Delivery Hero SE (DHER) Earnings Call Transcript & Summary

Ladies and gentlemen, welcome to the Delivery Hero Q1 2024 Trading Update Conference Call and Live Webcast. I'm Vicky, the operator. I would like to remind you that all participants will be in listen-only mode and the conference is being recorded. [Operator Instructions] Conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Christoph Bast, Head of IR. Please go ahead, sir.

Hello, and welcome, everyone. Thank you very much for joining our Q1 2024 earnings call. We would like to remind you that this call is being webcast and a replay will be available later today on our website. With me today, we have Niklas Oestberg, CEO; and Emmanuel Thomassin, CFO of Delivery Hero, who will take us through the most relevant aspects of our Q1 performance. After that, we look forward to answering your questions. And now let me hand it over to you, Niklas.

Thank you, Christoph, and hey, everyone, and thanks for listening in. We have a lot to cover, so let's jump straight into our Q1 highlights. Our business continued to show substantial growth with GMV increased to 8% year-on-year in Q1 on constant currency and excluding effects of hyperinflation accounting. Growth, including hyperinflation accounting, was marginally higher. The positive momentum was driven by healthy order growth, which has been in the double digits across our markets outside of Asia, where GMV has grown in aggregate by 20% year-on-year this quarter. Total segment revenues continue to significantly outgrow GMV with a 21% year-on-year increase in the quarter, driven by multiple levers, including AdTech revenues, service and subscription fees, higher commission from own-delivery as well as increase in Dmarts' contribution. This is also why we now increased the revenue guidance range from 15% to 17% year-on-year to 18% to 21% year-on-year on constant currency and excluding hyperinflation. We are further executing our profitable growth strategy, which means not only delivering strong revenue growth, but also substantially enhancing profitability. In Q1, we reached a gross profit margin of 7.7%, and that's 60% or 60 basis points higher than last year. We expect to continue expanding margins further in the quarters ahead. I'm also pleased -- very pleased to report that Glovo has been growing exponentially since the acquisition, while simultaneously improving profitability. We anticipate that Glovo will achieve a positive adjusted EBITDA in the second half of this year, including Goup cost. Additionally, Dmarts is progressing well as we continue to execute our optimization initiatives. We now anticipate a positive adjusted EBITDA for Dmarts by the end of 2024. We also executed a refinancing transaction during Q1, benefiting from highly supported debt capital markets and very healthy investor interest from our debt investors. The transactions further enhanced the maturity profile of our debt obligation while improving the associated interest rates. Our next upcoming debt outflow amounts to less than EUR 100 million in July 2025. As mentioned before, we are in the comfortable position to repay all of our debt maturities organically over the coming years through our own cash flow, if so desired. Now on to the next slide, please. Both GMV and revenue continued their positive development as we had healthy order development in most of our segments. We continue to grow the business while delivering substantial profit and cash flow improvements. Next slide shows the strong momentum. It has come from almost all segments. If you take a look at then Slide 5 here, you can get a very good understanding of where our growth is coming from. During the quarter, 4 out of 5 segments were generating strong double-digit revenue growth in constant currency and excluding hyperinflation accounting. Also including hyperinflation accounting I believe, as it was even partially affected. But MENA here, growing almost 30% year-on-year, again, including hyperinflation accounting growth was marginally higher. Now let me hand it over to Emmanuel, who will give a deeper dive into the financials. Emmanuel?

