Delivery Hero SE (DHER) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for standing by. Welcome, and thank you for joining Delivery Hero's conference call. [Operator Instructions] I would now like to turn the conference over to Christoph Bast, Head of Investor Relations. Please go ahead.

Hello, everyone, and thank you much for joining today's conference call. We trust you have all received the flash update presentation on the Glovo transaction, which we published yesterday evening on our IR website. I would like to remind everyone that this call is being recorded and the webcast as well as a replay of this call will be available later today. And Niklas will now give you an overview of the contemplated acquisition and share excitement with you, and then he will discuss our path to profitability. After that, we will turn it over to the operator for questions. And now let me hand over to you, Niklas.

Thank you, Christoph. So today, I'm here with Oscar Pierre to discuss the recent signed agreement to acquire the controller segment Glovo. And this is, as you know, a milestone transaction with the 2 leading technology companies joining forces in the delivery space. Therefore, I wanted to share with you some further background why we are so excited about this and the strategic rationale behind this transaction. Before diving into this. Let me introduce Oscar. Oscar is Co-Founder and CEO of Glovo and he will also share some of his perspective on why this is such a beneficial partnership for both our companies. So welcome, Oscar.

Thanks, Niklas. Hi, everyone, and happy to join.

So yes, I've worked with Oscar and the team for many, many years. I'm a huge fan, and I've been incredibly impressed with their shipments. As you know, Glovo is the leading, fastest-growing on-demand delivery platform across its core regions in Europe, Central Asia and Africa. What makes Glovo very special and different from many of other companies we have looked into, is that Glovo started as a multi-category player from day one. Being a native multi-vertical product with exceptional customer experience, the manageable leadership position and scale quickly despite having launched later than its competitors. They also had to be ultra efficient as we had far less capital. Glovo has developed good unit economics on a group level and is on track to be EBITDA positive in Spain and a few other markets. Last not least, Glovo is a founder-led company, built Oscar with possibly, in my view, the coolest product globally. So Oscar, please share your story with us here in a minute.

Thanks, Niklas. And again, I'm really excited to be here. I start the Glovo 7 years ago in 2015, when I was right out of college and together with my co-founder, Sacha Michaud. And I'm very proud and I'm very impressed of how fast we have generated such an impact by -- through technology in all the cities where we operate. I feel we have changed how millions of users get their local products and manage their busy urban life. On top of that and for most of our more than 100,000 merchants, we have created a new online channel that didn't exist before. And we are providing a flexible earnings opportunity through all the couriers that work with us. I'm a huge believer that we're in very early days in this journey. In all of our markets, both user penetration and user frequency have so much room to grow. I think our markets are still very young in terms of delivery industry development. And on top of that, as Niklas, we are probably the only Glovo delivery brand that started from day 1 being a multi-vertical app. And this gives us a lot of advantages in all this massive opportunity in quick commerce and all the verticals outside of restaurants. I'm very happy to have partner with Niklas and with DH. I have worked with him and his team for a while, and I believe it's a super match in terms of ambition, culture and a speed of execution to keep working on this and continue this adventure.

Thanks, Oscar. So the fit and alignment of delivery and Glovo can be seen by the common ambitions. So we have both been early believers in delivering whatever you want, fast, easy and to your door. The passion for multi-category delivery and quick commerce is at the heart of our journey, and has turned our companies into innovation leaders in the industry. Oscar, anything to add there?

I agree over the last years to also become a leader in multivertical offering, Delivery Hero is clearly ahead in multivertical offering versus their competitors or our competitors. And I would add, Niklas, a few more things that we share. First is an obsession with customer experience. We both believe it is the best tool to become leaders in each market. Second, that we both always invested in innovation to increase the value proposition to users and great things have come out of it as we'll see later. And third, the culture. I think we have a culture that feels very like in line. So yes, overall, I think it's a very good fit.

