million corresponds to an enterprise value to GMV multiple of around 0.7, and this also is including the earn-out. So after closing actually happens, this multiple will be slightly lower. But assuming full earn-out at today's size will be 0.7x GMV multiple, and we think that is an attractive one. Having already discussed InstaShop in a bit more detail in the call at the end of August, I won't cover all the aspects again today. As a reminder, InstaShop is the leading online grocery marketplace in MENA and showing an astonishing 330% growth this year. It's a great fit to our current online grocery offering in the region, and we're determined to expand its offering to additional countries together with the existing management team. In addition to the acquisition of InstaShop, we have signed another important deal in the past quarter that will have a very positive impact on our offering in the MENA region. And then if you go to Slide 9, you can see the main components of the partnership with MasterCard. The objective is to fully digitalize the payment chain within the Delivery Hero ecosystem in the region. [ It grew from us ] having developed digital wallet solutions for our riders, customers and restaurants. This was borne from our vision to create an amazing experience for our customers. We have developed digital wallets and have quickly realized that this offers many advantages for everyone involved and can help lower our payment costs considerably. The partnership will help to develop these solutions even further and integrate them deeper into our offering and the entire payment chain. We love to dive deeper into the economic attractiveness of the partnership but are bound by confidentiality clauses. We, therefore, actually trust that this is a very good deal, not only for our customers, riders and restaurants, but also from a financial perspective. And yes, I think this gives a good segue over to you, Emmanuel.