Yes. Thanks, Niklas, and also a warm welcome from my side. So, very quickly on the European segment, with a GMV and revenue growth of 19% and respectively 26% year-on-year in Q1 on a constant currency basis and driven by double-digit order growth. And this growth had been significantly above the market. We continue to enhance our operations across the region. For example, Glovo improved adjusted EBITDA burn by around 55% year-on-year in Q1. And we project that it will be richer, positive adjusted EBITDA in the second half of this year, including the allocation of central cost. So now, moving on to MENA on the next slide. Here, we continue to see a great momentum in MENA. We posted strong growth on GMV of 24% in Q1 on constant currency and excluding the impact from hyperinflation in Turkey. Our sustained double-digit growth can be attributed to our relentless focus on enhancing the customer experience with products offering like Dmarts, the grocery, subscriptions, the royalty programs, kitchen operations, but also credit cards and much more. So now, onto Asia on Slide 8. So despite the flat GMV on constant currency, we post strong revenue growth of 14% in Q1, driven by an uptick in own-delivery penetration in South Korea and positive AdTech development across the region. With our competitors' move to a free delivery mid-March in South Korea, we saw an instant negative impact on our category position and order growth in the following 2 weeks. We responded quickly and have regained some momentum, but continued to witness an adverse impact on our category share and also top line growth. So, we continue with our several key initiatives in Q2, and potentially into H2. In addition, we are constantly improving the offering for our customers, and are now the exclusive partner of Starbucks in Korea, connecting around 700 Starbucks stores with our large customer base. This partnership is another testimony of our unique proposition to both our customers and our partners, and we are confident that we will be able to regain and defend our category share with the superior offering. Turning to APAC, we continue to progress our AdTech offering and enhanced vendor targeting. And this is leading to an all-time high revenue as a percentage to GMV of 3.4% in the quarter. And this is currently the highest rate amongst our segment. Now moving to the Americas region on the next slide. Americas performed well in the quarter. The region grew GMV and revenues by 7%, respectively, 6% year-on-year on constant currency and excluding the hyperinflation adjustments for Argentina. Overall, we are very happy with the performance in the region. We saw double-digit order growth across 12 out of 15 countries in which we operate. But Argentina is still suffering from macroeconomic headwinds impacting consumptions, which has had some limited impact on the basket size, while order volume showed a slight uptick. Now onto the Integrated Verticals on the next slide, please. Our Integrated Verticals segment generated strong GMV and revenue growth of 25% and respectively, 27% on constant currency and also excluding hyperinflation adjustment. And this is an amazing achievement as we keep improving unique economics and our Dmarts footprint. And despite that, we have managed to grow our top line fast while improving margin and reducing the numbers of stores with around 200 Dmarts during the last 12 months. And today, we operate in 895 Dmarts across the Group. Integrated Verticals is a very important aspect for us. It offers our customer base a multitude of use cases, which is a strong complement to our food offering and a competitive advantage against our peers. We provide a better customer experience, while generating higher royalty rates across our customer cohorts and as their operation scale, we generate higher profitability. After profitability, now move on to the gross profit margin on the next slide. The gross profit margin of the Platform business reached 7.6% in the quarter, which represent an increase of 240 basis points since we doubled down on our profitability focus in early 2022. MENA, Americas and the APAC region lead the Group in terms of gross profit margin and are close to 10%. The continued positive development in the Group gross profit margin is also supported by continued improvement in our AdTech business. In Q1 2024, our non-commission-based revenue or shortly so called NCR amount to 2.2% of the Group GMV and is expected to further increase from here. Although not included in this graph, I'd like to share that our Integrated Verticals continue to perform very well also and increased gross profit margin by 320 basis points year-on-year to above 2% this quarter. And we expect a substantial margin expansion throughout 2024 with Q4 gross profit margin for the Dmarts estimated internally at around 7%. So now let's go ahead to Slide 14. As we have not only published our Q1 figures today, but also our annual report, I would like to take the opportunity to present the key figures from the financial year 2023 based on the IFRS report. Total segment revenue grew double-digit year-on-year and continued to outpace the GMV development in 2023. As a result of the strong revenue growth and strict cost control, our adjusted EBITDA improved by more than EUR 700 million to EUR 254 million and turned positive on the full year basis, as promised in 2022. Also, the operating cash flow significantly improved by around EUR 670 million and almost turned positive on the full year basis. The improvement in operating cash flow is driven by an improvement in adjusted EBITDA, which is partly offset by a higher income tax as we are becoming more profitable in more countries. So, let's now move to the next slide. The bridge here presented on this slide take us through the cash relevant and non-relevant items between adjusted EBITDA and the net income. So starting on the left-hand side of the slide, with adjusted EBITDA of EUR 254 million, the management adjustment totaling EUR 148 million include one-off expense for corporate transactions, some financing measures, legal matters, some earn-outs and also restructuring in connection with our headcounts reduction. In addition, there are some lease payment, which is in alignment with our IFRS 16, are below adjusted EBITDA. I think the tax are self-explanatory, and we have a negative financial results coming from net interest income and expenses. So, adding all cash relevant items together, you arrive at the cash relevant expenses of EUR 580 million. On the right-hand side, you can see all the cost items that are not cash flow relevant or cash relevant. Besides the share-based compensation, they are permanently one-off goodwill impairment of EUR 858 million, depreciation and amortization of EUR 485 million and a financial result of EUR 397 million. But let me explain these positions in more details. So, the goodwill impairment is driven by higher interest rates, leading to higher cost of capital, combined with a review of our long-term assessment on growth and margin, which are then applied in the annual impairment testing. And the impairment is in large extent related to Glovo but also Americas and Europe segments. Depreciation and amortization include a brand impairment of -- in Turkey of the amount of EUR 140 million. And the financial results includes the remeasurement of financial instruments of EUR 164 million, which includes fair value losses from public and private assets, but also FX losses of EUR 144 million and EUR 130 million in the amortization of financial liabilities in connection with convertible bonds. So, if you summarize these cost items, we then arrive at EUR 2 billion of non-cash relevant expenses within the -- of the net income. So now let's review how this was evolved compared to the last year on the next slide. As already mentioned, in 2023, the adjusted EBITDA has improved by EUR 721 million compared to last year 2022. The management adjustments have improved by EUR 47 million and now account for only 0.3% of GMV. Assuming there are no further M&A transactions or financing transactions, this cost line should, of course considerably, decline this year. The share-based compensation program had declined by EUR 79 million to 0.6% of GMV, and we expect it to remain at this ratio in 2024. When it comes to goodwill, the vast majority of the remaining goodwill comes from Korea and Thailand. Depreciation and amortization has increased year-on-year, but only due to the impairment I mentioned before in regards to the Turkey brand depreciation. So, excluding this one-off of D&A item, our depreciation and amortization was stable. So let us now have a look at the debt maturity profile on the next slide. As you might remember, we successfully executed a refinancing transaction last month. We extend the maturity of the term loan by more than 2 years from August 2027 to now December 2029. And at the same time, we reduced the cost of debt associated with the term loan by 75 basis points. So, we improved 2 metrics at the same time. And this is in line with our approach to optimize our capital structure whenever possible and also in the best interest of our shareholders. In addition, we benefit from a highly supportive financial market environment and increased the term-loan bond by an equivalent of EUR 740 million. And from the proceed, we repurchased EUR 409 million principal amount of bonds due in 2025, but also EUR 100 million principal amount of bonds due to 2026. And we had tendered the full amount of EUR 500 million principal amount of the year 2025 bonds, but not whole bondholders accept offers. So, we may do additional buyback of outstanding convertible bond in the future. And last but not least, we had to switch the currency of our EUR 540 million trench into South Korean won to better match the currency of our cash-generating assets to our debt currency. So, we have a very balanced debt maturity profile with an average debt maturity of 4.5 years, has an average interest rate of around 4.2%. That can be addressed by our substantial cash flow generation over the next few years. So now, let's look at the next slide, how the debt maturity match up to our cash flow generation. This slide was introduced last quarter and had been updated here to reflect the latest debt refinancing. It has also been extended from 2028 to 2030 to match our current debt maturities. To be clear, we did not update this slide -- we will not update this slide on a consistent basis for all coming quarters. As you can see, our organic growth generation comfortably exceed all upcoming convertible debt and also term loan maturities. We have nearly EUR 1.8 billion in freely available cash and cash equivalents on a pro forma basis at the end of the quarter. This is the cash balance as of year-end 2023 after the [ divestments ] of Deliveroo shares, upsize of term loans, and repayment of convertible bonds, both the 2024 maturity as well as the partial repurchase of 2025 and 2026 maturities. Just to be clear, we're mapping on an initial conservative assumptions, underlying the leveraged free cash flow projections and expanded to '23. That is that the GMV CAGR below our long term -- is below our long-term ambitions and adjusted EBITDA margin conservatively expanding towards the lower hand of a long-term margin ambition range of 5% to 8% by 2030. So we did adjust the higher interest rate payments on our outstanding debt as well. There is also a potential upside to our projections as we will not hesitate to engage in further portfolio rationalization or pursue additional efficiency gains in operations. And this approach has been instrumental in significantly altering the financial trajectory of the company in recent years and we are dedicated to continuing on this path in the future. But now let me hand over back to Niklas, who will take you through some case studies starting on the next slide. Niklas?