Thanks, Oscar. Then if we move on to some numbers. I think on Slide 3, you find some high levels, GTV or Glovo transaction value grew 80% organically in 2021, with circa EUR 2 billion (sic) [ EUR 3 billion ] of run rate GTV in October. Happy to add that December turned out really well and reached EUR 3.2 billion and including 3 small M&A deals signed, but not yet closed. The pro forma GTV was about EUR 3.8 billion, so significantly above the EUR 3 billion we announced earlier. In many of the Glovo markets, it's the most loved app with more than 130,000 monthly active partners, ensuring excellent content and offering to its more than 15 million yearly active users. And if you turn to the next slide. Let me then further highlight the compelling rationale for this transaction to Delivery Hero. First of all, Glovo is the leading multi-category delivery platform with a geographical footprint that is 100% complementary to Delivery Hero's. This expands our TAM in attractive, fast-growing profitable countries. Glovo's current footprint translate into an incremental total addressable population of more than 700 million. So our combined footprint serves now more than 2.2 billion people. Secondly, Glovo has developed a very strong leadership position by having superior product and service. Like us, Glovo is obsessed with offering great user experience and their smart approach to it has allowed them to surpass many larger comparators with deeper pockets. Today, more than 70% of Glovo's GTV is generated from countries where Glovo has the #1 position. On a combined basis, Delivery Hero number #1 position countries will generate over 90% of our group GMV. I'm a switching here between GMV and GTV as sort of that, we are still setting the exact right number for translation with GTV, GMV here for Glovo. I'll come back to that later, but it's a couple of percent difference. But 90% of GMV is from leadership markets. No other global player is even close to this kind of leadership that we are holding. And we think that is the fundamental driver for also higher profitability long term. Thirdly, I've been working with the founder team since 2018 and Delivery Hero is a great place for founders. We already know each other exceptionally well and know what we can leverage together. Glovo's growth profile is great. And we believe we can sustain high growth for many, many years to come. However, this does not come at the expense of margins, Glovo proved that it can be profitable during the early days of COVID, but decided after that to invest more into growth again. Despite that, they are now on path to profitability in several countries such as Spain, we expect further margin improvement as we work on clear synergies from shared technology but also other central functions and significant opportunities to drive cost down in things like cloud cost, data warehouse, payments, just to mention a few things there. We do believe that jointly, we will be able to activate Glovo's path to profitability and any in-market consolidation we make will accelerate the path to profitability even further. We believe there are clear possibilities for this. We see Glovo reaching similar EBITDA margin as Delivery Hero. And therefore, we feel comfortable to reconfirm our long-term adjusted EBITDA margin of 5% to 8% of GMV for Delivery Hero, and I'll come back to the short-term impact from this transaction in terms of path to profitability in a second. Now let's to have a deeper look at the comparative position on the next slide here. I have seen in this industry where so many -- or very few examples of someone coming from behind and overtaking so many players as Glovo has done. And it is really remarkable that they have managed to grow leadership position and outperform better funded comparator that launched earlier than Glovo. There were able to build #1 position in 16 out of 25 markets. And if I know 3 markets are very early stage, has barely started. So there will soon be 19 out of 25 markets, if we include those markets already. And as I said, no other company has such a track record in my view, to get there. In this slide, we have used App Annie as the primary source, and in some cases, seasonal data with credit card data, where sample size is being large enough, which often is not the case. But where it is, we have used that as a secondary source. In cases, we've actually had access to actual data, we have, of course, also validated with that. What we do not look at is that traffic as the new generation delivery companies such as Glovo and others, will have 90% to 100% ad traffic. So looking at the web is obviously, were distorted, especially since there are differences, all the generations have more bad traffic than the new generation apps. You also look at Google Trends as app users will never search Google when they order food. So therefore, will very rarely show up in Google Trends to the same extent as web platforms do. And overall, we are very confident in the 16 leadership position, which, as I said, with 3 additional markets where we just launched. So would be 19 shortly. We are also confident about Glovo gaining position in almost every market. Oscar, anything you'd like to share on this? I think your mute or you have nothing to share?

Thanks, Niklas. Look, we grew up with very limited funding in most of our markets. And as you said, in most of them, we started at a distance number 2 or #3 player, even #4 in some. Being based in Barcelona, access to capital was never very easy during the first 3, 4 years. And I believe that made us super frugal and super efficient in how we operate. Actually internally, we always talk about doing more with less. I think this is one of our big mantras in our culture. And then after those difficult 3, 4 years, we managed to raise some funds. We got Delivery Hero on board as a shareholder. And finally, we had some chance to scale our budgets but still keeping that same mentality of doing more with less. And basically, I think in Glovo every euro we spend needs to make our service better. And now if we move to the next slide, I can also comment on that one. You have here example of Spain. So Spain, in 2015, it was historically dominated by Just Eat. And then both Deliveroo and later on Uber Eats launched with very aggressive investing while we were in those early days of Glovo with very limited capital. So nowhere nearly as deeply funded as these other players. And therefore, we had to build a culture of only investing in very smart ways. For example, we always resected of only growing through promotions as we saw most of our competitors doing. And we have proven, I think, that great execution beats bigger budgets. Also having a strong multi-category offering has helped a lot. I believe it is a business of thousands of small details, and you need top-notch talent that executes better than competitors. And this is what I personally focused on a lot. So back to this slide, we can say today, we're the clear leader in Spain. Also to comment on the graph based on our actual data and trustful data, we believe the distance is much larger than what you see in this slide. We're seeing similar things in many other markets like Romania, Morocco, Ukraine, Kenya, et cetera, you see very similar trends and also in big markets like Italy and Poland. It feels like the story is very similar, maybe at an earlier stage. And finally, I'd also highlight that the key part of our success has been to be always very pragmatic and brave in making oppositions like selling or shutting down in markets, where we didn't believe we were getting the traction and the leadership that we aim to. So within that during 2018, 2019, 2020. And I feel today we have -- as Niklas shared, we have a very healthy portfolio in terms of leadership.

Thanks, Oscar. Turning to the next slide. Here, you can see that Glovo has consistently shown a remarkable growth -- growth trajectory, all segments have continued to perform strongly in 2021. West in Europe grew 81%, this is not a data point for that they have been growing market share. Southern and Eastern Europe grew at 149%, mostly organic, but partly also driven by acquisitions. CIS and Africa delivered 83% growth with ample opportunities left in the regions. Glovo has developed a proven expansion playbook a little bit what Oscar mentioned before and particularly into undercurrent rate market and has consistently achieved strong order and GTV growth in new countries from shortly after launch. Across all regions, strong growth in food delivery was complemented by even more rapid growth in Glovo's verticals, in particular, ultrafast deliveries and partnerships in quick commerce. On the next page, here you can see the 4 pillars behind this tremendous growth. This is the playbook that Oscar has allowed Glovo to outcompete much larger competitors on. And I think Oscar is the best to speak on this topic, Oscar.

