Delivery Hero SE (DHER) Earnings Call Transcript & Summary

Ladies and gentlemen, welcome to the Delivery Hero Q4 2024 Trading Update Conference Call and Live Webcast. I'm Morts, the Chorus Call operator. [Operator Instructions] The conference is being recorded. [Operator Instructions]. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Christoph Bast, Head of Investor Relations. Please go ahead, sir.

Hello, and welcome, everyone. Thank you very much for joining our Q4 2024 Earnings Call. We would like to remind you again that this call is being webcast, and a replay will be available later today on our website. Joining me today are Niklas Oestberg, CEO; and Marie-Anne Popp, CFO of Delivery Hero, who will walk us through the key highlights of our Q4 performance. Afterwards, we will be happy to answer your questions. And now let me hand over to you, Niklas.

Thanks, Christoph, and hey, everyone, and thanks for listening in. So let's jump straight into it. In Q4, we continued our strong momentum in line with the last quarters and grew our GMV by 8% in constant currency, and excluding the effects from hyperinflation accounting. On a like-for-like basis, we had 8.6% GMV growth in Q4. Even more exciting, growth outside of Asia accelerated further from 25% in Q3 to 27% year-on-year in Q4. This is growth far exceeding all our peers globally. As we already announced in November, 2024 was a transition year for the Asia segment. And, we soon will have all the fundamental pieces in place to grow sustainably. I'm very confident that we activated the right drivers to return to growth, and a sign of that is that we are back in GMV growth in 8 out of 12 countries in Q4, while having a parallel substantially improved profitability. Total segment revenue continued to significantly outgrow GMV with a 23% year-on-year increase in the quarter. This puts our full year revenue growth to 22%, exceeding our already increased full year guidance, which was upper end of 18% to 21%. This also had a positive impact on our profitability and led to a further increase of our adjusted EBITDA, both in a year-on-year comparison as well as for quarter-on-quarter. Year-on-year EBITDA or adjusted EBITDA improved significantly by almost EUR 500 million and came in at around EUR 750 million, thereby also exceeding our full year guidance, which was the lower end of EUR 725 million and EUR 775 million. In line with the profitability improvements, free cash flow also improved considerably to around EUR 100 million and came in at the upper end of our already increased guidance of EUR 50 million to EUR 100 million. Lastly, the recent Talabat IPO proceeds significantly reduced our net debt to EUR 1.9 billion and the leverage ratio down to 2.5x. Now on to the next slide for an actual versus guidance comparison. And here, GMV came in on target despite the discontinuation of free delivery for nonsubscribers in Korea. This encouraging news is based on all the changes we made in Korea. We have now also started to see good trends end of December. Total segment revenue exceeded our guidance even after the guidance increase in November. And adjusted EBITDA was clearly ahead of our guidance and driven by higher earnings in Korea based on improved efficiency in our own delivery service and strong ad revenues. In addition, the Americas and MENA segment had very strong finishes to the year. This then ultimately also drove better free cash flow, which came in at the upper end of our guidance. Now I'll move to the next slide, not much to say on this. Yes, solid GMV and revenue growth. Let's go to the next slide. So here, you can see that we recorded revenue growth rates of around 25% to 35% outside of Asia. And despite the challenges we had in Korea throughout 2024, even the Asia segment recorded a double-digit revenue growth rate. Now let me hand over to Marie-Anne for more details. Marie-Anne?