Thank you, Niklas. Good morning, everyone, also from my side, and welcome to the third update of 2020. I'm very much looking forward to giving you an update on where we stand today. This is for 2 reasons. The first, because the numbers are really outstanding and once again showed the strong and the very positive momentum we have; and second, because we are certain that the additional disclosure we're giving you today is hopefully enabling you to fully appreciate the underlying trends that we have been able to build over the last years of our business. We become -- before we come to that, let's start with our improved financial on Slide 11. So Niklas has already mentioned the strong headline numbers. And maybe to remind everyone that this is, by far, not the first quarter with that kind of growth. This is instead the seventh consecutive quarter with year-on-year revenue growth of around 100%. And outside the financial metrics, we are again decreased -- we have again decreased the global delivery time further and now stand at 25 minutes in average. So by now, many of you know the next slide, the next chart, on which we show the order development indexed to the date where COVID was declared as a pandemic. So what you see here is that after the very first phase in March and April, which was characterized by many and very strict lockdowns and curfews. The order growth has basically returned to its very healthy structural growth in all of the regions. And also in MENA, all meaningful restrictions have been lifted. Although it was only at the end of August, when it was the case in Kuwait. In the meetings that we have had with you in the last months, we have often been asked about the quality of the cohorts that have acquired during the pandemic. And for those customers we acquired in March and April, we have now at least half a year of track record so that we can now start to make some first assessments and solid analysis on their behavior. And what we see is that their behavior is at least in line with the older cohorts, which is obviously very encouraging. We continue to expect that this situation due to COVID has rather accelerated the structural shift to more online ordering of food but also grocery and that most of the current effect will have a permanent and, therefore, positive impact on us. The average order values, also in line with our expectations, have gradually retraced to pre-COVID levels in most markets after the immediate effect of lockdowns has receded and customers start going back to work and have had more of an ability to do grocery shopping themselves. So now let's move to our first segment on the next slide and start with Asia. So here, I'm happy to say that order growth or price expectations. And despite the increasingly challenging comparables, the segment posted order growth at 178% year-on-year. We also see a significant increase in the share of own delivery orders, which account for 78% of orders in the quarter compared to 55% a year ago. The revenues were almost as much with 162% on reported basis and with 170% on a constant currency basis. We also kept pushing for operational improvements, and the overall delivery time improved by 14% year-on-year at now 23% -- 23 minutes. In Korea, we are -- we invest in our own delivery service and also leverage our technology to that extent. And there, being able to deliver in 20 minutes versus the usual 30 to 35 minutes. Now let's move to the next segment, MENA. So as you know, I mean, MENA has been impacted by very strict lockdowns and curfews. And as the result of this, even show negative year-on-year growth of 6% in the last quarter in Q2. In Q3, operation had a very good recovery from this and generate an order growth of 40% over Q3 '19. And again, this is despite the fact that some of the countries, part of the quarter was still difficult with restrictions still are prevailing. And here, I'm thinking about Kuwait. GMV grew by 30% on reported currency and even 44% on constant currency basis. The revenue went up by 27% and by 38%, if adjusting from the adverse effect coming months mostly from the Turkish lira. So now let's move to the next slide and show the development of our European operations. So our Europe segment had another very strong quarter, with actually the strongest order growth since IPO. So the order grew by 55% and thereby nicely accelerating sequentially after already 47% growth in the prior quarter. And we believe that has been outgrowing our competitors at least in overlapping markets. The GMV increased even stronger by 65%, and revenues went up by 88%, thanks to very good customer acquisition and also improved cohort behavior. So now on next slide, Americas. Americas had the second quarter with orders more than doubling, having grown by 111% in Q2 already, Q3 came in at the same level with order growth at 112% year-on-year, and we continue to see clear acceleration. So the segment showed a similar strong jump in the share of own delivery orders at the Asia segment. The OD share is now standing at 76%, which compared to 49% a year ago. The GMV of Americas went up by 130% on a reporting basis, and even by 149% on constant currency base, as far, we know the fastest-growing Lat Am food delivery company. The revenues increased by 157% and even by 178% if adjusting from the headwind from FX effects. And here, again, revenues as well as the GMV for Americas have been impacting by the application of the IAS 29. It means the hyperinflation accounting for Argentinian operation. And this came to play, as you remember -- this came into action since September 2018. So the impact of this, considering Argentina as a hyperinflation country, was a negative of EUR 6 million in Q3 2020 regarding GMV and a negative EUR 1.4 million in terms of revenues. Finally, let's move to the Integrated Verticals segment on the next slide. As you all know, the segment captured the activities where we are operating as a principle, i.e., where we are in full ownership of Dmarts and the kitchen that we operate. And as a reminder, the Integrated Vertical orders and GMV shown here on this slide are only shown for illustrative purposes. We are currently accounting for in the platform business segment as it is on the platform business infrastructure that the order and also for the Dmart have