Yes. So as I said, our business is one where we need to be in many small details, the complexity of our service. And the economics is high and the business has thousands of levers to keep improving. But what you see in this slide is what I would highlight from our strategy in winning in food, so mostly in restaurants. The first pillar is providing the best selection on coverage to consumers. So if you believe like we do that selection matters in the marketplace business, Glovo has the largest selection pretty much everywhere, in pretty much all our markets. We operate today with more than 130 active -- 130,000 active partners on the platform. Everything from fast food chains, high-end restaurants, discounters, premium wine shops, gift shops, beauty stores, pharmacies, et cetera. And I would also like to mention that our growth rates and our capacity to scale fast. We're now growing our partner base at the rate of doubling the current sites in 12 months. I mean, a year from now. This has also allowed us to expand our coverage across secondary cities and suburbs. In a country like Spain, for example, we operate in more than 300 cities with our own logistics. The second is offering a superior user experience. No need to go deeper into this based on our data, it's obvious that our service and our logistics is faster and better than our users' alternatives. The same with subscriptions, what we call Glovo Prime. We we're still in very early days of Glovo Prime. We still have many features to develop, but we're seeing amazing results in terms of frequency incrementality while keeping very healthy margins. So we still haven't rolled out in most markets, and it already represents 15% of orders. And I believe it will represent the majority of our orders pretty soon. And finally, innovation, as we said at the beginning, we have -- even with low budget, we have always kept a percentage of our budget to invest in new ideas, and some of them are showing great return on investment. Two examples are Glovo concepts, which is our own food brands that we franchised our partners. And the second is Cook Room, where we operate today more than 150 dark kitchens, and both businesses are today EBITDA profitable as a stand-alone businesses.

Thanks, Oscar. So the next slide, we cover quicker commerce. It has been at the forefront or Glovo has been at the forefront of introducing quick commerce in their markets. The team has already reached a quick commerce GTV of EUR 300 million in 2021 and the growth continues to outstrive the company's overall growth profile by multiples. On the next page, we have their offering here. This multi-category offering has produced half synergies for Glovo the majority of the new commercial customers are, of course, existing Glovo customers, which comes at [ 0 CAC ], existing career network can be utilized more efficiently and the multi-category offering significantly answers the lifetime value. So not only does it make the product more attractive consumer, it also confirms or it also help the financial benefits for Glovo. And nothing new, I think, for most of you here. If you go to the next slide, then we cover the transaction background and structure. As I have mentioned, the partnership between Glovo and Delivery Hero goes back quite a long time. We first participated in their Series C funding round in May 2018, since then supported the company. Glovo is an example or an excellent example of how we continuously invest in and develop our partnerships over time. This transaction used evolved naturally under the traffic collaboration, we have built over a number of years, and we believe it is a great foundation for our joint endeavors in the future. And one of the reasons why we're so bullish about this transaction. Focusing on the Glovo transaction value. We value Glovo at EUR 2.3 billion, I believe before -- before certain adjustments based on the Delivery share price at announcement and net of debt and cash. Obviously, our blended acquisition price for the full 83% majority stake is much lower, given our current 44% stake was acquired at lower valuation at earlier points in time. Needless to say, the GMV multiple is in line with Delivery Hero for Q1 and accretive looking at Q2 and beyond. In absolute term, it's a multiple lower than recent acquisition, if you look at Vault as an example, despite Glovo having significantly more leadership and other acquisitions that have been done. It shows that we remain a very disciplined buyer. It also shows the trust of Glovo shareholders in the Delivery Hero share price upside. The transaction will be share financed at a fixed ratio. The remaining minority shareholders will have the possibility to adhere to the SPA until January 31. The transaction is subject to customer antitrust clearance, and we currently expect closing in Q2 2022, so this year. Last not least, we would like to highlight that Glovo has approximately 140 or so cash at hand and is in the final stage of concluding an external financing at very attractive conditions. This will then be sufficient to fund the business until cash flow breakeven. Then going to the next slide on the guidance and what this means for our overall group profitability in 2022. We have been focusing, as you know, on driving unit economics since -- in particular since Q3. We have been operating on a plan where we are not reliant on equity financing. And this is still true. On a combined basis, including Glovo, we expect the food delivery business to reach breakeven this year during H2 and produce between EUR 0 million and EUR 100 million positive adjusted EBITDA in Q4 2022. On the quick commerce front, investments are predicted to peak in the first quarter of 2022 and gradually decline thereafter. On a long-term basis, as mentioned before, we are reconfirming our long-term adjusted EBITDA margin target of 5% to 8%. So this is it from our side, and we are looking forward to your questions. Operator?

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

Today, 3 questions from me, if I may. Firstly, when you say you expect quick commerce investment to peak in 1Q '22, is there anything you can say to help us how to think about how high that peak could be? If you can't be explicit, perhaps you could talk about dark store openings and expectations there, but any color would be great. Secondly, when we consider your guidance for food to deliver EUR 0 million to EUR 100 million of profit stated that includes Glovo and central cost allocation. Does that include all of Glovo or just Glovo's food business? And when we consider Glovo, how does that break down both the GTV and losses between food and integrated vertical? And then thirdly, we've seen an evolution of political thinking with regards to the gig economy. Those evolutions are varied by country. Can you talk a bit about Glovo's employment policies by country and specifically what the impact of gig evolution has been on the business in Spain?

