Delivery Hero SE (DHER) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for standing by. I am Sugi, your Chorus Call operator. Welcome, and thank you for joining Delivery Hero's conference call. [Operator Instructions] I would now like to turn the conference over to Daniel Fard-Yazdani. Please go ahead.

Thank you, Sugi. Good afternoon, everyone, and thank you for joining this call. You have seen from the material we have sent out this morning, we are going quite a number of topics today. We're starting with the short review of the 2020 full year results as we have published the annual report 2020 today after having provided you with prelim numbers in February. We are also presenting the Q1 '21 trading update today. That's -- we know that many of you have eagerly awaited an update of the contribution margin charts for the OD business that we introduced in Q3. We have also updated those charts. And quite importantly, we have published, of course, as you have seen our guidance for the current business year this morning that we would like to also discuss. Last but not least, we are showing a snapshot of some of the more important ESG initiatives that are underway at Delivery Hero. Niklas and Emmanuel will also mention it during the call, but let me point out already now, we are reporting the Q1 numbers as well as the guidance on a pro forma basis. That includes Woowa from January this year and excludes Delivery Hero Korea also from the start of the year. We do so to give you the best possible picture of what the group will look like going forward, and we are also providing you with adjusted historical figures in the appendix. But now and without further ado, let me hand the call over to Niklas.

Thank you, Daniel, and hey, everyone. Hope you're doing well. I'm -- we are very excited that we can finally share the outlook for the year and also discuss the very good start we had in 2021. But before doing so, let me reiterate our vision, which is to always deliver an amazing experience to our customers, fast, easy and to the door. We do this with traditional food delivery, but of course, also in the significant growing quick commercial space. As an example, here, in April, we delivered more than 400,000 orders per day in our quick commerce, which likely makes us the largest global quick commerce player. So that means now we are truly a super app for delivery. We're also working hard on delivering on our promises to our investors. You can see here some of the commitments done in Chart 3. Growth continues to be our #1 priority, and this is our ninth consecutive quarter with revenue growth over 100%, which shows that there is still so much potential in the markets where we operate in and that we can help to develop. We will continue to push for leadership in the countries we operate in. And to be clear, leadership for us means a clear #1 position and nothing else. We get there and by satisfying our customers, which is the heart of our vision and the basis for our success. We will, therefore, continue to invest in tech and product leadership. As a market leader, we need to ensure that we have the best product and service offering in every market, and we will take aggressive steps towards closing any temporary gaps in any market where we feel we don't provide this best experience. And finally, we're also absolutely determined to achieve our long-term adjusted EBITDA over GMV margin target of 5% to 8%. And I think many of the data points that we're providing you today with clearly shows that we are on a good track to reach this target. But before I come to the current trading and the outlook, let's take a quick look at the 2020 results. And before handing over to Emmanuel to go into details, I would first like to iterate our promises and how we delivered on other promises during the last year that we gave in our initial guidance for 2020. On the left hand of the chart, you can see that we have, by far, exceeded our revenue guidance. And we were well within our EBITDA guidance and the range we have given for the initial investments. In the segments, Europe basically reached breakeven with minus EUR 2 million in adjusted EBITDA, which corresponds to an adjusted EBITDA-to-GMV margin of minus 0.1%. And the MENA segment adjusted EBITDA of EUR 99 million was significantly higher than in 2019 despite the very challenging COVID environment with extended curfews blocking us from delivering. And we quite significantly exceeded the target for the Dmarts by year-end as well. At the same time, we drove the business forward in many aspects, realized significant growth in the top line and also made very promising progress on increasing efficiencies. Increase the strength in our footprint both through small acquisitions, such as Glovo Latin America or InstaShop. And we also invested organically into our existing business. We feel there is a very solid fundamental in place for significant further growth from here. But before we come to that, let me hand over to Emmanuel for the financials. Emmanuel?