been placed. So the rapid expansion of our Dmart business contributed to a strong order growth of 64% quarter-on-quarter, and the GMV stood at EUR 54 million in Q3, up 41% compared to the prior quarter. Decline in AOV or average order value is due to both the strong extension of Dmart, but also the end of restriction and lockdown, which before [ half was the ] AOV for many customers, we have to rely more than usual on ordering groceries online. We have also pursued an intensive rollout of new Dmarts in Q3, having 106 such warehouse after 44 new Dmart in Q2 and ending the quarter at a total of the 254 Dmarts now active. And we still expect to reach our plan, as Niklas mentioned, of 400 Dmarts by the end of the year despite challenges to open stores during the COVID. So, so far, the review of the operating business for the past quarter, and now let's [ unbuild ] the underlying profitability of especially on the own delivery business in the case study that we prepared on the next 2 slides. So what we are showing now on this Slide #19 is contributing margin as a percentage of GMV for our own delivery business. And obviously, it comes at no surprised that you operating a profitable marketplace business is a relatively easy endeavor. It is the own delivery business where the going gets tougher and when you need to decide if you really want to do it or not because doing it half [ heartily ] and without conviction would only result in very mediocre result at best. So we have to decide for ourselves a few years ago or a few years back by putting in place superior last mile logistic capacities will pay out at the end. And now looking at the lines that you see on the charts and the numbers behind this, we think this is clear that we are now seeing that the decision is starting to pay out nicely. We are now earning money for each incremental order that is being placed in any of the 4 regions. And while MENA was -- has been profitable for many quarters now, we are super happy to see the improvements made by the other regions. Americas and Asia have both shown a particularly strong improvement in recent quarters, and both are basically profiting from the economies of scale and the constant improvement in the best practice that we've been implementing across the group. A large part of this improvement has been due to delivery cost reduction, thanks to a better utilization of the [indiscernible], but also overall efficiency gains in various areas, such, for example, for the contact center in the Americas. In the Asia segment, we have seen the investments in the form of free delivery campaigns for a good part of 2019 that are now contributing to the order and the revenue growth I've shown before in the segment presentation. Thanks to the customer we have acquired during this phase. And finally, [ and to content ] to sometimes voice assumption that own delivery only works in countries with a relatively low-cost structure, we find it very encouraging to see that also Europe is already well in positive territory, and the recipe here is the same as the other segment: attention to detail in every part of the operation and a relentless effort to define and implement efficiency gains whenever possible. So as we are also well aware that many of you also constantly ask about the level and impact of the vouchers or generally speaking, revenue reductions, we are using as part of marketing to attract new and/or retain and activate existing customers. So hence, we have gone a step further and have on the next chart shown the same data after deducted cost of this marketing tool. So what you see on Slide 20 is that also with this even more conservative view, 3 of the 4 geographic segments are already earning money on own delivery orders. MENA, Europe and Americas are all in positive territories. Only Asia, you need to go a couple of more steps into that direction. But looking at the improvement of the segment has made in the past quarters, the direction is clear. Also using this opportunity today to give an update on how we see the usage of vouchers. In 2019, we saw peak in the use of these marketing tools, as you can see on the right-hand side on the slide. And as expected but also announced in 2020, this level is coming down. In H1 this year, we already went below the level of that we've seen in H2 last year, and we're expecting a further decline from this year until the end of the year. But to report any misunderstanding, we're still considering vouchers and similar incentives to be a very productive tool to promote the usage and also the first-time adoption of our service, and they will continue to be part of the tool set going forward. The centralized and data-driven approach that we have allow us to ensure a high-efficiency on marketing and a good return on our investment. So before we take your questions, let me give you an update on outlook of the current business year on the next slide. So as Niklas point out already and on the back of the very strong operating business performance for the first 9 months of 2020, we are again increasing our outlook for the full year 2020 revenues. In July, we raised the total segment revenue guidance to a new range of EUR 2.6 billion to EUR 2.8 billion, up from EUR 2.4 billion to EUR 2.6 billion before. We are now confident to come out at the upper end of this range and are, therefore, changing our guidance to a range of EUR 2.7 billion to EUR 2.8 billion. The outlook for the adjusted EBITDA remains unchanged. And here, we continue to expect an adjusted EBITDA margin of between minus 14% and minus 18% as a percentage of revenue. We have stated that this guidance is excluding additional investments what -- that we intend to utilize for -- to defend our leadership in selected markets where required. And in July, we have specified that amount to be up to EUR 150 million and therefore, less than the up to EUR 200 million we had reserved for this going into the year. And today, we are reducing that number again, up to EUR 220 million that are still including between EUR 20 million and 20 -- EUR 20 million and EUR 30 million for the launch in Japan. So these are the change to our guidance. We otherwise stays unchanged. So that was it from our side. And well, we are now looking forward to your questions. Thank you very much.