Thank you, Niklas, and a warm welcome also from my side. Let's start straight into the Europe segment, where strong order growth led to plus 17% year-over-year GMV growth in constant currency during the fourth quarter. This was a great achievement, given that we exited several countries in Europe throughout 2024. On a like-for-like basis, the segment grew by 21% year-over-year. This means that we again significantly outgrow our peers. Our revenue grew even faster with 24% growth. As already mentioned in November during the Q3 update, the positive earnings trajectory continued further into 4Q, resulting in a positive adjusted EBITDA for the second half of 2024. This was also driven by Glovo, which has really delivered a remarkable performance and generated a positive adjusted EBITDA in the second half of the year as well. As a short reminder, Glovo Spain is expected to generate a positive adjusted EBITDA also in 2025, even after the higher costs from the new employment-based model. Furthermore, the entire Europe segment is expected to be around breakeven in 2025. Now let's have a look at our MENA segment. In MENA, GMV and revenue growth both accelerated to 34%, respectively, both in constant currency and excluding the impact from hyperinflation. This was predominantly driven by a 30% year-over-year increase in order volumes and based on continued leadership across all markets. Saudi Arabia had again a standout quarter, much like in Q3. The country generated strong GMV growth and maintained its clear category leadership while increasing profitability. Talabat was also nothing short of outstanding as GMV growth accelerated even further in the fourth quarter and continued to enhance profitability with an adjusted EBITDA margin of more than 6% for the full year 2024. In sum, the MENA segment recorded an adjusted EBITDA margin of around 3.7% for the full year, and we expect further earnings growth in 2025. Now on to the Asia segment. For the Asia segment, GMV development was largely impacted by fading out free delivery for nonsubscribers in Korea. However, while this had a negative short-term impact on the top line, profitability has been improving. In addition, we recorded ongoing strong traction of Baemin's subscription program with a user penetration of around 35% at the end of the year. But also the APAC business, meaning Asia, excluding Korea, continued its upward trajectory with sequential order growth for the third consecutive quarter and a positive adjusted EBITDA before group costs in the second half of the year. Moving on to Hong Kong. We've seen a clear recovery now with strong customer growth towards the end of the year, positioning the business for improving top line trends in 2025. Overall, the Asia segment recorded an adjusted EBITDA margin of around 1.6% in 2024. For 2025, we expect stable to slightly higher earnings despite additional growth investments in Korea. Now continuing with the Americas segment. In Q4, GMV growth accelerated further to 25%, driven by double-digit volume growth across most countries. After reaching breakeven in Q3, and further earnings growth in Q4, we successfully recorded a positive adjusted EBITDA for the full year. With ongoing improvements of the macroeconomic environment in Argentina, we anticipate an attractive top line development and further earnings increase throughout 2025. Now onto Integrated Verticals. In line with the previous quarter, our Integrated Verticals segment grew GMV and revenue by 32% and 27%, driven by more daily orders per store and larger basket sizes, despite having reduced the Dmarts footprint throughout the year. As a result of increased store utilization, as well as improved supply conditions and growing AdTech business, the gross profit margin continues to expand further. This shows that with increasing operational size as well as improved customer retention and frequency, scale benefits become more visible and significant on the path to segmental profitability. Consequently, the adjusted EBITDA for Dmarts business has improved by more than 80% throughout 2024, and the business generated a positive adjusted EBITDA in December, excluding the effects from hyperinflation accounting. For 2025, we expect further dynamic growth in this segment and adjusted EBITDA at a breakeven level. Let's now have a closer look at the gross profit margin development on group level. We managed to accelerate gross profit margin in Q4 to new record levels, especially MENA and the Americas are already within our long-term gross profit margin target range of 10% to 13%. For Asia, you might recall that we stopped offering free delivery for nonsubscribers in Korea from September onwards, which helped gross profit margins to rebound throughout Q4. As just mentioned before, our Dmarts business improved its gross profit margin significantly throughout 2024. With increasing scale benefits, we expect this positive trajectory to continue further into 2025. As a side note, we have started to include the gross profit margin of the Integrated Vertical business in this chart within the group gross profit margin. For our full year financials, our GMV grew by 8% to almost EUR 49 billion and segment revenue by 22% to almost EUR 13 billion. On an adjusted EBITDA level, we have shown a great performance with an uplift of almost EUR 500 million and recorded a full year result of around EUR 750 million. With ongoing profitability measures, we reached improvements in all segments. We posted a free cash flow of around EUR 100 million, implying an uplift of around EUR 466 million, reaching the top end of our previously increased guidance range. A great job by all teams across the company. I would now like to circle back on commitments we made to drive loss-making markets and Integrated Verticals to profitability. As you can see, we have fully achieved our goals for the platform side and were only EUR 0.8 million short from reaching the breakeven target for Integrated Verticals. Going forward, we will, therefore, discontinue this illustration. As you can see on the next slide, we've been growing EBITDA by almost EUR 2 billion in the last 3 years. This was achieved despite low growth from COVID highs. Looking 3 years forward, we expect to achieve higher growth, making it easier to drive profitability and cash generation. In 2025, we will continue to grow EBITDA, while at the same time, making some extra growth investments into Korea and incurring around EUR 100 million cost associated with the change in the rider model in Spain. Beyond 2025, we expect to further expand our adjusted EBITDA margin until it reaches our adjusted EBITDA margin target of 5% to 8% of GMV by 2030. Now let's take a look at how the improvements in profitability have impacted our cash development. As you can see in 2024, we achieved a positive cash flow after interest even with that capital increase in IPO proceeds. The main driver for this was, of course, a significant EBITDA increase, which covers CapEx, leasing and taxes. Excluding the Talabat IPO proceeds and the capital increase related to our planned Taiwan divestment, our cash position was already fairly stable. Including these 2 events, we benefited from a combined cash inflow of more than EUR 2 billion, which resulted in a year-end cash position of EUR 3.8 billion, up from EUR 1.7 billion at the end of December 2023. This puts us in a strong financial position. Let's have a look at how this large cash balance combines with a debt maturity profile. On the one hand, the cash position more than doubled to EUR 3.8 billion, and in addition, we upsized the revolving credit facility to EUR 600 million to ensure ongoing flexibility if needed. On the other hand, we have EUR 3.8 billion convertible bonds outstanding at a weighted average coupon of 1.8% as well as a EUR 1.8 billion term loan due 2029. As we announced this morning, we aim to use approximately EUR 1 billion for convertible bond repurchases in order to further optimize our balance sheet. Talabat IPO resulted in a cash inflow of EUR 1.8 billion, boosting our cash position and ultimately reducing the net debt position by around 55% to EUR 1.9 billion. Consequently, the leverage ratio drops to 2.5x net debt to adjusted EBITDA. Let me now hand back to Niklas, who will take you through our case studies.