Thanks, Emmanuel. We have a lot of complementary material for this quarter. So starting off with our leadership position, over the last year, we've been competing with many players across our business. Some of these are global players, while others have been deep-pocketed local and regional players that invested heavily in our shared markets over the past years. We have seen total investments by our competitors of EUR 12 billion to EUR 15 billion in our markets alone, plus cross-selling to large customer bases from ride-hailing and e-commerce companies. Despite this, you will see on the next slide that we have managed to gain leadership in markets representing over 90% of our GMV. If you look here, you can also see that the remaining 10% can be divided in half between countries where we are fighting for the #1 position such as Italy and Peru and countries where we're clearly behind such as in Thailand and Finland. There are many reasons for our leadership positions. One of them is our operating model, which is our next case study. There are 3 components of our central operations based in Berlin. First bucket is our global tech stack, which is around 85% of our Berlin team. This team's focus is to optimize for conversion rates, revenue and cost across all markets. Examples of this are all logistics tech, vendor applications, devices, AdTech, Picker applications, but also on the consumer side, when it comes to data-focused applications such as search or discovery. The second group of our central operation is to drive performance management, quick commerce and marketing. This represents a bit less than 10% of our team. And the third group is finance, legal and HR. All these functions are global. However, the core of our model is that we also enable regional and local teams to fully own brand and consumer interface. This enables more localized applications and stronger execution teams. So now let's move to the following slide, where I intend to focus on the cost efficiency achieved through the centralization of shared activities. So in the past 2 years, we've focused our efforts on increasing efficiencies within the Group, while simultaneously decrease headcounts in our central office. In this time frame, we have decreased our FTE base by 21% and increased our share of product and tech focused FTEs to 85% of the central team. The central team is now responsible for over 50 services that are provided to all our regional entities and their scope has continuously increased as we're onboarding Woowa and Glovo, generating additional synergies for the Group. This has led G&A expenses as a percent of GMV to decline over the years. So let's move to the next slide where I can address this further. Our GMV, including R&D and stock-based comp has decreased from 4.4% to 4.0% as a percent of our GMV last year or last year and this year. This is second place among our global peer group despite a larger market scope. We have been -- we have never been happy about being #2, and we have continued to optimize our costs during 2024 and beyond. We are, therefore, expecting this ratio to further improve. The improvement is coming from strong cost control while growing our GMV, adding operational leverage. Now let's move to the next slide, where I'll give an update on Glovo. Glovo has consistently delivered profitable growth as it scales its operation. GMV trajectory since acquisition has been very strong across all its regions, achieving an expected GMV uptick of at least 40% from 2022 to 2024. We expect to continue to grow above the industry. At the same time, we anticipate Glovo to improve adjusted EBITDA substantially by around 10 percentage points from 2022 to 2024 on a GMV basis. We expect to achieve positive adjusted EBITDA in the second half of this year, including central costs. Glovo's profitable growth path has been unlocked by a sharp focus on scaling its operation with leveraging synergies with Delivery Hero's ecosystem. This is only the start, with further acceleration in both growth and profitability expected for the years ahead. Now to the next slide, where we will deep-dive into the development of Glovo post-acquisition. So as you can see, not only have we been seeing strong growth and profitability improvements, but also clear improvement in leadership. This is quite a transformational story. We acquired Glovo in 2022 when the business generated an adjusted EBITDA burn of more than EUR 300 million. And in 2 years' time, we're on track to generate positive adjusted EBITDA in H2. Now to Slide 31, where I'd like to update you in more details on our Dmarts business. We continue to optimize our Dmarts footprint and cut our unprofitable stores. Together with further optimization efforts, we aim to achieve positive adjusted EBITDA by the end of this year. Over the coming quarters, we will continue to consistently track the performance of our stores and move quickly to shut all stores for which we do not see a clear path to short-term profitability. We will also work on consolidating stores with focus on improving SKU and enhancing operational performance. Despite reaching breakeven already by the end of 2024, we believe there is a lot more to come as we continue to grow GMV per store, increasing advertisement from FMCG companies, better procurement, pricing and more. Now to the next slide, which shows our best performing country and our North Star for other countries. Here you see on the left side, we can see this country achieved quite a nice GMV development over the last years. On the right hand, you can see the positive profitability developments that can be achieved when you get things right. Even if this market shows great profitability and cash flow generation, we think there are still areas for this country to improve. Advertisement from FMCG is one of those big levers. Now to Slide 34, where I'd like to cover our profitability path. As you can see on the slide, we have made tremendous progress since doubling down on our profitability focus in early 2022. We have maintained a grouping of countries consistent to demonstrate the progression over time. We executed on our profitability growth strategy, emphasizing profitability, cash generation and disciplined capital allocation over the past years. This has taken us from a negative EUR 0.1 billion in annualized Group adjusted EBITDA in Q4 2022 to an expected positive EUR 1.2 billion in annualized adjusted EBITDA by Q4 2024. And this breaks down as follows; our Profitable Platform business continues to perform well, we will expand adjusted EBITDA from EUR 1.2 billion to EUR 1.3 billion in Q4 2024 on an annualized basis. This will be achieved despite the increased investments in Korea. This number does not include profitable markets within the Unprofitable Platform cohort. If we go for the Unprofitable Platform business, we will continue to see significant improvement in adjusted EBITDA as market scale and additional efficiency gains are pursued with adjusted EBITDA losses expected to reduce by 90% from Q4 2022. The Unprofitable Platform grouping is expected to reach breakeven in December this year. And last but not least, we expect Integrated Verticals to progress considerably. We expect adjusted EBITDA losses to improve by more than 50% year-on-year in 2024 with operations reaching breakeven, including Group cost by year-end. Moving forward, we will continue enhancing our operations with adjusted EBITDA gradually moving towards our 5% to 8% long-term margin range. Simultaneously, we expect total cash flow to be significant in Q4 this year and grow substantially from there. Now, I'll turn it back to Emmanuel, who will take us through the full year guidance.