[Operator Instructions] And the first question is from Joe Barnet-Lamb, Crédit Suisse.

Two from me, please. Firstly, with regards to those additional investments, you've obviously now nudged that down twice, and you've also added in Japan. Can you talk a bit about why you're spending less than your originally stated upper end? Is it to do with more benign competition? Or just a little bit more color around that would be great. Then secondly, with regards to contribution margin slide. Thanks very much for disclosing this, it's fantastic. A couple of questions on it. Firstly, how much benefit is there in Q2 and Q3 of 2020 driven by COVID? And secondly, do you believe that Asia and Americas can get to the MENA level? And if so, how long will it take?

So maybe I'll start with the first one. So when you enter a new year, you don't know how tough the competition will be, and we expect there will be a very tough year in many regards. I think it turned out that merged competitors pulled back a little bit or went a little bit more towards the economical side being a little bit more focused on efficiency and profitability rather than grow at any cost. So that's why we didn't feel like we have a need to invest the full amount but pull back a little bit on investments. I think most of investment that we did was rather opportunities that we saw that had very good returns. And only some of it was driven by comparative pressure in a couple of markets. I think despite not having used the full amount, we see that we actually increased leadership in 6 countries this year, and we have lost leadership in no countries this year, so it's a net gain of 6 markets that we gained leadership organically. I think that also points us to a direction that we have done many things right. And then maybe, Emmanuel, you can cover the second question?

Yes, sure. So on the contribution margin, if you look at how much benefit we get in Q2 and Q3 from COVID, I think like, MENA, obviously, we didn't have so much benefit, as you know, because some -- many markets have been impacted by COVID and restriction and curfews. So here, I think COVID was not a benefit, but a slight negative for the segment. The other one, I would say, if there is any kind of benefit of COVID, this is not the full story behind it. I mean we've been working on the decrease of the CPOs, so cost per order, working hard on efficiency gain in terms of logistics, but not only. I mentioned before, the contact center and so on and so forth. So I think this is much more to continue the trajectory of our efforts well to improve this unit economics that you've seen. So I think if COVID, and it's difficult to quantify, there may be a positive impact for 3 of the 4 segments, but definitely not from MENA. But I think the curves that we're showing here today are much more the consolidation of the efforts and the focus that we've done of the quarters. And as I said, efficiency gain in terms of CPO but also like your other part of it. Where can it go now from here in Asia and Americas when you get to me MENA? Yes. I mean that's the million-dollar question. I mean we think we can still improve. I mean I care about this for sure. I mean we continue to work on this, and there will be gains in terms of efficiency, but also, we can focus on how who can maximize our revenues. Will we get to the MENA's level? That's too early to say. This is a challenge, but this is I think too early to say. And also how long will it take, so -- but we continue to work on this to improve this and to push this curve as far as we can.

And maybe to clarify, moving to MENA level, on a gross profit to GMV, that we will do. The question is how high would MENA be at that point in time. So we also expect to improve MENA segment gross profit to GMV. So the question is will it catch up in the long term to the same level, but it will shortly reach the MENA level as of today.

The next question is from Giles Thorne, Jefferies.

First question was, again, on the profit contribution for own delivery. And I suppose it's really a question about the limits of the business model really, so quite a high-level question. But you don't have to look too far to see the groundswell of change towards labor regulation and the news out of Korea about your right as becoming salaried employees is just one of many, many, many, many examples. So it's my understanding that the improvement in your profit contribution per order thus far has mostly come from the efficiency lever rather than anything else. So my question is, if you see input cost inflation around the rider costs across your entire business, how much do you think the other levels of delivery unit economics, mainly the basket size, the delivery fee, the commission, how much do you think those can absorb any input cost inflation? A discussion there would be really, really useful. The second question was a question actually I asked in the Q4 results, and I'm going to ask again now for the benefit of an additional 6 to 9 months of trading. And it's around the conflict of interest between a merchant partner and dark store concept in quick commerce. And the question is really prompted by, again, news flow out of Korea, where we've seen a convenience store trade association start to moan about cannibalization of delivery orders by dark stores, not yourself, it's actually Woowa. But anyway, how do you manage that conflict of interest? That was it.