So I'll cover the first 2 and maybe you Oscar can add on the third one. So Yes. So the losses are still moving up. I would say Q4 and Q1 are on similar levels, but we really start seeing that it the economics that we are able to produce are improving, not yet breakeven on a unit economic basis. And since we are growing, of course, we have to improve our gross profit in order to be on stable basis, and that's what we're seeing right now. Then on a going forward, on -- we are not yet as mentioned, gross profit, and we are growing. So that is generally bad for profitability, but we are improving that gross profitability fairly fast. As you will see a slight decline. The big jump in profitability is, of course, at the point when you reach profitable contribution margin, and you keep on growing, then you have the double effect, of course, and there is a little bit we see in food and other businesses where the growth is significantly helping us to profitability, but that is not yet the case for quick commerce. Therefore, you will expect that the second half will be second half of 2021 was significantly higher than the first half of 2021. You see Q1 being -- yes, let's say, first half being order of magnitude, let's say, similar then. And then you will and you will see a gradual decline. But it's still significant investment there. I hope that can help without given you any exact numbers there. Then on the profitability part -- this was actually not taking Glovo's quick commerce part of the integrated vertical part into account. However, I don't know, given the size of that quick commerce size as a relation to Delivery Hero Group, it is fairly -- it's fairly minimal. So it will also not make a big difference if I would include that into that guidance. But when we set the guidance, that was not included, but this is fairly minimal, I would say in the big scheme of things. Then Oscar regulation in Europe and status.

Yes, I'll take that one. So regulation in Europe and also in all the regions where we operate. First clarify that Glovo, we always -- we have always been willing to comply with existing regulation in all the markets where we operate, and we invest significant time in having conversations and being in touch with the relevant ministries and stakeholders in every country. We also strongly believe in establishing independent relationships with our couriers and provide flexibility because we know they care and they value that a lot. So for example, that they can accept and reject orders, they can choose when to work, et cetera. So Going into the situation in Spain. In Spain, there was a new rider law in -- that came out in mid-2021. Will it a massive investment to adapt to it. And today, we're operating according to this new law with a massive investment in products and also adapting our operations to it. And of course, we could afford this investment because we care a lot of what Spain is our home market. So taking into account just a bit more in detail into this situation in Spain. Taking into account that we run different activities, we have separated our operations. And today, we combine model with freelancers with a model with employees, depending on the activity that they perform. So in the case of freelancers, we have also adopted a lot how we work with freelancers in Spain, basically increasing a lot the flexibility in autonomy and independence that they have. Again, in line with the criteria that has been defined by the courts. And then on the other hand, Glovo has -- we have hired in-house couriers in some of our business units, where we don't offer the same level of autonomy. So these are our MFCs, what basically the equivalent of Dmarts and also our B2B service where we basically offer courier services for different companies. There's -- maybe also touch on Italy. In Italy, we are currently operating with a valid model after the new collective bargaining agreement that we agreed in mid-2020. So we have adapted to this new framework and where we introduced several new benefits like minimum earnings per hour health insurance, seniority bonuses, et cetera.

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

Great. I've got 3 as well. First one is, could you give us a sense as to what the Glovo EBITDA actually is for 2021 and expectation for '22, at least directionally? Second question is on the group growth for '22. I appreciate that you're not guiding today, but I think consensus is kind of in the low 30s GMV growth ex Glovo for '22 as it stands today, are you okay with that? And then the third question is just a follow-up about the terminology between quick commerce and foods. In the past, you've spoken about integrated verticals and platform. So can I just confirm that integrated verticals and quick commerce are kind of the same thing as you're talking about it. And I think at the Q3, you said platform business would be profitable in '22 ex investments. Investment has gone now with Japan and Germany or largely gone. I mean, there's some reinvestment coming in. So how are you thinking about the platform business EBITDA for all of '22?

Thank you, Andrew. So on the Glovo EBITDA, we have not this or we are not disclosing, and we still have to work together a little bit more here. I think what you should assume is that in the first half, there's not much that we can do in terms of synergies. There's a lot we can do on what I mentioned before, both in technology as well as on the cloud costs and payment costs, et cetera. But none of that will happen during the first half year. And also think that at this stage with Glovo's right now, it's also a good moment to keep doubling down. So therefore, you would probably assume that the first half year will be significantly higher than the second half of the year, but because we are able to operate together and the size will also be at a different magnitude. So that's the only thing I could say. In terms of group growth, excluding Glovo, I can't really comment on, I think it's -- I'm sure the analysts have done a good job on the major assessment and growth trajectory, and we are coming from a tremendous year. And I guess, if you would extrapolate the absolute order growth, into 2022, you're probably getting in that order of magnitude. Normally, we usually grow absolute terms more every year than the previous year, but we are coming from a COVID year, especially in Asia was in the middle of the year in Taiwan as one lockdown there. Now we're coming end of the year, a little bit lockdown, although the impact is a little bit less now had on Q1 being very much lockdown in Europe. So it was a very strong Q1 beginning of the year. So therefore, the absolute growth normally would be higher every year. Now again, keep in mind that you have a little bit of acceleration or a little bit extra absolute growth in 2021 for that will not be the case in 2022. Then quick commerce versus integrated, yes, it's correct. When we say quick commerce, that is the whole integrated vertical segment. Quick commerce is the, by far, the largest item right now, that's correct. Then, yes, in terms of profitable excluding investments, now we took a couple of investments out in Germany, Japan. We still have a couple of country investments such as I know a couple of Latin American countries was entered into as in the middle of the year. There are 5 or so markets in addition to those. But it's -- nothing has to worsen. So therefore, in general, the business is more profitable and not less over time. And now we took some investments off and we added some investments in. Yes. Then if then take last -- that was the last question, right?