Well, thanks Niklas. So for the full year 2024, I will maintain our initial guidance that GMV growth will accelerate and reach 7% to 9% year-on-year. We currently expect FX headwinds to be around 2% to 3% for the year. On the back of the stronger Q1 results, we now expect total segment revenues to grow even faster and reach 18% to 21% year-on-year. Both the growth rates for GMV and revenue are in constant currency and exclude the effects from hyperinflation accounting. In addition, our gross profit margin will continue to expand further during the quarter -- during the year, which results in an adjusted EBITDA guidance range of EUR 725 million to EUR 775 million, which we have maintained despite increased investments in South Korea. The positive development on adjusted EBITDA automatically translate into a positive free cash flow before interest payments for the full year 2024. So, just to be clear, we will continue to focus on delivering a highly profitable and also cash generative business going forward. Lastly, as you know, our upcoming AGM in 2024 will take place on June 19. We have been working diligently with our Supervisory Board to ensure that we have the right set of skills and experience to oversee the execution of the company strategy, and we will file our AGM documents shortly and look forward to discussing them with you then. So, we now look forward to taking your questions. I hand over to Christoph.

Thanks, Emmanuel. [Operator Instructions] Thank you.

[Operator Instructions] The first question is from Jo Barnet-Lamb, UBS.

So, you've clearly had a very strong quarter, beating on GMV and then beating even more on revenues. On the back of that, you've raised revenue guidance by 3 percentage points to 4 percentage points, but you've left profit guidance unchanged. Can you talk about why you haven't increased adjusted EBITDA guidance at this juncture? Is that simply inherent conservatism? Or are you expecting to invest more in other areas in the business, perhaps in Korea, for example?

Yes, I may start Niklas -- yes, I may start and then you complete my answer. So, yes, you're right, Jo. I mean, in Q1, the quarter shows a very strong momentum of our revenue growth. And basically, it was demonstrating our capacity to monetize our services such as AdTech, service fee and so and so forth. And that was, well translating in acceleration of the revenue growth compared to the GMV. There's also a kind of -- bit of market mix that we should take into consideration, and we expect this trend of revenue growth to continue for the next quarters. So this increase of revenue should or could translate into an improvement of EBITDA. But at this point, we will consider to reinvest any EBITDA improvement to defend and regain market share in South Korea. So we increased our revenue, as you rightly said, revenue guidance, and we are cautious on EBITDA because we will reinvest, or might reinvest, any gain that we see here or any improvement in the market in South Korea, especially.