Cool. Thanks, Giles. So I quickly cover the few questions. So yes, the improvements have been mainly through efficiency. So we haven't really increased any fees or delivery fees more than potentially marginally, but in general, not -- the main lever is rather on the rider efficiency. I think there is still a lot of efficiencies that we can do. There's still a lot of improvements that can be made on reducing delivery distances and having less wait time, et cetera, et cetera. And it really comes down to the details, and enormous amount detail, there's 100 things to be done to improve there. Then, of course, if labor regulation in some country will go to less optimal set up, and I really say less optimal set up because this is not a set up that riders want. In such set up they will make less money. But -- and they will have less freedom. So it's really a lose-lose for the riders and riders don't want it. There will also be much less riders working, because we are then in control of efficiency, rather than they themselves control of efficiency, it meets their efficiency. We need also have stronger control or our rider fleet, and we have to pay. So really inefficient way of setting it up. And the biggest loser of this is, of course, the rider. And it's not necessarily good for restaurant either. In the end, our platform needs to make money. And we are not charity. So in the end, we will have to make money, and we will have to adapt. And if there is something that is increasing the cost level and making it less efficient, then, of course, someone has to pay for that inefficiency. And it -- as I said, it cannot be the platform. So therefore, the losers will be the users, the restaurants or the riders. And unfortunately, I think it will be all the 3 of them who would have to cover this cost. So it would be very unfortunate really. Another question, if you make money on OD is a little bit half ridiculous in my view, because it depends how much it charge. You can charge more delivery fee or you can charge the restaurant more. But of course, you might take down growth margin by doing so. But there's plenty of room it just [ ways at the level ]. Then when it comes to emerging and the partners and the Dmarts. Yes, I conceptually get that conflict, and I think there is a very easy parallel to draw. But if you look at it from the other way, we're working with 30,000 partners, and we today have 250 Dmarts. The Dmarts are only there to cover something that those partners cannot do. They cannot do fast deliveries. They can do fast picking, and they have certain sub-optimal set up for delivery. So it's not that Dmart is taking over for the grocery aspect, Dmart is taking over for the emergent need of getting something small delivered to you. And no grocery in the world would do what we do with the Dmart because that will not be cost efficient. I will not make any money. So we take a loss-making part of their business, make it profitable and make it possible what they cannot be possible. So it's not really cannibalizing anything on what they do. It really solves something that they cannot solve in that setup. We would also be happy if they would be the owner of these Dmarts and use as a franchise for some time. But right now, we are doing it in -- we are taking the risk and we are doing it right now. But that will also be the solution for the future. And also, we do not prioritize Dmarts. We will -- our customer chooses it because it's faster, and any grocery store can try to be the same.

So the MerryMart agreement you've got in the Philippines where they are actually -- they're going to own the dark store, do you think -- will we see a lot more on that?

I think there is a possibility. I know in the beginning, we want to optimize for protection in the setup and do all the learnings. So in the beginning now, we feel like we are the right owner to making sure we have that full flexibility and control. But there is nothing that says that we could or would consider this as a franchise model, where we give them the tools and the possibility to build their Dmart, and we are the agent here.

The next question is from Silvia Cuneo, Deutsche Bank.

The first is about the upgraded revenue guidance. If we take the midpoint, the employee segment revenue for the last quarter would be 75% year-on-year, which means a marked deceleration from the year-to-date of 95%. So can you please discuss if there is any [ tough counter fact] that could explain this? Or whether you're seeing a second wave of COVID not having as much as a positive effect on order in the market? And then my second question is just on the partnership with MasterCard. Can you please discuss the vision and adding payment solutions for customers? For example, is integrating these services a way of making users and drivers more loyal to your apps? And if you could comment on whether your peers are also already doing something similar. I think Grab is.

Emmanuel, do you want to cover?

Yes. Sure. So I think for your first question and taking the revenue guidance, I think it's fair to say that with this for a very special year that we are facing and is not done yet. There is a certain uncertainty on how the change of COVID dynamics will have an impact on the business. And when you look back in Q2, the impact was very different comparing the region. So if you compare MENA to Asia, for example, and then taking this experience, let's say, or this -- what we've seen in the quarters, we remain prudent for the next quarters. But I think it's fair to say that, so far, we've been happy with the start of the quarter. On the second question on MasterCard, I mean, like the deal is going to be a deal where we have some financial aspect to it, obviously, which is our -- which I can't give too much details today due to the clause that's in the contract, but this is a very interesting financial contract. And on top of that, we will also first -- we have some collaboration on a technical product. And the benefit would be for the ecosystem as a whole. So the first -- in the first place would be customers but also our riders using the wallet and all different kind of products that we want to develop with MasterCard. So that would be for the benefit of our ecosystem in the region in MENA. So we will disclose probably more in detail as we were going to launch these services or these services with new features, but this is a benefit for riders, customers and also vendors or restaurants. And that's the spirit of this deal with MasterCard, but we're super happy have reached, which is one of the largest MasterCard deal in the region ever.