Thanks, Marie-Anne. So a quick update on our Saudi business, as we received some questions on this. As you can see on this slide, this is a very competitive market, but we maintain a strong leadership position. Looking at the middle part of the chart or the middle part of the slide, you can see an acceleration in growth all through -- or during the year. And this was happening while having new entrants coming into the market. What's even more impressive is that we did this at record profitability, so record profitability while competing here. This was achieved by allocating extra engineering capacity to push affordability initiatives combined with selected profit drivers. We've also paid close attention to customer behaviors as one of our competitors spent huge amounts on discounts and vouchers. What we saw was at less than 0.5% churn of our high and medium value customers. And for reference, this is a large majority of our customers. We have approximately 4% to 5% churn within our lowest value customer segment group. These are customers driving negative unit economics, and we are fine to rent these customers away and we'll do nothing to try to retain these customers. This makes us very confident in our business in Saudi and across the MENA region. Our focus will remain to build a superior experience. We have allocated some extra budget to ensure the best experience in Saudi. But so far, we didn't have to use any of this budget. Let's now move to our advertisement business, which is already generating more than EUR 1 billion. And what you can see here is that we had a 36% increase in advertisement revenue to more than EUR 1.2 billion in 2024. And we are confident to increase our long-term target from previously 3% to 5% to now more than 4%. In Q4, advertising revenue already accounted for almost 3% of total GMV with ongoing growth rates outpacing company GMV growth. Margins in our AdTech products are around 70% and therefore, highly margin accretive for the group as a whole. With increased sales automation, we expect margins for these products to increase further. On the back of strong 2024, we expect advertisement revenue for 2025 to reach more than EUR 1.5 billion. Two main growth drivers for this will be Korea and Glovo as they are moving over to our global tech stack. You may recall that we initially planned for more than EUR 2 billion for '25. However, due to the change in competitive landscape in Korea, our focus in recent quarters has shifted away from the development and distribution of advertising products for the time being. Now I'll turn it back to Marie-Anne again to give you an overview of the new free cash flow definition as well as 2025 full year guidance.