The next question is from Andrew Ross, Barclays.

I wanted to follow up on Korea and ask in more detail about what you've seen in that market over the last few weeks. Obviously, there have been quite a few changes in the promotional offers, both by you and your competition. You alluded in the opening remarks Niklas that the initial impact of that had been negative in terms of your share, but can you tell us how negative? And then tell us how that share has changed since you guys also started to introduce free delivery. And perhaps if you could quantify to us how much more you're planning on spending on Korea beyond EUR 100 million to EUR 150 million and why you're so confident this is going to be enough to kind of stem a competitive change in that market?

Thanks, Andrew. And as you pointed out, as mentioned in our prepared remarks, the change to free had a clear impact on our category share and order growth. We did respond fast, and we have been regaining some of that loss, but continue to see an adverse impact here on category share and top line growth. There is no silver bullet, but we continue to push for a superior product experience. Pricing is usually a temporary action, but we also understand it's a competitive environment, which we will have for the long term or we should expect for the long term. I cannot -- I don't know -- we don't really comment on daily or weekly, I don't know, trends in any category share or in any order development, can you just say that there was a clear adverse impact, but we regained some and we hope that we can continue to regain. It's not only about money, it's also about a lot of other activities that we're pushing, I don't know, such as Starbucks, but there are a lot more. There is an enormous amount of focus here. And I'm pretty excited about the things that we are pushing and driving. But yes, that's as far as I can take the comment. Yes, I think we're overall happy with the actions that we have taken so far and the fact that we responded very fast.

The next question is from Marcus Diebel, JPM.

Just again on your EBITDA, you highlighted an EBITDA margin 0.6% in Q1, that implies roughly EUR [ 70 ] million, midpoint of guidance is EUR 750 million. Clearly, I mean, there's seasonality in there, and then Q1 is always the weakest quarter. But then you invest or reinvest also in Korea. Could you help us understand maybe about the weighting of these investments throughout the year? I mean, how broadly or conceptually do we get from Q1 EBITDA to really the EUR 750 million, is that really H2 weighted? How shall we actually think about it? I mean, if you can give an indication about Q2 EBITDA or H1 that would be already helpful. But if not, then at least conceptually, that would be great.

Yes. I mean, like in general, the first quarter is always the weakest in our business, as you know. We also had the impact of Ramadan this year, with 12 days more in the first quarter. So what it shows is basically that we generate positive EBITDA for the first quarter of 2024. And you're right, I mean, you will ramp up the EBITDA through the year. As I said, the first quarter is usually the weakest. We also [ have started ] some upfront loaded their investments a bit in terms of marketing. That was the case a bit of Europe. And in Korea, [indiscernible] we have also like some initiatives where we invest a little bit more. Having said that, we are very close to our budget -- initial budget in terms of EBITDA. And we're very positive about the outcome for this quarter. This will accelerate through the year, and that's why we have this trajectory. We know that the fourth quarter, as you've seen last year, H2 to H1, very strong, and that would be exactly the same or we expect exactly the same for 2024. I'm afraid I can't say too much of Q2 now and H1, but we wanted to highlight this because you were probably referring to the Slide 41, when you see the trajectory and the conversion from the gross profit improvement to EBITDA, I think.

Next question from Lisa Yang, Goldman Sachs.

I'm just curious, obviously, I think there was [indiscernible] shareholder who has declared their position recently. I'm just curious if you can maybe share whether you have engaged with that shareholder? What is it that they really want? What do you think is feasible or not? And basically, just how you think about the demands and what do you agree and what do you disagree on.

Thank you, Lisa. Well, we always welcome an open and constructive dialogue with shareholders. We are very focused on building a very valuable company here, and we are happy to work with any shareholder to help driving value. I think that's as far as I can comment now, and I don't want to go into individual discussions that we have with many of our shareholders. So -- but in general, we are very open to constructive dialogue and anything we can do to improve our -- the value of our business is greatly appreciated.

Next question is from Christopher Johnen, HSBC.

Mine is on M&A. So first, I'm just curious, we've had a number of press reports over the past couple of months. You left Vietnam, you left Slovakia. So I'm curious in terms of the current, let's say, list of things you're working off. Is there anything that you can share at this point about M&A in 2024? Just maybe a bit of a general update on that. And then I'm also curious whether there is any update on the comment you gave last quarter with respect to discussing the possibility of selling minority stakes, for example, to a strategic investor, whether there's anything new to be said there.