Maybe add a little bit on the revenue guidance. So we also compared to a very, very tough quarter. And the last quarter, Asia grew 261%, up from 211% in the previous quarter and 114% in the quarter before. And Asia taking a bigger portion of that back then in end of '19. So we are really comparing to a very, very strong quarter when we doubled down on affordability and other measures, which we saw before. So it's really a function of size and scale. The other aspect also to keep in mind is FX. So we have seen Europe strengthening a lot lately, which also impact our revenue on a reported basis negatively on a constant currency obviously not, but on a reported basis, that has also contributed to that. So I think we had a great start of Q4, but we compare it to a very tough quarter.

And the next question is from Andrew Porteous, HSBC.

Just echoing thoughts before of the detail on the contribution side, contribution margin side is very, very helpful. But with the detail you've given, I'm just wondering sort of what the thinking about the sort of the move from pre voucher to post voucher. Have you got any experience of consumer behavior as you reduce vouchering? I'm just trying to understand really whether there's a risk that the positive impact of reducing vouchering may be partly offset by a drop back in efficiencies or such as frequency or basket sizes as some of that subsidy is removed from customers? And then secondly, I know you talked previously a lot about more rational competition. And I'm just wondered if that's something that you continue to subscribe to and whether you feel that everyone in the industry has been benefiting from some of the impressive trends you've seen at the sector level or whether you think you've been benefiting sort of disproportionately and extending your leads in a lot of markets.

Sure. So maybe I will cover first. I mean mostly we actually do we try to target the new users. But of course, it's very hard sometimes to target new users. And we have also done some occasion platform-wide free delivery campaign over a week or 2. But usually, we try to make these margins very small, because when we give someone EUR 10 to order, they will not order because the harder it is to order, because they got a good deal. If we give someone out EUR 0.50 or EUR 1 or EUR 2, maybe at a max, they're not going to order, because you discuss that -- they kind of -- they use it, but it was not the main driver of the decision. And that's why we have seen that the behavior of these customers have been very similar to other customers. I should say that it's a little bit less, but it's still not as material as people would think or what has been communicated in the market. Even if there would be a slight impact of reducing vouchers and so on, and we're still going to grow very, very fast in these markets. So I don't think there will be an impact on efficiencies. And so we'll keep on driving efficiency from larger scale even if a percent or 2 will be volume from vouchers. What also means is usually that you have a slightly better basket. So if we give some a free delivery, with no restrictions on basket, they might order something very small. If they pay a delivery fee, you usually have 1 or 2 extra items because you don't want to order for next day, maybe order, I mean, for next day as well. So you see general that the baskets usually increase a little bit, which has been also beneficial for us. So therefore, yes, we don't expect much there negatively. In terms of COVID, some markets have been more affected positively and within U.S. being absolutely booming. Similar we have seen in some Nordic markets. They have also seen similar -- actually now in Europe, in general, we have seen a clear uptick in at least some market in some markets have been more neutral. Latin America, you're seeing that's probably a positive impact as well. But I think -- but it's a small segment. I think proportionately, we have been less impacted or less positively impacted by COVID than, in particular, our American colleagues, where also baskets drastically increased as [indiscernible]. I think the positive is that when COVID goes away and, hopefully soon, that will also not have as much of a drop when that happens, if there is some degree of drop, and I think there will be something we adopt with behavior, but we will be less impacted in that case. In terms of the markets we operate, we have definitely been -- if it's COVID related or not, but we have definitely been taking market share and been winning market share. I think that is with or without COVID. That is also our clear -- not ambition but our commitment, and we will continue to do that as well going forward.