Yes. Thanks, Niklas. Good afternoon, also from my side. As Niklas already mentioned, we are quite happy with the results we can share with you today, not only for 2020 but also for the first quarter 2021. And let me start on Slide 6 with another view of the past year. You have seen most of these numbers in a preliminary basis already in February, and they haven't really changed since then. So stating the obvious, our reported numbers for the fiscal year 2020 are including our year-over-year operations and excluding Woowa. So we have basically doubled our business in terms of orders and total segment revenues. On the profit side, we have improved efficiency further, and the adjusted EBITDA over GMV margin has improved by 1.2 percentage points to minus 4.6%. So while in the past, we have shown adjusted EBITDA to segment -- total segment revenue number, going forward, we are showing adjusted EBITDA margin over GMV, simply because this is becoming more and more the market standard. And it also makes sense from the business point of view as the conversion of GMV to revenues differ significantly between the commission-based business in the food delivery space, where we act as an agent, and the new verticals or businesses where we are the principle, which is especially the case in our Dmart business. So looking at the segment results. While you already knew the MENA and the Europe numbers since February, you can see today that also in the Asia and Americas segment, we have improved the margin significantly, which is also in line with the improvement we have already presented to you in Q3 on the contribution margin slide. So given also the early stage of our operations in the Integrated Verticals segment, the margin here is, of course, seen more negative than in our other business. So let's move to the next slides. And let me cover a couple of the items below EBITDA on Slide 7. I saw that new information we published today, and some of them probably need a bit of explanation. On this slide, we are comparing 2019 and 2020 and the progression of -- from adjusted EBITDA to EBT. And as you can see, the smaller part of the items between adjusted EBITDA and EBT are cash relevant. So those are EUR 135 million in 2020. The biggest part of this EUR 92 million related to our management adjustment to EBITDA that mostly consists of costs related to corporate transactions and financing rounds. Of the EUR 92 million, this accounts for EUR 66 million. Then a couple of comments on the last bracket of noncash-relevant items. The share-based compensation expenses went up, mostly due to the higher numbers of employees and therefore, logically, a higher number of eligible years for this. The depreciation and amortization increase compared to last year, both due to the higher CapEx for our Dmarts, but also due to the growing business overall. And the main increase stems from FX related to financial instruments in effect. So let me mention here 2 large -- largest effects here. So firstly, we had to have a cash settlement option linked to the convertible bond we issued in July last year. And due to the strong share price increase, this derivatives led to effect of minus EUR 193 million. Also, we had negative effects in the amount of EUR 161 million related to intercompany loans and foreign currency balance. And as you can see on the chart, a large part of the more than EUR 800 million gap between adjusted EBITDA and EBT is explained by these noncash-relevant effects. Up until now, we have discussed the 2020 results, and they were applicable in our so far relevant scope of operations. But as Daniel already mentioned, going forward, we will present and discuss our results in the scope that is going to be the relevant one for the future. So let's turn to the next chart that lay out the basis of our future reporting to you. So basically here, we are adjusting for 2 things from January 1 onwards. But firstly, we are including the Woowa financials from the beginning of the year on the pro forma basis, while the actual consolidation of course only starts with the closing of the transaction on March 4, 2021. Secondly, as you know, we are required by the KFTC, the antitrust in Korea, to dispose of our Korean operations, which are mainly those under the Yogiyo brand. And while this sale hasn't yet taken place, we are also excluding the financials of Yogiyo from the 1st of January 2021 onwards to give a better picture of the group as it will be operating in the future. So on Chart 9, translate the 2020 results into this pro forma setting in order to give you a true picture of what the group would have looked like on a 2020 full year basis. So as you can see in 2020, and on a combined basis, we would have processed 1.9 billion orders. And given that today's quite small share of own-delivery orders at Woowa, the overall share of own-delivery orders would have been lower than at 45% instead of the 61% we generated in 2020. Together, we would have generated a combined GMV of almost EUR 22 billion and total segment revenues of EUR 3.5 billion. The adjusted EBITDA-to-GMV margin would have stood at negative 2.6% (sic) [ 2.7% ] instead of the negative 4.6%. So again, the same pro forma logic will be the basis now when we go into the Q1 trading update numbers. We have also adjusted all the historic numbers accordingly. And I will keep my comments very brief as most of the numbers will be very straightforward and to save time, for sure, for the Q&A session. So on Chart 11, I really like this chart as it does not only show the tremendous growth in the last 3 years, but also high stability of growth. The Q1 2021 GMV stand at EUR 7.8 billion, 83% higher than a year ago. And we generated EUR 1.4 billion revenues, which is an increase of even 116% year-on-year on reported currency and 129% on constant currency. Let's move to the next slide. Here, I'll also keep my comments short on Slide 12, which summarizes some of the highlights of this quarter. The most important event was certainly the closing of the Woowa transaction on March 4, and we have already given you many details about that business in our call on March 16. But beyond this and the strong top line growth I already mentioned, we have further increased the share of our own-delivery orders year-on-year to 48%. Again, that number is based on the pro forma scope and cannot be compared to the above 60% we have reported in the past without the addition of the Woowa transaction -- operations. So as you know, we drive this expansion of own-delivery orders in Korea as well. Another highlight was the progress we have made in the quick commerce space. As you know, quick commerce comprised both the Dmart, that we report for the Integrated Vertical segment, as well as the delivery we do for third-party vendors, and that is reported in the platform business. So regarding the Dmart, we operate around 600 at the end of March. And overall, the quick commerce business grew by more than 400% year-on-year compared to the same quarter in 2020. It's probably fair to say that we are a clear leader in that business outside of China and continue to see very high growth rate. So let me now also comment on the last bullet. Having acquired a lifetime operations from Glovo in September last year, we have completed the migration of those activities to the PedidosYa platform first -- during the first quarter of this year. And generally, we are close to having migrate all our operations to 8 platforms on a global basis and expect the migration of the last 2 countries during the next 6 months this year, 2021. I would like to say that this centralization process has been quite an effort in recent quarters, and we are now already more and more benefiting from these investments, as, for example, the rollout of technology components or features can be executed much faster and more seamlessly than in the past. And with this remark, let me jump over the group slide and go quickly into Asia on Slide 14. In terms of segment contribution, it's worthwhile to mention that the Asia segment already has a share of 47% (sic) [ 47% ] of total segment revenue, highlighting the growing importance of this segment, which, are again doubled its size year-on-year in Q1. And we're not wanting to take away too much of the later slide on the contribution margin. This is, therefore, even more exciting that also on a contribution margin basis, Asia is making significant improvements. Also, I would like to highlight that we are several times larger than our closest delivery competitors in this region. We also grow faster. And worth mentioning that the company recently receiving USD 4 billion valuation [ getback ]. Now moving to MENA. The MENA segment has a fantastic start to the year, with order growth of 65% year-on-year, and GMV and segment revenue grew only a few percentage points below this. And as you remember, our MENA business were severely impacted by COVID-related restrictions in 2020 and even suffer a 6% order decline year-on-year in Q2 last year. But now, it's fair to say that also in March this year already had a relatively easy comp. And January and February combined still grew by circa 50% year-on-year. Now moving to Chart 16, where in Europe, we also had a very strong start to the year, as you can see on this slide. Order increased by 85% year-on-year. GMV and revenues were even stronger with 113% and 137%, respectively. And also here, March was a very particular strong month with orders of 111% year-on-year, so 111% growth year-on-year for the month of March. Turning to the last 2 remaining segments. And at the risk of being boring, very strong growth is the main topic here, too. Americas, on Chart 17, you can see that this segment is proving us right in the investments we have made in 2019 and before. The top line year-on-year growth range from 141% for orders to 183% for segment revenues in reporting currency. And already, 83% of the orders are delivered by ourselves, which compared to 62% in Q1 2020. Lastly, our Integrated Verticals business had explosive growth over 600% on GMV. Also worth pointing out that an equally large part of our quick commerce business via local stores and therefore, not part of the Integrated Verticals. On a segment revenue basis, Integrated Verticals now contribute with more than 10% of the total segment revenue of the group. And now I hand it back to Niklas for the next slide.