Thank you, Christopher. So yes, on M&A, we -- as a matter of policy, we try to avoid this discuss. I can only say that, I don't know, we have proven to be very rational in the past. I think there is no other company that has been as active in both buying and selling. So I think we have proven that in the past that we are really shareholder-driven. In the end, we are very focused on building our business. I think we have a fantastic plan. We have a great development. We are pushing things to profitability, and that's a clear focus, moving the whole business to profit. And yes, building an amazing service to our customers. If there is anything coming along, then we are always very open to engage. And if we see that there is clear value from a shareholder point of view to be made, then we are always very open. In the end, it always have to make sense from a value and certainty point of view. So we take both value and certainty into account when we evaluate these opportunities. So I think that's as far as we can say in terms of a potential minority stake sell in any local entities. I don't know, we -- if there is a -- at the right price and more importantly, a value-add investor, I don't know, we are always -- I don't know, we are always willing to engage. I cannot say more. But in the end, it needs to be at the value that represents what we think it's worth, and we think it's a fantastic business. But again, it needs to be a value-add shareholder. Otherwise, we are not doing it for cash, and we have enough cash. We are not doing it for any other reasons only to see how we can drive more value for Delivery Hero as shareholders. I hope that helped, Christopher. Yes, it does.

The next question is from Giles Thorne, Jefferies.

It was a question back on Korea. Are you in a position, Niklas, to confirm whether you will or won't be launching a subscription program this year? And if you are, given the investments in Korea that you signaled at the Q4 and the extra room for investment you've now got as a result of the revenue outperformance, is it fair to say -- to assume that the subscription program will come with a pretty aggressive promotion.

Thanks. So, I don't know, we don't go into detail on features and other things that we're launching. I would say there is no silver bullet in things. There are a number of things that drives the number forward. And of course, subscription could be one part, but by no means is that a silver bullet in any way. Of course, it recaptures some of the free delivery and other things. So it could be a slight improvement in profitability by launching subscription in that sense. But from a user point of view, it has very little impact because, right now, it's free delivery anyways. So I -- but again, I can't comment on necessarily kind of features and other things so we're planning. We like to keep it for ourselves. In terms of investments, we always plan to invest a little bit more in Q2 because there are a number of exciting things that we are launching in Q2. This has nothing to do with Coupang. So that was always the plan. But yes. And of course, now we are responding also in addition to that, a little bit to what we're seeing in the market. So there are 2 aspects of our investments at the moment there. I hope that helps somewhat even if I didn't give a clear straight answer there, Giles.

The next question from Joseph McNamara, Citi.

I was hoping you could help me better understand the moving parts within the Profitable Platform EBITDA guidance you've given. I guess you mentioned that Q4 '23 had a run rate of over EUR 1.3 billion with the kind of narrower set of countries. And now the 4Q '24, when there's this wider set of countries that are going to be profitable, you're expecting EUR 1.3 billion run rate. Again, I guess, could you help me with the right explanation? Is this -- these kind of new countries that have been added in, are they more like breakeven? Or are these kind of the core countries that were in the definition last year? Are any of them going backwards in terms of profitability?

Right. So what we tried to avoid here is that we have any double counting because we showed this on different slides. And of course, you had the profitable part. And as soon as the loss-making market got unprofitable, we included them in the profitable part, but we still kept them in the unprofitable. So of course, that was a little bit confusing. We, therefore, decide let's just keep the cohort of profitable markets, loss-making markets, such as a clear what is the true direction here. So as we did that, we -- Q4 2023 moved from EUR 1.3 billion, as you said, to EUR 1.2 billion. Now -- so that is the -- I don't know, the correct comparison. So taking those profitable markets out of that, that belongs in that unprofitable part. You were at EUR 1.2 billion, and that grows to EUR 1.3 billion. So there is a growth there. That growth is, again, common despite the Korea. So you can assume that the growth is coming from the other profitable parts of the business, and that is continue to grow fairly fast while -- yes, so that's the way to see it. And yes, I think, I don't know, taking Korea aside, I think the profitable business continued to increase its profitability as it continues to grow and have a more operational leverage and other benefits that we have of growth.

Excellent. I guess just to follow up if I could. Is Korea, therefore, potentially, I guess, going backwards in terms of absolute profitability this year?

We don't give disclosure on individual countries. I can't comment on that. We will also have to see and see how things are evolving. So I can only reiterate that, I don't know, regardless of Korea in investments, we will be hitting our guidance of EUR 725 million, EUR 775 million because we are doing better than expected in many other places across the world, as we've been pushing, I don't know, profit and operational efficiencies in every aspect to making sure that we take everything of our business into profitability. I can also confirm like regardless of the investment levels that we do in Korea, we will be at the EUR 1.2 billion annualized EBITDA in Q4, and that results in a substantial positive total cash flows, including interest payments, et cetera, et cetera, a substantial amount there. So that's the only thing I can share there. I hope that helped.

Next question is from Silvia Cuneo, Deutsche Bank.

I'd like to ask a question on the order trends. You commented about this in some of the segment slides. So I wanted to ask if you could please share an overall view of order trends and how demand for food delivery is shaping up now that the COVID comps are behind. So for example, whether this growth is coming from food delivery primarily or other categories and whether it's new or existing customers? That would be helpful.