The next question is from Marcus Diebel, JPMorgan.

Yes, I would also like to echo previous comments on increasing the reporting, particularly when it comes to contribution margin. So thank you, Emmanuel and Daniel for doing this. One question, I think, that comes up is now what happens below contribution margin. I know you're not going to guide on an EBITDA profitability per se. But if you could maybe give us an indication, I mean, what needs to happen to also turn positive at the EBITDA level? You're growing at 100%. You were highlighting that the returns on investments on new investments are coming down. So that leaves largely the, I guess, marketing angle less as a variable. So how shall we think about this? Or at least, shall we think that it will also continue to follow the contribution margin gradually? Or can we get -- can we -- or do we need to expect some pickups on anything below contribution margin? That will be interesting. And then 2 more questions, very short. The first one on Glovo, you bought the stake from AmRest. Maybe if you could tell us a bit more why that is? I understand that the Lat Am situation, but why increasing the exposure with Glovo in Europe? and then thirdly is on the delivery share, could you just tell us a bit more where you think this share going in the next 2 years? It seems that you clearly follow the Chinese example in terms of a high share of delivery share. Where do you think this is going to go in the next 2, 3 years in your portfolio?

Perfect. Yes. No, we don't expect any hiccups on anything below that. But Emmanuel maybe can elaborate a little bit there.

Yes. No, absolute -- yes, we don't expect any hiccups below process contribution. I think that our focus still is on growth. I mean like you've seen we're doubling the company. So right now, we're still focusing on growth. Obviously, EBITDA should benefit from this improvement of the contribution margin that you've seen today, and we will continue to focus on improvement of the contribution margin. And with the scale, EBITDA should then improve. But that clear focus is now still on growth. We see the potential. We also see the potential not only in regions that offers, where I think [ have rebound ] in Asia, but also now Lat Am and also Europe are going extremely fast. So still, I think we reconsider concentrate on growth while also continuing to improve our unit economics. So I think that no hiccups obviously to be expected.

Then, of course, market launches. When you do that, you have to scale up, so Japan in as one example, but there are a few other cases as well. Same with new [indiscernible], of course, that is something that is very early stage. We are not at a mature state, so we have to deal with teams to set up for this. So -- but in our core, no hiccups there. Then Glovo, yes, we are very happy with Glovo is achieving. We also see that it -- had a very strong execution. So we are very happy with that investment, and we like to keep supporting that company. We are, of course, a substantial shareholder. And yes, we saw there's logical step to further increase our stake based on the belief that we have. Then on the delivery share, I think there are markets where we see that there is a strong difference between -- of -- clear difference when we deliver versus when the restaurants is delivering, both in terms of inventory but also in terms of quality and speed and cost. And in those markets, you would expect that delivery to go to 80 or even more. Then there are some markets where the difference between own delivery and marketplace is very little and in some cases even negative, but the restaurants find ways to even deliver anything equally fast at a lower cost than what we can do and every restaurant is delivering. And we have no urge to them building delivery for the sake of delivery. So therefore, some markets will have a significantly lower share of OD. And then, of course, the combination of that is making the mix. I think yes, so therefore, will continue to grow, but maybe not that fast anymore. Maybe in the markets where we do not do delivery yet because we see that the restaurant is doing it equally good or even more cost efficient. As we improve our delivery efficiency, we may, at some point, even come to a point where we can do it even cheaper and even better than they do. And of course, at that point in time, we will also move OD to probably 80% in those markets as well. But for the time being, that's not the case.

And the next question is from Andrew Ross, Barclays. All right. Let's go to the next question. The next question is from Sherri Malek, RBC.