Thank you, Emmanuel. So I'd like to quickly comment on the profile of the group in the new scope and beyond the pure size we have now reached. And if you look at the number of countries in which we are leading and the share of GMV we are generating for those countries, you can see that today, more than 95% of GMV comes from countries in which we have a leading position. No other global player is even close to have this level of leadership. And I'd like to highlight that we do look at clear external data for this that you can also go back and look at yourself. I think it's clearly visible that we are a leader where we say we are leader. Strategically, this also puts us in a very good position where we can well respond to any change in the competitive situation in any of the countries we operate. And be sure, we will respond. With our focus on cost and efficiency, we are in a position where we would never have to be accepting -- being more expensive or having a lower service level than any of our peers. And speaking of efficiencies, let me then quickly give an update on the same case study of contribution margins, as I showed in Q3 last year. So what you can see, the picture looks quite nice, while there was and will always be some short-term volatility, the overall direction clearly points upwards, and all of the platform businesses are showing contribution margins that are positive. You can also see that the further strong improvement that Asia has achieved and that Emmanuel has already mentioned. While we continue to work on cost efficiency, we have more recently also seen the effect of the initiatives that have started a while ago on, for example, dynamic pricing of delivery fees, which is being rolled out in more and more regions. And that is also being implemented in smarter ways than what you're used to. Worth pointing out that these charts do not take noncommission revenue into account such as premium listing or [indiscernible]. On a group basis, these revenue streams accounted for 1.4% of GMV in 2020. And this one has been increasing to approximately 1.7% in Q1 2021. So you can essentially add that or simplistically speaking, you can add that to our gross profit. And the picture remains broadly the same if we adjust for voucher costs, which have -- we have done in the graph of Chart 22 here, especially the Americas and the Asia segment have again achieved strong improvements in Q1 this year. As we are aggressively rolling out logistics in Korea, there may be a temporary dip in progress for a couple of quarters, but the trend is clear. You can also see that the LatAm business is now almost on par with our European activities. Again, these graphs won't always go up in a single line. And also, on the share of vouchers as a potential segment revenues, you will always have variation from quarter-to-quarter. But overall, you should expect further improvements on the contribution margin and a gradual decline of the share of vouchers. But now let's finally turn to the guidance for the year, which, of course, is an important part of today's call. And on Chart 24 here, we have a summary of what we're aiming for 2021. Let me emphasize again that this outlook is made on a pro forma basis and factors in the inclusion of Woowa for the whole year and the exclusion of Delivery Hero Korea, also for the entire year. From that basis, segment reported GMV of between EUR 31 billion and EUR 34 billion and total segment revenue of between EUR 6.1 billion and EUR 6.6 billion. Regarding the adjusted EBITDA, we are expecting to achieve a margin over GMV of between minus 1.4% (sic) [ 1.5% ] to minus 2.0%. Importantly, this margin guidance includes investments in the magnitude of around EUR 550 million negative EBITDA into new markets and verticals. One of these investments is into the expansion of Dmarts business, which is captured in the Integrated Vertical segment. And the second bracket is the expansion of our footprint in the new markets we and Woowa have entered into recently. In terms of relevance, this mostly refers to the ongoing expansion in Japan and Vietnam, but also in the countries we have acquired last year from Glovo in Latin America. We are convinced about the potential of those investments, and we hope that the track record in terms of capital allocation we have built over the past helps you to also trust us with the investments we are planning in these areas. That means without our expansion into new verticals and new territories, it would be close to breakeven this year already. Before we go into Q&A part of this call, we want to briefly touch on the topic that, for many good reasons, gets more and more attention. This is the overall topic of ESG with its many various aspects. One of the company value we have is we are here because we care. And we do take this seriously. And as such, we are working on a multitude of initiatives for many years already. While we are far from being perfect, we have a number of achievements that we also want to speak about more. The first is the question on how we work together with the riders. In my view, there are a few fundamental misunderstandings in the public discussion when it comes to riders and the relationship to delivery companies. One is that the belief that all the riders who want to be employed, while the companies are forcing them to work as freelancer. Another one seems to be the belief that delivery companies do not care much about their riders and how they're being treated. And both of those views are completely wrong in our view. To start with, it's in our very own interest to make sure that riders are satisfied with their working conditions as they are essentially 1 of the 2 touch points you have with our brand. The first being on the app and the second one being with the rider who delivers the food or other items. We are, therefore, since long, doing a number of things to increase the satisfaction of our riders. And Emmanuel will give an overview in a minute as he is the leader of the global rider program that is in place since 2019. And secondly, as we have argued many times in the past, flexible work competition are preferred choice by most riders and staff. And instead of looking at surveys, let's look at a simple case study for hard, empiric data in one of the countries that we have a very high level -- or high level of labor protection, which is Norway, with possibly the world's strongest union, at least as far as I know. And in Norway, we have struck a collective bargain agreement. It's a very good agreement for everyone being employed. And the Norwegian union has done a very good job here. But on the back of this, when riders want to work for us, they can choose if they want to have the collective bargain agreement that have been negotiating with the union or if they want to be freelance. And we have this in almost all cities. And what you will see is that most riders choose the freelance model. Actually, 7 out of 10 riders go for the freelance model. And it makes sense as it allows them to better adopt the work to the personal situation, which, for the great number of reasons, might mean that they can work a lot 1 week or month and nothing next week or month or spontaneously go out and deliver during a boring evening, or stop and pick up their kids from school, or decide to take some orders from one of our competitors when we are not able to give enough orders to keep them busy. And on top of that, it gives them opportunity to earn way more money in the same time frame. And that's their #1 priority. And we have seen players probably say they're employed but usually close to minimum wage. And that's at least not what our riders want, and we will fight hard for making sure that we deliver what they need and what they want. And irrespective of our engagement model, we can and are supporting them with central measures to the extent possible. One example of how we support, especially the freelancers, in the COVID rider fund, or is the COVID rider fund and have initiated on our own and have funded with EUR 3 million. Out of that fund, we compensate those riders that are directly affected by COVID for the duration of up to 2 weeks. That means if you are, for example, affected, you can't work, we are paying your lost compensation. Well, this is one example. We have, as I mentioned, also structured program in place that Emmanuel will briefly introduce you to.