Thanks, Silvia. Yes. So as I think in most of all, we are now behind the whole COVID. I think we grew tremendously fast, of course, during that time. I'm very glad that we maintained the size after COVID as well. And now, as you see, we are back into great growth, especially then outside of Asia. This is across the group. If you look at -- I don't know, we often hear that there is challenges in the European market and economy and it's maybe weak, but I think we had 19% growth there in GMV, good double-digit order growth there as well. So we haven't really felt that I think we are -- I don't know, we are back into good growth, same in many other places, Latin America, very strong. It grew very high in all markets. Argentina, of course, took a big hit and Argentina is a -- I don't know, a big part of that segment. So of course, the overall growth there looks a little bit weak, but temporarily at least. But if you look at the -- outside of Argentina, the growth has been in high double digits across almost every country there. So -- and then the Middle East, of course, incredibly strong, remaining very, very strong integrated verticals. So you're right, it's not only the food business that is growing fast. It's also our integrated vertical as well as our quick commerce offering overall. Yes, I think everything starts getting back to a more, I don't know, normal growth that we had pre-pandemic. Now we are back to similar growth again. So I think that's pretty exciting, and I hope that we can keep maintaining that growth momentum going forward. And hopefully then also -- yes, also getting there in Asia over time. So yes, we -- yes, that's a trend. And order and GMV is more or less similar. So most of the growth is coming from order growth. There is just a marginal increase in basket. So -- and I think 4there's more opportunity there as well that there is still opportunity to make food more affordable. I think that's probably held us back a little bit after COVID, a lot of restaurants increased their prices. So you had both inflation as well as restaurants increase price because you start getting the dine-in being full. I think there is an opportunity for us to find ways of making it more affordable again, making sure that there is no increased menu pricing on online orders which we have seen and many of our competitors has also seen. And that's, of course, something we have to work against. And that could further help our order growth even more.

The next question is from Annick Maas, Bernstein.

So my question is also on Korea. I understand it's difficult to really tell us how much more you plan to invest. But I guess you're looking for KPI or signal, at which point you think, okay, investment is now enough. Can you maybe tell us what that is? And with that in mind, how much of the EUR 100 million and EUR 150 million have you already invested?

Sure. So there are 2 parts of this. One part is -- we have same background music now. If we can take that off, please. So we had the original plan to spend EUR 100 million to EUR 150 million. That is just to drive certain product initiatives and driving own delivery even faster than we've done in the past outside of Seoul and so on. That should help our profitability for next year. So all these investments should have a very high good return as we get into next year. Then now there is an incremental investment because we also care for category position and respond to the market dynamics, exactly how much and when -- how much is needed and required there is still too early to say. As I said, they started to change for free delivery around mid of March. As I said, we took a hit over the first couple of weeks, we responded to that very fast, and we have seen, I don't know, better momentum since then. But how long we will have to keep spending up, still too early for me to say. I don't know, we -- and we're also something that we prefer not to guide to. But again, overall, as a group, we will still deliver on our guidance, both the EUR 725 million, EUR 775 million as well as Q4 EUR 1.2 billion annualized. We have a lot of room as we have been driving cost efficiencies and we have driving monetization in a lot of places, and that puts us in a very strong position to respond and still hitting our guidance. Thanks, Annick.

The next question is from Andrew Gwynn, BNP Paribas Exane.

Yes, it's not about South Korea. It's a different one. So integrated verticals, obviously, you've highlighted the best performing markets. What separates it from the worst performing markets, anything to take away from that?

So yes, the best-performing markets are usually -- I don't know, there are many aspects of it, but usually is to getting the right GMV density or order density, but even more so GMV density in a market. In order to have good density of orders and GMV, we need a lot of customers in that area. So the more customers have in an area, the more we can run orders and GMV per store. Then, of course, there are a few other aspects. It's a little bit how supply chains are working to get this. And also, that there is enough size of cities. So actually, we can have good distribution center to further drive down cost of distributing orders, buying procurement, but also distributing these orders to our Dmarts. So that is an important aspect. Then -- yes, so there are a few aspects there in order to drive it profitably, but the most important one is to get the right order and GMV density per store. If you look at Korea because I think you hinted us there, economics there are good. The team is executing really well. I don't know, we sit on over 1,000 SKUs there per store, which we also do in the best markets where over 1,000 -- 10,000 -- sorry, more than 10,000 SKUs. That's also the case for the best practice markets. That means it's a good hypermarket type of store. It's not a small store. It's maybe in size, but not in terms of SKUs. I think what still needs to be done in Korea is to drive more orders there. And I think we have, I don't know, proven that in many other places. So it's just a matter of time. The proportion of quick commerce in Korea is still very, very low in comparison to our best-in-class markets. I don't know, best-in-class markets are as high as 30% of orders coming from quick commerce, I don't know, mostly groceries, while Korea is far, far behind in this aspect. But I don't know, it's catching up very fast. It's one of our fastest part -- fastest-growing country in terms of quick commerce.

Okay. Just to summarize, there aren't sort of country-specific factors. A lot of it is just execution on the ground. It's not like Middle East works and nowhere else will. It's -- yes.