It was. I asked about whilst only asking for, but it was really just what do you expect from the platform business EBITDA for all of '22? And maybe you don't want to give a number, but directionally.

Yes, I think directionally, I think overall, like most markets as they grow and improve profitability over time will get more leverage there. I would like to point out, though, is that we have the oil price scheme in Korea, and Korea is 50% of our GMV so it is very substantial. We have the promotional pricing that is ending now in partially in Q1, partially in Q2 and we will be implementing CPC, another joker amount of product around, but that will also take until Q2 until that starts playing out. That means as we have increased OD quite significantly actually in Q4, a little bit more than we expected, means that we actually have worse made economics in Korea. And that will still be a lower levels, a worse level and to actually implemented the final pricing and also until we start pushing on CPC and joker. So that means we have a little bit of a headwind with us that 50% of our business is rather on the opposite side, the more with the economics, which are negative on the promotional pricing. So that is going to wait a lot on us in H1. That's why H2 is going to be significantly better than H1. Same was with Glovo. We doubled down a little bit in H1 and especially in Q1. And so therefore, yes. So that's how you should see a little bit the dynamic on the profitability side during this year.

Before we continue with the next question, I will shortly hand over to Christoph Bast.

Christoph speaking here. Just one comment from my side. I think we have still a lot of questions and analysts in the queue, sorry. And therefore, we would kindly ask you to limit your questions to 2 so to give everyone a chance to ask the question. That's it.

The next question is from the line of Miriam Adisa from Morgan Stanley.

Firstly, just on the profitability in the Glovo business again, I understand that you don't want to share numbers, but you spoke about the efficiency of the business and the relative lack of access to capital. So you just share some more detail about the unit economics, particularly around the dark stores and potentially how that compares to what you've seen in the Dmart business, perhaps anything on what you see in terms of best-in-class cities in terms of the margin profile or perhaps the contribution margin? That's the first question. And then secondly, how do you think about the path to getting to the #1 position in markets like Italy, Portugal and Poland in terms of timing and in terms of the cost of that? Or are you happy to stay as #2 in those markets? I think you mentioned some clear possibilities consolidation. So should we think about you as being a buyer in that situation? Or are there also some markets that you're willing to divest?

Sure. I will cover the first one and then maybe Oscar cover the second part. So on the contribution at on the quick commercial. And we see similar things, I would say. And we might have been in a little bit more aggressive in terms of scaling it up. We have more than 1,000 stores globally. But yes, therefore, I would say, similar still. In terms of contribution margin in our OD business, Glovo is slightly ahead in Europe, I would say. So our OD business in Europe is slightly less. I don't know it's less profitable than Glovo's. Then overall, and of course, we still have a little bit marketplace as one. I don't know what the net effect is there. But I would still believe that Glovo is probably a higher on the contribution margin. But I do think that Delivery Hero has certain tools and systems that could potentially also help Glovo improving their margins even further. The reason why this will have a slightly better economics is a little bit the mix of markets of higher AOV markets than Delivery Hero. So you have Spain, you have Italy, high AOV and that is also a big driver to that and also more willing to pay for delivery fees, et cetera, et cetera. But I think on the logistic efficiency, I still think Delivery Hero is slightly -- possibly slightly ahead in some areas, at least. Then we pass to number one, Oscar, do you want to comment?

Yes. So I think that we -- basically, in South of Europe in this big markets with high basket sizes. We have a playbook that is working and it's the same playbook that we executed in Spain where our service and our value proposition was stronger, combined with, I think, a very smart growth budget execution. We have some markets where we think there is enough momentum to now start optimizing for profitability. But in those where we're still not leaders, we have the ambition to become leaders everywhere because it doesn't 100% depend on us, but things as they are today, we are now growing much faster than competitors. And we think the playbook, the story will repeat in these other markets. So yes, we have the ambition to keep investing and getting and replicating this manage history.

And then in terms of consolidation. So I think in general, we believe that we have a superior product and a very strong position. So we feel fairly confident here. And if that's the case, then generally would be more of a buyer than a seller. So that's maybe the guidance I can give there.

The next question is from the line of Rob Joyce from Goldman Sachs.

So the first one, just on the EBITDA trajectory, you've got your forecasting to exit 2022 in the food delivery business. Does that mean we should extrapolate that as a sort of -- think about that as a minimum into 2023 for the food delivery business? And with the integrated vertical, does that mean potentially there's room for breakeven in 2023 at the EBITDA line on a group basis? And then the second one is I guess in the last couple of weeks, we've seen a sort of acquisition of Glovo and a sell-down of some of your stake in Rappi. Can you just contrast the two opportunities there, why you're acquiring one and looking to sell down the other?