Thanks. So as Niklas has mentioned, the Global Rider Program is in place since June 2019 and is consolidating many initiatives that have partly already been active before. Purpose of this program is to improve the experience of the riders while also contributing to the business objectives of our companies or of Delivery Hero. And we believe that the two actually go hand in hand. On the chart, you can find the 8 different main work streams that we are pushing here. But let me give you 2 examples. Under the Workstream 6, you find the cash collection. And what it means is that we have constructed a solution for the riders to deposit the cash they collect as part of their work much more efficiently and frequently than in the past. The advantages for them are that they lose significantly less productive time than in the past when they had to drive longer distances just deposit the cash collected. They can use this time more predictably to make another delivery and earn more money. And also, the personal safety increase as they are less attractive targets for robbers. And at the same time, as the cash deposit is linked to a code generated on the rider app, the cash reconciliation is much easier process for the finance departments of Delivery Hero. Another example and a little bit more longer-term project is the rider public policy workstream, which tries to help shape a regulation that address the requirements of both the delivery industry as well as the riders and that facilitates the flexible working conditions that many of our riders are looking for. So we have started to engage with policymakers and also together with other delivery companies are going to continue with this. Happy to dive more -- I would be happy to dive more into more topics, but for the sake of time, let me hand it back to Niklas now.

Thanks, Emmanuel. So the final 2 aspects I want to mention are the initiatives we pursue regarding climate action and the diversity inclusion at the Delivery Hero. Regarding our carbon footprint, we have communicated already in 2019 the objective to become carbon neutral by the end of 2021, and this including packaging and all deliveries. We have achieved this in 2020 for our European and Latin American operations and are on track to do the same for MENA and Asia by the end of this year. And as everyone else, at the moment, we're achieving this goal mostly through offsetting and we are aware that we need to go beyond this, and we are launching many initiatives, of which, one is a sustainable packaging program in 2021. That will help to reduce our carbon footprint, and we will also set our targets to actively reduce our CO2 emission going forward. In terms of diversity inclusion, I truly believe that Delivery Hero is already today on a quite good track. We are combining more than 100 nationalities in our workforce. And if you walk down the floors in our Berlin headquarter, you have people from all places, with all kinds of preferences or beliefs present, and we see them working strongly together. We do a lot to do to foster and support an inclusive sentiment through our workforce. The most recent initiative in this regard was launching the diversity inclusion advisory board that is tasked with further supporting our commitment in this area. This was it from our side at the moment. We are extremely confident that 2021 will be another very successful year for Delivery Hero and we hope you continue to support us on the journey. Now we are looking forward to your questions. Moderator, please kick off Q&A.

[Operator Instructions] The first question is from the line of Joe Barnet-Lamb from Credit Suisse.

Joe Barnet-Lamb from Credit Suisse. I have 3. So firstly, within your EUR 550 million, you flag a few areas of investment. The fact that you're not mentioning Korea in there, does that mean you expect Korea to be profitable in 2021? Some discussion around that would be great. Secondly, on Dmart openings. It looks like they slowed a little bit in 1Q. I believe you were in the high 10s per month at the back end of last year, and it looks like you're in the low tens per month in 1Q. Firstly, do you agree with that? And if so, why is it? And how many Dmarts do you expect to have at the end of 2021? And then thirdly, on MENA and contribution margin. So the MENA contribution margin seems to have flatlined over the last couple of quarters. Is that now capped? Or where do you think it can get to over time? And do you see any reasons other divisions can't match MENA?

Perfect. Thanks, Joe. So on the first topic, we mainly wanted to kind of show the investment, which were new initiatives such as the Integrated Verticals as well as new countries. We felt like you start adding a portion of our logistics and so on, it feels like -- and of course, we will invest a lot of money there, but it's so integrated to our core that -- and what you're used to when you evaluate or assess Delivery Hero as a company. So we didn't feel like that would be appropriate to kind of pick and choose a little bit there. So that's why we didn't include Korea logistic as investment. But you're absolutely right. There will be significant investments there. We do not give guidance if those investments will exceed the profitability. But yes, I'm super excited about Korea. I think we are in a super strong position, and I'm very excited about our plans. When it comes to Dmarts, so you are right. I think you opened 239 or so in Q4. We did 149 or so in Q1. So there was a little bit of a slowdown. I think one is that we pushed really hard in Q4. Second is that we also were a little bit careful that we don't add more stores than we can [ shore ] because there's the high cost of having stores with low utilization. And many players that we've seen around there, they don't take into account that you have store managers, you have CapEx, you have pickers, you have a lot of things that if you don't have the store on full capacity, then you have very bad economics. Therefore, we were a little bit more cautious maybe in Q1. I think what you should expect is that this will ramp back up and continue to grow very fast for the remainder of the year as that's seen both an increasing competition, but also our ability to drive orders and business has been higher than probably expected in Q1. Then in terms of contribution margin for MENA. It's a little bit flat. It's probably not been the key focus. We have some areas where we have been doubling down a little bit harder, such as Egypt. We also wanted to drive more of own-delivery share in these markets. And we -- yes, we probably prioritized 1 or 2 other things ahead of this. We also launched a quick commerce, not the Dmart side, but also even further into the other angle, which may have countered a marginal impact as well. In terms of long term, we believe that we will be within where we have guided to. I think we have kind of said that we expect that we're setting our targets on gross profitability between 11% and 13%. And we believe that MENA will also be in that range. But probably slightly higher priorities in some other markets as we are already fairly close to these levels if I include Integrated -- sorry, if we include noncommission revenue initiatives as well. So all on plan when it comes to MENA and gross profit.