No, there is no -- and I think there is also a little bit misconception in general also when it comes to food. If in general, there is a, let's call it, better dynamics of income levels and disposable income and so on, it usually means there's just lower delivery fee and such that, in the end, one is reaching more or less the same gross profit margin in that business. So -- I don't know, we -- that is -- I don't now, you can get food delivery working in India, you can get it to work in China, you can get it to work in Sweden, you can get it to work in Japan, you can get it to work anywhere. The same for this. But it is a matter of where can you drive a lot of GMV per store because you need to utilize your pickers, your store manager, your rent. And also, you need enough size to have procurement power in order to be relevant for FMCG companies to drive AdTech. You need size in order to have, I don't know, the way you distribute items to the stores. So there are many aspects of it, but we see it, I don't know, where we get volume, we get it to work. It's not an easy model. And you've seen many companies going bankrupt here, right? So it's not an easy model, but I think we have proven that we've been doing pretty well. And as I said, we will be breakeven end of the year, including group costs and technology costs and so on. So we're pretty excited about it, and I think it has an enormous amount of user loyalty. because it's an incredible experience to get, I don't know, a selection of 10,000 -- up to 10,000 SKUs delivered in a fast manner. And I don't know, we are optimizing what items we have and pricing, availability is always there. We have full control of inventory. So it's an amazing experience. And it's the reason why companies like PedidosYa in Latin America or Talabat and -- or Hungerstation are incredibly strong, not only tMart, but also a lot of other services that built outside of food that is really paying off and building a strong position in the markets.

Very clear. And it feels like by the end of the year, you could be the last company standing in rapid grocery. So best of luck.

Maybe. Thank you.

Last question from Joe Barnet-Lamb, UBS.

Back to the front of the queue. So we've seen you to close and walk balk launches and a few territories recently, but no sweeping closures. Can you talk a bit about your thought process behind the decisions that you've taken to date? And what would encourage you to close more territories? Then I guess, related to just the clarification, your 90% reduction in adjusted EBITDA losses to Unprofitable Platform 4Q '22 to '24. Does that assume any further market exits?

Thank you. So there are many aspects of this, I'll try to simplify, I don't know. So one is that the country needs to -- a store needs to have enough orders per store. So it needs to be enough density, but it also makes no sense to have just 1 or 2 or 3 stores in a country. So it needs to also, the country needs to be large enough. There are also aspects about distribution. There are areas in the world where it's just very hard to get, I don't know, the items procured in a good, consistent low-cost way. So I don't know, it could be a part of Sweden is just not suitable, a part of Turkey is not suitable or a part of some other country is not suitable. So you have to also look at the city level, can we procure these items well? And do you have enough size in that country and do you have enough size in that store? It's also -- I don't know, as part of it, we also see how relevant is it for our business and for our consumer? How much does it drive our loyalty among our consumers? Is it just an additional way of making money? Or is it also a value-add as a loyalty aspect to our customers to subscription programs, et cetera, et cetera. So are there other benefits of it, too? And thirdly, what other strong retailers do we have in our platform? There are cases where we feel like, oh, we have a, I don't know, very close to breakeven in maybe a certain market or maybe it is even breakeven a certain market. But we don't see that there is -- the value that we can create in addition to have the best retail in our platform might just be a distraction because we're not building this to make -- I don't know, of course, we built it to make money, but the ultimate goal is to make money and building loyalty to our customers. And in some cases, we used to have an amazing third-party local store concept as well. And there's just a matter of priority and focus. And in some cases, we said, let's just double down on that. and make it an amazing experience from those retailers and hypermarkets and so on. So as part of this process, and this is an evolving thing, I don't know, if you look 2 years back, we had no good retailers in our store or 2, 3 years back or very few of them. Now we have the best retailers. We have an amazing SKU set, and we have built a product that is really good when it comes to managing local shops and stores. And the complexity of there that is a lot, like how to deal with out of stock, how to deal with replacement items, how to deal with -- yes. So there is an enormous focus here by me and the Berlin team to build the world's greatest local shop experience. And when we do that, we can also [Technical Difficulty].

Niklas, that was useful color on [ IV ], and I apologize, maybe I should have been a little bit clear. I meant specifically with regards countries for platform where you've obviously closed a couple of countries within platform and rolled back a launch as well. It was more, could we see further country closures within platform? Yes. Sorry, I should have been clear on it. That's my fault.

So yes, but if Dmarts, it could be further countries. For the overall platform markets, well, first, we look at, I don't know, do we have a market position there where we can build a clear leader and -- or at least a strong #2, is the market large enough to make sense, and yes, I don't now, is it also progressing on the plans that we're setting out? And there is always an assessment there. And yes, we continue to assess. And yes, so I don't want to preannounce anything if -- but we continue to evolve and analyze are we in the position that we need to be in order to justify operating in that market. I hope that was a...

No, no, that's helpful. No, that's great. But do you need any market closures to get to your 90% reduction in Unprofitable Platform?

No. If you will be in a market closer, those are relevant in amount because usually, there will be either very small markets. And if it's a small market, I don't know, we don't spend a lot of money on small markets. If it's something larger market, well, then usually it's, I don't know, close to breakeven anyways, but I still not justify a lot of focus if you are #3 or if you are not in a position where we can be a strong #2. So it will not be required in order to hit our unprofitable markets breakeven. That is not required. It would rather be a question of focus. I think that was it?

Ladies and gentlemen, that was the last question. I would like now to turn the conference back over to Mr. Oestberg for any final remarks. Thank you.

Well, not much for me. Thank you, everyone, for listening in, and thanks to all Heroes for your very hard work. It's truly appreciated. So thank you, everyone.

Thank you, everyone. Have a good one.

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