Thank you. So I think it's fair to extrapolate on the '22 ending into 2023 that as we grow and we have positive unit economics and the economics will improve a little bit every year. That means that the profitability should also increase. And we have done our market expansions and all of that. This is not a company that started with one country and then start to expand to other countries, and therefore, profitability will kind of decline over the years. For us is that all the markets we have been around for a long time. We are a leader in those markets. So every year, all of them is getting a little bit more profitable. So that's why I think it's fair to assume that you can extrapolate. Then, of course, the quarter-on-quarter Q4 is generally a good quarter. So it's Q1, but then you have Ramadan in Q2. But yes, generally, profitability should move up. And we have also seen that in several segments, if not all segments, I believe, on a percentage basis at least. Then integrated vertical. So here, when we look at the quick commerce yes. So that is what you would expect that as we have from peak losses and now it will go down as we improve economics and will turn that positive at some point. And then at that positive economics with growth you should start to see a good traction also to profitability, but we are still early stage in this business. We operated for a couple of years. It's too early to drive profitability and already now we believe, but it will definitely be faster to profitability in our food business and partially because we don't have to acquire the customer again, what we mentioned before. However, we I don't want to give a guidance on 2023. We feel it's a little bit premature and it might restrict us in one or another way. We don't know what the future holds. I take a good example of this. And a couple of years ago, we quick commerce didn't even exist and now we have 1,000 Dmarts or even more than 1,000 Dmarts has been enormous strategic value or a business that is going to produce substantial cash flow to the group and as well as the user experience is one. And we let ourselves have that flexibility, and that's why we are the leader in quicker globally, including the pure-play players. And at this point in time, I don't know what 2023 will hold. So therefore, it's probably a little bit too early for us to give this statement, but we'll keep you updated. And Rappi, yes. Yes. So did we have a tremendous -- We've built a very close or a bit below love for Glovo. We think it's a fantastic product with great leadership. We also think that Rappi is a fantastic company, very multi-vertical as well. It kind of has tremendous success. It's just that the country overlap is -- there is a little bit more country overlap and there is a little bit I would say Glovo is still more of a leader in the countries, and that is also aligned with our strategy. I don't say that Rappi has a sense to become a leader in Mexico, in Colombia and Brazil, which are all huge markets. But at the time, they are not yet with their product and the way they're building the product as they have a good chance, but it's a slightly different story than what Delivery Hero offers. And I think in general, we held a smaller stake in Rappi. We therefore feel more as a shareholder than a strategic partner, and we don't hold financial holdings without strategically rationale. So we felt it's better to double down on Glovo and therefore, cash flow a little bit on Rappi as well as other potential nonstrategic assets.

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

Yes. Well done on the deal and getting this done over the holidays. A couple of questions, if I may, please. I'm trying to reconcile your comments saying that quick commerce has been at the core of Glovo since day 1. And still, it's only about roughly, let's say, 10% of the group's GTV. And then secondly, I think -- sorry for the difficult question, Oscar, but I think you mentioned last year that you wanted to stay independent. So what has changed over the past 12 months to make you perhaps change your mind?

Yes. I'll add the first question. You can maybe add to that question, Oscar. And then of course, your the second one. I think still quick commerce in its early stage. So it -- delivery has to push really, really hard to get to where we are right now, getting such a large portion of our business. I think Glovo came a little bit easier to that, let's say, 10% because they already kind of operated that. And I think even today, I would argue that even if you look vertical by vertical, we are equally much more the vertical. We equally much of Dmart relative to size, et cetera, et cetera. But if you look at applications, you can see that they are native in this. You can see that a multi-category offering. You can hear it from the brand perception of people. When you ask people on the street, they speak about Glovo as a multivertical. And unfortunately, we still speak about our brands as food delivery company also diver other things. And I think that's something that we have to work on. Glovo already nailed it. And I think it's not as easy as it sounds to change that perception. And I think therefore, in a strong position to continue to grow this these verticals very fast even going forward. Oscar, do you want to add something or just comment on the independents?

Yes, I agree. I think, market -- so first of all, this percentage depends a lot on every market. We see, for example, adoption of non-restaurant categories being much, much higher in Eastern European countries or African countries. But overall, we feel that we signed partnerships a lot faster, we grow -- when we ask these partners, how well we're doing versus other competitors we always do much better. So I do think there's a brand effect that since they won we launch every market with an ad that says that Glovo brings you everything, and this is helping a lot. The percentage today is higher than 10%. We -- I think we can comment on the exact number, but it's significantly higher. And the other thing is that food keeps growing super fast now, and we see this as a journey as a user journey where there's still a massive percentage of relatively new customers in Glovo. We have almost doubled our new customers in 2021 versus last year. And this means that we have a big percentage of our business that is our users that are still in the early stages of the journey and still many are to be converted into groceries and multi-category. And then on the difficult second question you said, yes, it's true. It's true that I said this. And I guess I don't regret it because based on the information that I had, that's what I felt at that moment around a year ago. Maybe I have realized a bit the -- doing an IPO or staying independent. And I think what has changed is that we -- during this last year, we have gotten to know and work together much better Delivery Hero. And I truly feel they have a very unique model to accommodate founders to keep giving them a lot of autonomy while still unlocking a lot of synergies opening -- now being part of this community of very smart people developing similar things in over 50 countries. I think it's going to make us fly a lot faster. So yes, it just -- I feel it was the right timing and the pros are very big to join delivery here so overall, my team and I were very happy.

The next question is from the line of Monique Pollard from Citi.