The next question is from the line of Andrew Gwynn from Exane BNPP.

Andrew Gwynn, BNPP. Yes, 2 questions, actually, make it 3. But first question, just if you could, again, flesh out a little bit more on the investment. So approximate weighting -- obviously, we don't need to be too precise, but yes, approximate weighting between the Integrated logistics and then new markets. Second question, as you're going back to the slides, obviously, you talked about those noncash costs. Just having in mind how much of those may eventually in time become cash? And maybe if there's any sort of further risks there around some of the derivatives on the convertibles? And then the final question, just thinking about CapEx, obviously, not normally a question we would ask a food delivery company. But given the growth of the Dmart business, should we start to think about CapEx as becoming quite material in the context of the group? It's obviously picked up in the last 12 months.

Happy to cover the first one and Emmanuel on the other 2 questions. So we do not give a breakdown on how much to Integrated Verticals and how much goes to the new market. And partially to keep a little bit of flexibility, but also not to signal too much information to our competitors, how much we will be investing. But to help a little bit there. What we see normally is that when you launch a market, the cost in the first year is usually less than in the second year as you first need to build good coverage before you can start spending on a significant marketing as well. So therefore, you would expect that the new market will increase in investments. When it comes to Integrated Verticals, we are ramping up. A big part of the ramp-up happened also end of last year, and we will keep on ramping up very quickly this year. So similar kind of methodology when you -- similar methodology here that you will expect that we will increase our investment there versus this year. Exactly how much in each of these buckets, I'd like to keep still a little bit for ourselves for the time being. Emmanuel?

So just before Emmanuel jumps in, but just on Japan, it's clearly a market which could be huge, but starting from a very low base. Is that a market where we should expect very significant investment? Is that a big, big opportunity and therefore, area to focus on?

So yes, we think it's a very big year opportunity. But we are not the first one to enter. So we need to find ways how we clearly differentiate ourselves and that we clearly offer a better service. And so we don't always want to win by spending more money. That is rarely a good strategy for coming as a #2 because you advertise for the industry. And therefore, the beneficiary is actually the market leader as often also better service due to the size advantage that is there. So therefore, we will have to be very smart and it's not only about spending money but it's doing the right things to improve our service to the point that we are clearly better than our peers in that market. It's still early stage. We are super happy with the development of Japan. As we said when we launched it, this is a little bit of a test. And granted, we're several years behind some -- a strong competitor like Uber Eats and even more years behind someone like Demae-can and still catch up. We think so. We hope so. But it's going to be a little bit of an experiment. It's going to be very, very hard. So far, we are very happy, but still too busy.

So Andrew, I'll come back to your 2 questions. The one is the risk, if I remember, what is the risk to see the noncash position...

Sorry, Emmanuel, you were cut off at the beginning there. Sorry, I couldn't hear.

Yes. No, I wanted to cover the 2 questions. So the first one, if I remember, was like is the risk to see some noncash relevant position becoming cash relevant, right? The main part of this EUR 686 million noncash-relevant matters were basically financial impacts. So the first one, its correspondings are -- was the valuation effect related to a cash settlement option that we had in our convertible bonds in connection with the Woowa transaction. So that was like the valuation. And we don't expect any cash implication in the future. The Woowa transaction is closed. And the second big portion, and it was about EUR 160 million, and I mentioned it also in my -- in the slide before, were basically linked to the valuation of our intercompany loans that we have within the company. So the FX impact or the movements in U.S. dollar to euro. So also noncash, but we have to valuate this impact in our results, in our balance sheet. So I don't think that these 2 major positions, I don't see any areas to become cash relevant. The same will apply obviously for share-based compensation program. Your question on capital expenditure. So I completely hear. We are obviously monitoring our CapEx as we develop our Dmart business because this is a CapEx-relevant topic for the business. So we are watching that closely. And we expect this CapEx and we see this CapEx decreasing over time as we get more experience and we know how to open Dmarts even more efficiently from the CapEx point of view. I would put the Dmart...

Emmanuel, I'm really sorry, I'm not sure if there's a problem with your line or my line but you keep sort of fading in and out. So I don't know if it's in my end of on your end, sorry.

Do you hear me, Niklas? Or...

Yes, I hear well.

Okay. So I mean, I can maybe repeat. So on the CapEx.

Just on the CapEx, sorry. I think I got the other part there.

Sure, sure. On the CapEx. So yes, we are monitoring this closely because we are, obviously, for every single store that we open, we do have some CapEx expenditure. So we do close -- watch closely. We see also that the CapEx are reducing over time. We see a decrease as we open more and more CapEx -- Dmarts because we do have a better experience. We know how to optimize the investments that we're doing. Going forward, we might see -- we also will open some -- maybe some distribution center. So that also we should expect some CapEx. Having said that, our investments last year in terms of CapEx were about 6% of the revenue. So a little bit higher than what you might expect for a food delivery company, but still low. But you're absolutely right. We are monitoring this CapEx per store.