Thank you, Niklas. So to increase comparability with our external IFRS reporting and to better align with industry standards, we have revised our free cash flow definition. Going forward, readers will be able to fully reconcile the free cash flow from operating activity per our consolidated statements of cash flows to the guided and disclosed free cash flows. On the left-hand side, you can see the previous free cash flow definition, which excluded working capital changes from payment service providers and restaurant liabilities as well as extraordinary effects below the adjusted EBITDA. We have adjusted this in the new definition of free cash flow. According to the new definition, it's calculated as cash flow from operating activities as stated in the IFRS statement of cash flows less net capital expenditures and payment of lease liabilities. For 2024, the revised definition shows free cash flow amounting to approximately EUR 200 million. The increase from the former definition is largely due to favorable movements in working capital, specifically payment service provider and restaurant liabilities. Let's now turn to the full year 2025 guidance. For 2025, we are confident to accelerate our GMV growth again. With GMV trends in Korea expected to improve throughout the year, we expect GMV growth of 8% to 10% on a group level. Also revenue growth of 17% to 19% year-over-year. As always, both growth rates are in constant currency and excluding hyperinflation accounting. The 2025 adjusted EBITDA is expected to come in between EUR 975 million and EUR 1.025 billion. This step-up already includes the additional investments into our Korea business as well as the EUR 100 million EBITDA headwind resulting from the switch to the employment-based model in Spain. Free cash flow is expected to be more than EUR 200 million for 2025. This guidance excludes extraordinary cash in and outflows such as M&A break fees and ongoing larger legal disputes. As shown in our cash bridge, 2024 cash flow included net working capital inflows of around EUR 180 million, of which over EUR 100 million were attributable to payment service provider and restaurant liabilities due to calendar day of year-end in 2023 versus 2024. In 2025, we expect a small net working capital inflow in line with our guidance. The lower working capital inflows in 2025 will be compensated by an adjusted EBITDA improvement of around EUR 250 million, which after taxes paid, CapEx and leases will result in a small free cash flow improvement year-over-year. Midterm, we expect the adjusted EBITDA to cash flow conversion to reach over 60% and long term around 70%. That's it from my side. Thank you for listening. And we're now looking forward to taking your questions. Christoph?

Thank you very much, Marie-Anne. Before we start with the Q&A, I would kindly ask you to limit your questions to one per analyst, so this way, we can ensure that everyone has the opportunity to ask a question. Operator, please go ahead.

[Operator Instructions] And the first question comes from Andrew Ross from Barclays.

I wanted to ask about Korea and I guess a few parts. But can you give us a bit more color about the growth trajectory towards the end of Q4 and into Q1? It sounds like it's improving, but it would be good to get more color. And then can you give us more about how the product is evolving. So you said 35% of users are on the cloud. Like what percent of GMV is that? And how is the shift going from 3P to 1P, as you enrich the value of the cloud and kind of evolve proposition more broadly. It would be good just to get a bit more in terms of what you're actually changing in Korea and what you're seeing on the ground.

Andrew, so yes. As mentioned already back in Q3 trading update, we expected Q4 GMV development to be below Q3 levels as we discontinued the free delivery for nonsubscribers in September. And since nonsubscribers still represent the majority of our customer base, these changes had a short-term impact on our top line growth, as you mentioned. What we also said is that this will drive profitability and we also think that the change in pushing subscription in Baemin Club, we expect this to have a positive mid- to long-term improvement into both customer experience and into our growth, and this is also what happened then in starting, let's say, maybe end November, beginning of December and then start taking more effect towards end December as we did a few other changes in parallel. Yes, on the product road map, there are so many exciting good things in there. A few things we already spoke about, and we have done some work on this integrated list, but it's by no means completed. It takes a long time. It's very a little bit frustrating, but it is what it is. It's -- so that is, of course, one big improvement, also improvements in how we show on the logistics side and the time [indiscernible] side, on the -- yes, the whole logistic tech stack, which is also then leveraging kind of what we're building in Berlin. So a global tech stack. So that should improve logistic experience as well as, yes, the experience for both the riders and consumers. Yes, there are literally hundred things I can speak about in terms of product improvement that we are doing. Some of them have happened, most of them happened in Q1, towards the end of Q1. Some of them might happen in Q2, and some even start happening in Q3 and Q4. So this is really a year's project, but you will start seeing effect of all these changes sooner rather than later, possibly already. And as I said or as you said or we said, yes, we had a good ending to Q4. Yes, 30% of subscription. We don't disclose exactly what, I mean, how many users and so on, but this is the disclosure that we give. This is going to go higher. We have said before, we kind of want to target towards at least 50. So you would expect that we will probably drive it towards 50 or so, possibly higher. 3P to 1P that is happening quite fast, and I would expect an acceleration in this towards, say, yes, beginning of Q4, end of Q3, beginning of Q4 should be a further rapid expansion of this. But already today, it's -- we're moving as fast as we humanly can. And long term, we will go towards 70% to 100%. Long term, I guess, 100%.

And the next question comes from Marcus Diebel from JPMorgan.

Also another question on Korea. I think previously, you commented that you think we're going to get order growth in Korea in 2025. I mean is that something that you still defend sort of as of today from the data that you can see? And then if that is the case, could you maybe elaborate a bit more what the scenario is? Is it that you need some macro help? Is it that you feel the players or the market is increasingly moving towards the sort of 2-player markets given that you are suffering? Or is it just really all about the better product and the changes that you have made? I'm sure you might say, it's all of it a little bit, but what would be the key driver for the scenario that we see order growth in Korea in '25?