Afternoon. Niklas and Oscar. I've just got 2 questions, if I can. So in the presentation, you mentioned Glovo currently has EUR 140 million in cash. And you also said in your ad hoc release on the day of the announcement that you were committed to Delivery Hero to providing EUR 250 million backstop financing during 2022. So is it sort of rational for us to then sort of add those 2 things together and assume that Glovo's losses would be about EUR 400 million in 2022. And then the second question was just on the process of getting antitrust approvals to the clearance of this deal. I just wanted to understand why it is that you're required to get antitrust approval in Spain, Poland, Romania and Portugal, given that Delivery Hero doesn't operate there?

Yes. Thanks, Monique. So on the first question, yes, there is cash there and we have a backstop financing, but all of that money will not be used in 2022, but that is to take the company to break even win buffer included. And of course, there might be CapEx and other things there as well. But -- so that's -- that's the backdrop financing. We are currently late phase of -- or Glovo, I should say, in late stages of doing that financing. Do you see if you participate or if you don't, but yes, so most likely we will not. So there will be EUR 250 million that comes in from other parties. Then on the antitrust. Yes, well, I couldn't try to antitrust laws and regulations. It simply is the requirements of these countries based on the size of Glovo in those markets, we will have to file regardless if we operate there or not. On the positive analysis, we don't have overlap. We also see this as an antitrust process that should be fairly straightforward, and therefore, we're also expected to close in the next couple of months.

The next question is from the line of Silvia Cuneo from Deutsche Bank.

My first one is if you could please talk a little bit more about the different delivery categories available in the glovo app and our impact in the core left on for delivery within the marketplace mix. And related to this, I would like to get your view about the future for the sector and whether you see multicategory as a winning proposition in contrast to single vertical in the underlying growth delivery up could start payout ex into that front delivery upfront? And the second question is if you could shed some more light about the drivers of the food delivery business breakeven target in the second half of 2022 by region?

Can you repeat the second question again? I missed it a little bit, the drivers of...

The drivers of the food delivery business breakeven target in the second half of 2022 by its region?

Got it. Okay. So on the first question, maybe Oscar, you can fill in. But in general, I can speak about the future for a sector to speak specifically. I think we have taken the path that we want to have a multi-vertical offering, and we put a lot of effort and money into doing that I want to say that, that's the only way to succeed. I think there are players who will have a smaller scope and that can also be a viable strategy or having a nice segment and so on. It's just not our strategy. But I'm not sure if something in between makes a lot of sense. So I think either you are focused on having a very good multi-vertical offering or maybe you just focus on a very good food offering and that might also work. But again, that's not our strategy. I think there was a question on the marketplace delivery in Spain on glovo is a small portion, but Oscar, maybe you want to cover that and then maybe have something more to add to the first question.

Yes, not much to add. We combine we basically build marketplaces of local stores, local retailers and local restaurants in every city, and we're also combining this with our own quick commerce, what we call NFCs, Delivery Hero calls it Dmarts, which basically unlock a new level of speed for our users. Now would we deliver super fast in convenience products. And as I said before, I mean, there's no -- yes, everything that can be transported inside the city, we try to incur it in the marketplace.

I think you had a little bit aspect of it being there's pure-play delivery companies expanding into food. Yes, that can well happen. I think there will not be a very strategically sounded decision in general because it probably will mean that there are a little bit worse in the core, and they will never -- or it will be very hard for them to be equally good in the food delivery space. So basically, you dilute the value that you're having or being pure specialist to being -- to hopefully being verse version of a multi-category that we have right now. I think it's too late to start offering food in a good way. it's been done for 10, 15 years. I think it will be very hard for someone to catch up on that vertical. Then breakeven by region. So we don't give that guidance. But as you know, Middle East is already profitable, and I think it's fair to assume they probably will increase its profitability. Europe, we said was kind of breakeven before we started Germany. Now Germany is no longer there. So you would assume that, that has increased its profitability in food and will continue to do so. Now of course, with Glovo and other things coming in, that might change. But if we exclude Glovo for a second there will be increased profitability in that European segment as what you would expect. I would expect that the losses in Latin America will decline, but not at the level where it will be breakeven. And for Asia, you will expect to see a big shift into profitability. And that's, of course, a large segment. You will see in the APAC segment already as removing now. In the first half, all improvements, of course, improved improvements in the second half. But then if you look at the Asia overall with Korea as the largest part of the segment, as I mentioned before, we are operating on a promotional pricing on OD and OD has grown quite substantially over the last quarter. So that means that there is a clear headwind for Korea in both in Q4 as well as in Q1 and Q2 until we start having the tailwind of actually changes in pricing setup, as well as start producing an NCR or non-commission revenue through CPC and Joker and so on. So that will be a big, big headwind -- or a tailwind as we get into Q2 some time. So hopefully, that color helps you a little bit.

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

My first question for Oscar on the Glovo Courier pledge. It was only very recently launched, but with a pretty aggressive rollout to my reading is probably the most substantial platform-driven initiative and commitment to the conditions that riders working. So I'm just curious to hear what regulators and politicians are saying, as you are rolling this out across your operations? And secondly, back on the theme consolidation, but it seems that M&A is becoming more cross-border, more transformational in nature. So Niklas, I'd be interested to hear your thoughts on the end game of sector consolidation and where you want to fit into that overall picture. And then maybe a comment as to whether you think your cost of capital is in the right place to give you the type of self-determination that you want.

Oscar, the first one for you.