The next question is from the line of Andrew Porteous from HSBC.

Niklas and Emmanuel, could you just talk about the Dmart business and just sort of how you view the opportunity by region? Are there some areas that are sort of structurally more attractive, thinking maybe Asia versus Europe here? And sort of what you look for when you're opening a Dmart to judge the opportunity there? And then a second question, around the shape of profits this year. You've obviously helpfully given the guidance. But should we expect an improving trajectory of margins as we -- in H2 over H1 as we've seen in previous years? Or are there other things to consider this year like the rollout of own-delivery in Korea or the timing of Dmart rollouts, for example?

Perfect. So when it comes to the Dmart opportunity, I think it's a little bit the same as for food, Andrew. This is something that works in -- all humans wants to simplifying their life and get things delivered in 10 minutes. That's an amazing service regardless if you sit in Asia or sit in Europe or in U.S. Now it's a question where is it more economical. The problem here is that in markets where we have higher labor cost, there's also usually a higher willingness to pay and pay for services and so on. So I can't really say where this will be more or less attractive. I can only say that for us, we will focus the most in markets where we are very strong with our food business. Because that's where we can have a clear differentiation to our competitors, but also on the new entrants only doing the Dmart business. So here, we will double down and do whatever it takes to make sure that we emerge as a clear leader, not only in food, but also in quick commerce. When it comes to the margin, we do not give any guidance here. I think in general, what one would expect is that will continue to gradually improve margins as we improve our gross profitability and as we grow our GMV. You are correct that there will be more investments in Korea when it comes to logistics and that will take down potentially in the second half a little bit there in terms of profitability. But I would probably still expect that overall the business will rather improve the margin over time despite that. Then on the -- yes, that was the 2 questions.

Could you -- just as a quick follow-up, could you just give us an idea on what the geographic profile of your Dmart locations are at the moment? What's the split by -- of the 600 by region?

We do not give that. But we started in Middle East. So you can expect that Middle East is still the largest there and where we have been pushing the hardest. Asia has been the second region to expand on this, while Latin America was very early on, but they were more on the quick commerce side. So they started more as a quick commerce player and then moved to have both the local store as well as the Dmart. For Middle East, it's the reverse. They started with a Dmarts, then afterwards, they added to local stores. Europe is probably the one where we are a little bit behind. So -- but it's also a much smaller region for Delivery Hero in total.

The next question is from the line of Andrew Ross, Barclays.

Great. My first one is on Grab, which Emmanuel mentioned in the opening remarks. So they reported pretty decent delivery GMV of $5.5 billion, and they're talking about making money in delivery this year. I get it's not like-for-like. They're in some markets you aren't in. But can you update us on how you see the competitive position with them in Philippines, Thailand, Singapore, Malaysia, both in terms of orders and GMV as opposed to Google Trends? And is there any difference as you see it between their unit economics and yours? It would be helpful to get an update on both countries. The second question is on vouchers and how you think about them across food delivery and Integrated Verticals? And I guess in some of these countries, there are the same consumer using the same app to get both restaurants and dark store inventory delivered. So how do you think about allocating that subsidy in both countries? And then the third question is on quick commerce. You mentioned, I think, Niklas 400,000 orders a day in April. And clearly, that's coming both from the dark store model and the platform model with local merchants. As you kind of think 5 years out, how do you see the split between those 2 things? And any kind of comments you have on 1P versus 3P in a quick commerce world would be interesting.

Thank you. So starting with the Grab. So you correctly said $5.5 billion in GMV during last year. In dollars, I think in dollars we did in our Asia segment we did something like $20-point something billion in GMV. So that means we were approximately 4x larger than Grab on GMV basis there. Then of course, we have Korea, but they have Indonesia. So we both have markets where we don't compete. But most of the markets, we do compete. Exact how we trade on comparative environment in the specific market, I'll leave up to you by looking at AppAnnie or Google or other places you can find. But I would strongly disagree with the message that Grab is sending. I do not see what they see putting this way. And also given the size of relatively small $5.5 billion with moderate growth. We did grow faster quite significantly there. Both, if you look at food as well as if you look at all of their business, including rides and everything, which I think totally, including payment, was something like $12 billion versus our $20 billion. So -- but then again, I'll leave it up to you to make your assessment. When it comes to unit economics, I can't give too much there. I think they said that they want to be breakeven in the second half of the year as far as I have understood from media and other things I've seen, in food. But of course, they put most of their cost into some central overhead. So it's very hard to know what is the true economic and true profitability there. But at least, they indicate that it will be profitable there on a unit economics basis. Then the question there on the subsidy, did I understand it correctly that subsidizes more for the verticals or -- could you help me a little bit on the third question before I go to the fourth?

Yes. I guess if you were subsidizing or if you were issuing a voucher to a consumer and restaurant delivery in many launched Integrated Vehicles into that market. Are vouchers really coming down if you're just pivoting those towards dark stores?