Firstly, just a follow up on the unit economics in delivery and how this can improve further. I understand there's still a big opportunity to improve the cost per order. But how would you rank the other levers, so basket size, delivery fee and take rate in terms of their potential contribution to improving profitability longer term? And then my second question is on Asia. Basket sizes have continued to decline, I believe, due to the accelerated mix shift to own delivery where AOVs are lower than marketplace. How have you managed to offset that such that you can keep to the EBITDA guidance? Has the operating efficiency come through higher than expected?

Emmanuel, maybe I'll cover the first, you'll cover the second question. So it's -- I think out of the things that you mentioned, I think take rate is -- or commission rate is probably not a lever that we want to pull. We don't think it's necessary so that's -- has probably a smaller delivery fee. We have been very generous to the consumers, so this may be some -- a little bit of room there. But I think that's the last lever we would pull. And then basket, yes, I think also there is some room for us and so on, but also not huge. I think that by far, the biggest lever is that we can still improve our efficiencies, making on a less waiting time, shorter delivery distances -- yes, so how we manage the fleet, onboarding, et cetera, et cetera. And so -- but therefore, that's really the lever we want to pull. Of course, the other levers we can also pull, but we don't really see a need, and that was really the last levers that we would use. And as long as we have the big levers in efficiency, we will probably not pull many of those.

And I can cover maybe the basket size. So basically, the basket size, we have to keep 2 things in mind, I guess. The first one is the evolution of the year. So the COVID, we mentioned this, I mean, like that people are going back to -- or COVID in Asia has been less severe in Q3 and Q4 than Q2, then you had maybe some impact on the basket side as people are ordering now more individual than for a family. And the second is we have to keep in mind the market mix. I mean some countries in Asia have different kind GDP structure and the countries that are growing faster than others have sometimes a little lower GDP than in general. And hence, basket size is lower than you will have seen in the future or in the past due to this market mix effect. You will have the sense that the basket size is decreasing a bit in average. On the other hand, this doesn't impact or should have no impact on the EBITDA itself for each country. So the basket size, impacted by the market mix, but the EBITDA should not. Does that make sense?

Yes, that's really helpful.

I think we cut off Andrew a bit earlier. So if I may say, we will take Andrew Ross now for the last question. And to all the others we see in the queue, sorry, we are running out of time. But Chris and I will get back to you after the call to answer your questions separately. So Aurelia, if you can let Andrew in, please?

Sure. [Operator Instructions]

Can you hear me okay now?

Yes.

Sorry about that. I've got 2. First one on Woowa. Niklas, I think you said that the GMV in Q3 would have been EUR 6.2 billion, probably included Woowa, so we can back out the rule was EUR 2.8 billion. And I look through your presentation, that looks like it's growing about 65%. So a, is that number correct? And b, can we kind of assume that's a sensible run rate for the 9 months? Anything you can give us as to how much Woowa is growing would be great. And then the second question is on Dmart. Obviously, you're targeting 400 for this year. And I appreciate it's early to know what might happen next year, but could you give us a sense as to how many they might be by the end of next year?

Thank you. Yes, I think your math sounds very good, very sound, and I think that will be growth in euro terms that you would refer to. I think if you look at Korean won, it may have been a little bit more even. But it sounds like reasonable assumptions that you made there. In terms of Dmart, given that we are very committed to when we say something that we get it right, I feel a little bit hesitant to share that. We're still working on that plan. We -- it's still early days. We have to figure out in which area, which -- where do we have the size and volume in order to justify Dmart, where can we drive profitability? Where do we see the volume coming? Some are [indiscernible]. So therefore, I don't dare to say anything at this point in time, more than the fact that we remain bullish, and we're going to continue to grow very fast in such condition. And many thanks, everyone, for your continued support and trust. We'll be working day and night to make sure we deliver on our commitment and then also big thanks for the team doing an absolutely incredible job. I'm super grateful to be part of this incredible team. Thank you, everyone.

Thank you, everyone. Stay safe. Bye for now.

Ladies and gentlemen, thank you for your attendance. This call has been concluded. You may disconnect.