Yes. Glovo split is something we kicked off last quarter, Q4. It basically aims to raise the bar in what the conditions and benefit of all our couriers are or are offered certain conditions, sorry. So we started rolling that out in Q4 with a couple of countries. And yes, we do have the commitment to keep rolling it out. It's still very early. But of course, the -- all our conversations with the EU have been very positive. And I also want to take the advantage to comment on the EU legislation project, the current first draft was released a couple of months ago. And we're very positive. We're fairly positive that the EU will regulate this in 2, 3 years' time, all the geek economy, in a way that keeps offering flexibility to workers and also it's good for companies. The first draft field may be a bit too restricted to riders, it goes against what they want. But it's very early days. I think we have probably 2 years ahead of us, and we expect many changes until this becomes possibly a law in some of our markets. On the Glovo splits, finally, we after announcing it, we are working with many other players in the industry, of course, Delivery Hero to also work together in the same lines.

And I think on that, I think it's super cool to work the company real cash for riders and done such a great job in care for them and help them. And you see the happiness and satisfaction scores are really good. You also see that in Delivery Hero, I've also seen numbers on Deliveroo. Generally, it's a very good complement to total economy, what we're offering. And guys again we're happy in particular, if they can work with free flexibility because it makes them make more money and have the flexibility that we all want the more the flexibility the better it is and the model that we're offering [indiscernible] for is to have as much as possible. And we see it's such a positive impact to both the community to us, to local economies. So I hope that has been taken into account. Then on the M&A, cross-border and the game I don't know. I think for us, we kind of want to be heads down right now. You might want some more in-market consolidation possibilities and -- but generally, we are not actively looking for any larger M&A transactions at this point in time, it is too dilutive. We believe too much in our own business we think that any business that we'll acquire would be diluted for our shareholders. So yes, and you also don't care. We have the size. We have the scale. We are in 70 markets. We have leadership in almost all of them, we really don't need M&A. So you really need to be priced at the point, does it make sense or some other strategic value to it. If someone else does it. Yes, that's fine. They have to do so. But let's see. Then the cost of capital, yes. that is true. With the current cost of capital, it is very hard to do, especially any public market transactions, because people will look at the share price and certain value and so on. I think in the case of smaller transactions, I think we still have a possibility to play. And this example of Glovo now is a good one. Of course, Glovo would also argue that we should have EUR 7 billion, EUR 8 billion, EUR 9 billion, EUR 10 billion value given the recent transaction of another company and the more leadership that they own, but they feel like, well, in terms of actual value, which is the shares that you're getting was very valuable, very substantial, and they want to have delivery stock and saw that not a surprise. It was not a valuation thinking should this be how many billions should this be worth. It was just like what's the relative value between the companies that it makes sense? And if delivery would have been worth 3x as much as it is today, while they would have been the same ratio. So it would have been a different ratio because we would have been worth EUR 60 billion versus what they were today. So therefore, it was all about relative value for them to participate in the upside of delivery over the next few years that made them go for this alternative and say most than the team. So I think we have proven that people want to be part of delivery here or people want to see the upside. They see the value of our business, and therefore, we can be part of consolidation of smaller players. But of course, public market is a little bit different.

Yes, exactly. As you're running out of time, I'm afraid we will not be able to answer all analyst questions in this call. So we would now come to the last analyst for today, please.

The last question is from the line of Marcus Diebel from JPM.

I keep it short given that we have the numbers broadly for this year. Now just a question for you, Emmanuel, and we talked about it in the past. Do you expect to move also glovo on one platform at the end of the day, given that we obviously have been very acquisitive in recent years. Is that the plan? Or I assume short term, you will leave it separate, but is the expectation that the one platform model is still in case, including Glovo?

Yes. So Emmanuel is actually not part of it -- or be able to make the call today. Otherwise, you would have answered some of the questions I have to answer here, probably better than I could. But you had to be satisfied with me and Oscar here. In terms of the platform, we still believe in one platform, but the question is what is one platform. And the way we built our platform is that the platform consists of something like 100 different big micro services and 1,000 micro services. But let's say, 50 big services, everything from transmission to search, to logistics, even within the logistics, there are 6 or 7, 8 different services, everything from hiring to onboarding to tracking to incentives to all of it have different components and group into one, which is logistics in this case or transmission consistent also multiple services. And we believe in that, and I think Glovo do so too. So therefore, they will look at, let's say, 50 or so big services. And I will say, well, those is world-leading, best-in-class. We don't have to build it ourselves, let's just use an in years that would have to work on those things on something else because there's so much to build. So we will operate on one platform, if you look at today, almost all platforms that have are using probably something like 70%, 80% of our services or all the components that we're building as one Glovo tech team. And then still meaning that every platform has their own technology and the scale that technology, the increased number of resources of that technology, but they only build things that they cannot easily take from on service. So that means Talabat, Foodpanda and so on, they are scaling technology even faster because 50% of what they do is already covered through one platform and 50%, they can double down with every resource there. So there is a lot of cost synergies, but even more so, there's a lot of growth synergies and the speed of execution that we build through one platform in that way. I hope that will help Marcus.

Thanks a lot.

That's it. Then I'd like to thank everyone for listening in and for being in support of Delivery Hero. As I said, I'm super excited to work at Glovo and the team. I think it's one of the best companies that ever looked at cohorts and amazing frequent amazing it's really a fantastic company and extremely excited working with Oscar and the team. And I think that together with Delivery Hero, they will only fly faster. So I'm super excited, and thank you, everyone, for your support.

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