Yes. So we will turn on positive growth in '29, so we stand by that. I don't think we are the dependent on macro. I think anyone who's dependent on macro, I think it's -- yes, we will never blame or take credit for macro. I also don't think it has anything to do with competition. I know a lot of people try to -- or think so or try to somehow expect that. I don't think our growth is in any way dependent on competition. It has never been and never will be, neither in Korea nor in any other markets. If we don't grow, it is purely poor execution of us, nothing else. So growth is 100% driven by us and not our competitors. And I think we could have done a better job in end '23, beginning '24. I think we started to execute a little bit better mid-24, but a lot of heavy lifting. And I think '25 should be, I think, a decent year, but it's all driven by general execution in particular, product execution. And a lot is happening and it's moving fast. The team is working incredibly hard. It's very, very hard. There's all-nighters all the time, and it's going to show effect.

Perfect. But you would think, as of today, you think with these tools, orders will grow in '25? Just to -- it was breaking a little bit.

We will grow from a negative growth to a positive growth. That's what I'm saying.

And the next question comes from Luke Holbrook from Morgan Stanley.

I want to change track a little bit and talk on Saudi. You've given some very helpful disclosure in the presentation on Slide 23. But I'm just trying to understand that with the new entrant having expanded into more towns and cities over the past couple of months, your chart suggesting that their actives are flat. How do I square that with your commentary that you're also channeling potentially more investment back into that market? I'm just trying to understand as well the source of that data.

Can you repeat? I didn't fully connect on the investing a little bit more, but sorry, it was something there.

Your data suggests that [ their access ] has been flat since the start of November, but you're also discussing making more opportunistic investments into the market. So I'm just trying to square both commentaries together with the data that we're seeing on the slide.

Got it. Okay. Maybe the first, starting off a little bit on the premise of the question. So look, I'm incredibly competitive. And I think no other company has been forced to compete as much as Delivery Hero has. We have also ended up on top in more than 90% of our business, despite competitors having spent far exceeding EUR 10 billion, probably a multiple of that in our markets. So I think we are freaking good at competing. But the question people have is how it impacts growth and profits and all of that. And I do think it matters in the early stage of the market if you have a tough competitor because it clearly impacts customer acquisition cost. But as a company reaches scale in a market, it doesn't really make much of a difference if your competitors are big or small, whatever size they have. More relevant is if you have scale or not. Our experience is also that competition is rarely a problem if the growth is weak, as I mentioned before, it's way more about how we execute if growth is weak or strong. So if you then also look at the last 3 years, if you think about this profitability growth and what happens when you have strong competition, does it impact and how much does it impact? Because I think, there's an exaggeration in how much it actually does impact. So if you look at the last 3 years, we have been in intense competition across so many markets. And despite this, we increased profits with almost EUR 2 billion, and this is despite then coming from the COVID highs. So therefore, despite not having the growth that you would have expected from those levels, we still managed to drive EUR 2 billion in profitability. And this is despite very tough competition over these years. So I think that again shows that it doesn't really matter what your competitors do. It matters way more what we do. And I think now, as growth is starting to accelerate, I believe, we should have an easier path to drive profits going forward and not harder. So then coming to your question on Saudi specifically, and a little bit squaring the numbers here. So the main reason why we grow faster is looking at our data, and we should be clear that when we look at external data, this graph shows that we are more or less flat, even slightly declining, while reality is not, and the reality is that we grew faster. So that, again, kind of invalidates those external data points that are rarely correct. It might be directionally right. But obviously, it's not right here as we're growing our customer base and we're growing our orders, while the graph indicates that we were not. And the reason why we managed to grow in Saudi and while delivering record profitability is that we did allocate both a lot of tech and private resources as well as a lot of focus to make sure that we have -- that we cover any weaknesses in our product as new entrants are coming on board because that's the scary part. If you're losing share when a competitor comes in, it just means that you're doing something wrong. That could be -- we are not on par on logistics. I think I can give 1 or 2 examples like Korea where we're not on par, we didn't have full on delivery. There have been examples where we have had no multi-vertical offering and competitor did, and that also impacted us. But as long as you don't have any product weakness, your good customers do not leave for a voucher or discount. Your voucher hunters and your fraud customers do, but generally not good customers as long as we deliver. So that's what we're focused on. And this then also grew, I don't know, both profitability and growth. We then look at what was interesting coming to your question. I'm sorry, I'm making this very long here, but what is interesting is that, I don't know, Keeta probably reached something like 150,000 daily orders, our estimate. And yes, it hasn't impacted us at all or at least not a good part of the customer. What I mentioned before is that our medium to good customers, we had less than 0.5% loss of those customers. So literally nothing. And this was in Riyadh only. So this was not on a Saudi basis, it was in Riyadh, where they have been focusing. But we did lose some low value or negative value customers in 4% to 5%. And as I said, that's nothing that we will be focusing on retaining. We're actually -- yes, there is no value in maintaining those customers. As to the increased investment, well, we still see that Saudi is a big market and we want to capture most of that market while someone else is coming in and fight for the new customers. And therefore, we kind of plan on maybe we need to spend a little bit more in marketing and a few other things to keep acquisition rates up. So far, we haven't had to spend anything there. But maybe we'll do, if you see opportunity to acquire user cheaper, then we will do. Most important is that we're delivering a good experience and then we make those potentially or potentially not as opportunistic investments. So yes, so in terms of that external data, I wouldn't take it as matching it month by month, does it match up, to your question. I'd rather see directionally is that we are doing okay. There are 6, 7 other competitors being significantly smaller than us, fighting for a #2 position in the market. It doesn't really matter what they do. What matters is what we do.