Yes. So when we launch new businesses in new areas, it is -- for us, we do it sometimes with a free delivery trial or something like that. We do not do GBP 15 free, like some other players do. But we do maybe EUR 1 or EUR 2 free. So that they don't come because of the vouchers. But there is a small incentive to try out, at least, you -- maybe free delivery or such. So we do a little bit more of that when we try to get customers to try our services or early stages in certain markets,where we do some initiatives. So that means as we grow our Integrated Verticals, there is a degree of vouchers there. The same as we go for markets like Japan, new markets we want people to try out. There will be a fair amount of voucher as first-time customers and the proportion of first-time customers is, of course, very large when you launch a new market. But sustainably, we also are not big believers in vouchers. We don't see this working as a tool for increased frequency or to retain customers. We generally agree with a takeaway on that point. It's usually lost money. As soon as we pull it back, the customers, they're gone. So we try to avoid that as much as possible. Then -- yes. And then on the quick commerce, right now, on 400,000 orders per day, how would that look long term. And here, I have my views and I have my thoughts. But it's too early to speculate. I think, in general, it can be a very large space, but I also think that many players and investors will burn their money and then burn their fingers on the temptations to invest in some of these players. I do think that economics will be very challenging for many of them.

If I could just follow up on the first question. Are you saying that in each of Philippines, Thailand, Singapore and Malaysia, in food delivery specifically, do you think you're bigger than Grab in terms of GMV and orders?

I didn't say that. But I think if you would look at most data points, I think it's fair to come to that conclusion, yes.

The next question is from the line of Giles Thorne, Jefferies. The next question is from the line of Sreedhar Mahamkali from UBS.

Yes. Can I just follow up on Andrew's question on Grab, please, and then a couple of other ones. First one, where we can see the profitability targets that they've put out are after or before certain region costs and cost allocations and things like that. The exact numbers are what they are. But I was more interested in exploring if you're actually seeing anything different on the ground in terms of either moderation in competitive intensity, vouchering, which is some of the things I think they're signaling. Do you see anything at all on the ground? Clearly, you two are leading players in the market that Andrew just referred to, Philippines, Thailand, Malaysia and Singapore. So it would be helpful to know if one of you is signaling a fairly dramatic profile in margin trajectory. How that is coming across on the ground, please? Any comment would be super helpful. And secondly, just kind of going to Korea for a second. Can you talk about your share there -- Baemin share, how that's evolved in Q1? Are you holding or are you regaining share as you start to expand in logistics? Again, maybe anything more you can share there, Niklas, will be super helpful in terms of how that logistics model is evolving in terms of commission rates, restaurant choice, speed to market? And finally, just in terms of that EUR 550 million, I appreciate you're not willing to give us this sort of breakdown between IV and new markets. But are there any puts and takes here as you sort of go through the year because you've signaled your willingness to invest as much to your competitors as to us. But are there markets where you could see potentially if things go your way that EUR 550 million additional investment could be smaller than that? And what are those puts and takes? That will be super helpful.

Perfect. So I think in general, it's more of a constructive market. I think we both or most players in our industry start to try to win on the product experience. So do we. We try to making sure that we have a better product and experience and investments and money starts to play less of a role when you have that size. It's way more effective to actually offering a better service. And you can invest significantly less than another player and still win a market share if you have that product. But I think in general, it's -- it remains fairly constructive. And I think we are fairly focused as well and rather, as I said, focusing on our product experience and throwing money out there to -- yes, throwing money out there. When it comes to Korea and Baemin, so I think, in general, our own market share has been fairly stable for quite some time. But of course, when you come from such a high market share of aggregators, if someone puts an enormous amount of money into vouchers and discounts, there will be -- they will get some customers. And the market is still evolving. This market is still early. So even if we grow in an accelerated basis, and if you grow from no orders to 10 orders even, that would be a market share gain. And that's why I wouldn't -- I think I indicated in the last call that one should expect that we will continue to grow very fast, but not necessarily that we're going to win market shares at this point in time as long as someone is investing at that level. I think, in general, we have already done some initiatives to making sure that we have a very comparative product, good restaurant coverage, improve our logistics. But we are still a little bit too early to really have put the metal to the ground. You will probably see that rather in a couple of months that we will significantly accelerate and we feel like we have that product ready. But already now, I think market dynamic is pretty good. In terms of the EUR 550 million investment, I think we should count on the fact that it will be EUR 550 million investment. So I don't expect it to be less. I don't want to give that split. I think the investment into new markets are probably more predictable. So we know here more granular how much that amount will be. But we might want to allocate more money into the quick commerce space if we see that the competitive dynamic is heating up or that there is more market and trends and so on. Then, as I said, the initial lead that we will not accept being more expensive. We will not accept having a worse offering. We will not accept if someone is delivering in 9 minutes, we will not accept to deliver in 10 minutes. We will deliver in 8 or less. So whatever time they deliver, we'll do it faster. Whatever price to offer, we'll do it better. Whatever store they have, we will do it more. And therefore, it's a little bit less predictability on the investments into the new verticals than into the market itself -- into the new markets. But expect EUR 550 million.

One quick follow-up. Where do you see logistics with Baemin by the end of the year in terms of percentage penetration of OD? And perhaps just in terms of constraints, are there any? Clearly, the third-party distribution networks have there. Are there any constraints for you to really accelerate it as fast as you want to? Or is that not entirely possible?

No. We don't see any big constraints more than rolling it out and all the work and execution work that needs to happen to get that done. But no particular constraint there. I don't want to give any exact number on how big the OD part will be by the end of the year, but we will, for sure, be the largest logistic company in Korea that -- there is no question there. So -- but I leave it at that.

Sorry to interrupt. Maybe let me just jump in here quickly and say, we have a couple of minutes left only and 4 people in the queue. So if the next people could maybe limit their questions to 1 or 2 max. So hopefully, we can cover everyone. But if not already, sorry, then reach out to us later. So Sugi, back to you to take the next question.

The next question is from the line of Adrien de Saint Hilaire from Bank of America.

And yes, Daniel, I'll limit myself to 2 questions, which are maybe perhaps a bit more frame and all. So there is a guidance at the midpoint of 49%, I think, if I'm not mistaken, on GMV. You just did 83% in the first quarter. And of course, comparatives are getting a little bit stronger throughout the year. But could you just tell us why would things slow down? That's the first one. And then second one, your EBITDA guidance is pegged as a percentage of GMV. I'm just wondering if ever we have like better-than-expected GMV, would we still have the same formula i.e. would we have potentially like bigger losses if the GMV is bigger? Or in that case, would we have an upside to the EBITDA figure?

Yes. Happy -- yes, sure. Happy to start with the progression during the year. It's fair to say that at this stage, we've been, let's say, prudent concerning the outlook. I think looking at the world today, the COVID pandemic is not completely over. We see that in Europe, and we see that in other part of the world. We are looking at the next month in a conservative way, and that's probably the way that -- what we did last year, and I think it was a very good advice, and we will continue during this year, 2021. We see some regions like Asia coming out of the COVID. But still, we don't know exactly what will be, first, the reaction of the customers once the COVID is over. We have some scenarios in mind, but we have been here prudent in our estimate for the rest of 2021, and secondly, how long the current pandemic or the COVID pandemic is going to last. Hopefully, they will end soon, but it doesn't seem that way in Europe. And looking at South America, that we're basically the coming up of the summer, we see the same kind of development that we've seen in Europe in terms of coming out of the summer time and the number of cases is raising. So that's the reason why we've been prudent because things are moving extremely fast in terms of restrictions, sometimes from government. And that's the reason where we took this sort of conservative and prudent view. Having said that, this is still a nice growth compared to last year.

Maybe I cover quickly second question because here is more around how much we can invest at a good return as well. So I think it's actually the opposite. If we see a lot of good investment opportunities, that would mean that our EBITDA would rather be in the higher or slightly higher than the midpoint. But it will also probably mean that the GMV will be higher. So therefore, in that scenario, we'll have both high GMV as well as potentially even higher GMV as proportion of EBITDA. But again, the EBITDA and GMV is very much driven also by the investment opportunities, the returns that we're seeing, the opportunities that are at hand. And hopefully, there are a lot of opportunities at hand, and we can grow faster and then it might also mean that we have invested harder.

The next question is from the line of Giles Thorne, Jefferies.

My first question is on Turkey. We've now seen the launch of Getir Yemek, which I think is the first example of a dark store [indiscernible] in the world actually pushing into online food delivery. So I wanted to get your thoughts on that, Niklas? And how do you deal with a problem like that? And then forgive me for both these questions, I jumped off the call earlier, so maybe they've been answered, but my second question was back on the question of Grab and noting all of your comments, Niklas. It doesn't refute the fact that they are going to have $5 billion of liquidity that they're going to be pouring into the region to compete with yourself. So I just wanted to get your thoughts on how you think they will be spending that money and how you'll be responding.

Yes, so on the first question. It's absolutely right. We consider ourselves as the innovator on the quick commerce space, but there is actually a company who was before us when it came to dark store and there is Getir that started 2015. So that's 4 years head start when it came to dark store model. We have, in the last 1.5 years, matched, almost catch up with them in Turkey. So we are doing -- we are still a little smaller than them on the dark store. But we are definitely gaining market shares and we are maybe 60-40 or something like that. So we have managed to go from 0% market share to 40% market share in a matter of 1.5 years. That -- I think that shows the strength of our business. It's correct that they've invested in food and that they're doing an awesome amount of vouchers and discounts and promotions and so on. So if you see their orders will be very small in basket and highly incentivized, so I doubt there's any possible profitability coming out of that business. And we are pretty relaxed about it. Of course, if you do vouchers and promotions, you will get another 10% market share, maybe even a 15% market share. That is -- but what happens then? Because at some point, you have to stop with the vouchering and you have to make some economics. And in the end, I think, we will stand very strong. So the question is, can they sustain that, whatever, 10%, 15%, 20% market share and for how long can they sustain that market share until it falls back? That is still to be seen. We will -- we obviously take them very seriously and -- as I said before, and any product app that we potentially would have in any particular market, we'll make sure that those are being closed. No one should be able to offering better service than we do in any market anywhere. When it comes to Grab, I don't think that, that is a differentiating factor, how big your balance sheet is, how good your product is. And of course, technically, theoretically, they can spend $5 billion if they have a $5 billion balance sheet. Technically, we can also spend $5 billion if -- in that market if we would want to. I don't think any one of us want to do that. I don't think that will be sensible, I don't think it will be good return for investors. And I think all investors will be very critical to both us and them if we would burn money and waste money in that way. So even if they have big balance sheet, I think they're always bound by the fact that they have to make sensible stuff. And I think the same we could say with Meituan and [ Al Amaan ] to sit on even more money and more access to capital, but they are still making profit because at some point, it doesn't make sense to do more vouchering. What really makes sense is to build a good customer experience. That's my view.

So again, sorry, I need to jump in now. We already run over and we try to make more time, but we have to end the call now. I see that Ioannis from Morningstar, Sarah from Bernberg; Silvia from Deutsche Bank and [ Julie ] from [ Alliances ] still in the queue, so we will get back to you separately. Huge apologies for this. Obviously, more questions than we could take today. I'll hand it back to Niklas, if you want to -- any last remarks, and then we have, I guess, to end the call.

Yes. Thank you, and thank you very much for your support and for listening into our update today and this goes to all our shareholders. I'm extremely proud of what we have achieved so far or what the team has achieved so far. And while also recognizing we are in very early in our ambition. I would also like to give a big shout out to all our heroes around the world working extremely hard every day. You're doing an absolutely fantastic job. So a big thank you to you as well. And thank you, everyone. Have a good day.

Thank you. Have a good one.

Ladies and gentlemen, the conference has now concluded, and you may disconnect your telephone. Thank you for joining, and have a pleasant day. Goodbye.