And the next question comes from Giles Thorne from Jefferies.

Best pronunciation of my name I've heard in a while. It was one question, please. Inevitably back on Korea. And Niklas, it'd be useful to hear you talking about what it was about Austin Kim's time at Trendyol that made you think he was the right fit for the Baemin role here.

So you mentioned Trendyol here, and I didn't capture the connection to Korea.

So just picking up on the new CEO at Woowa. What was it about Austin's time in Turkey that made you think he was the best fit for Baemin here?

I forgot that Austin actually had a time at building Trendyol Go. Yes, of course, he came in with an enormous amount of experience in building food and quick commerce. And there was a great hire. He is one of the toughest competitors that we had, to be honest. Yes, Trendyol in Turkey, they were very good, and yes, we obviously want to have the best people in our business and also was a very logical choice for us and grateful that he wanted to join us. And since he joined, he has been fantastic. It's super exciting working with him. He's moving in light speed, exactly like we want in Delivery Hero. He has that drive and passion that we have in Delivery Hero. Whatever, yes, focused on impact and getting stuff done today, not in tomorrow, not in a week, not in a month, but he has that drive. So far it's been fantastic working with Austin.

And just by way of follow-up, as you look at the product road map, you spoke about a couple of questions ago, do you see any white space between what Baemin's offering and what Coupang is offering within 6 months? So the story of the past 2, 3 years has been, they've been able to differentiate themselves. Is it going to be white space still in 6 months' time?

There are still some white space, as I said, they have 100% on delivery, and we do not yet have that. So that's, of course, a little bit white space and the experience is better when we deliver. Then of course, there's a lot of white space or a lot of things that we do a lot better than them, mainly because understandably so, as this is our main focus and we can get all learnings from international markets and for them in there. So I think that helps us to move faster than them. And overall, I think we have a clear advantage, but we also have to cover probably the biggest disadvantage, which is in own delivery. There, going forward, I think that unique goods that we have are likely going to increase. I cannot imagine that anyone will move as fast as we will do when it comes to our product roadmap and what we're rolling out. So I think yes, I'm pretty excited. I don't think there's anything that we -- where we will lack. Potentially, we will not have 100% on delivery by that time, but the difference there will be smaller at least.

And the next question comes from Annick Maas from Bernstein.

You seem to have highlighted that Hong Kong has been doing well, that you have seen customer growth, which seems to be the first since really Keeta has launched it. So can you just tell us what has driven that? Has there been an inflection point now and Hong Kong is going to go better from here?

Yes. I think we're doing pretty well. Of course, there's always a little bit of a year-over-year effect. So as Keeta went in, we did take an initial hit. I think for two reasons. Firstly, when someone come and offer a big discount, some low-value customers will switch, the same way I told you about in Saudi. Some of the low-value customers will go to the competitor, at least as long as they have offers, which are better than what the competitor has. Secondly, I think we left a clear opening for Keeta to enter the low value basket segment. We didn't have an offer that cover that low-value baskets. I think here, unfortunately, we also lost a little bit extra because they came in and captured a piece that we didn't have, and that's why we moved in light speed when we heard that it would come into Saudi to cover those weaknesses, and that's also what you see in our growth. You can definitely see there's been a larger focus on Saudi over the last 6 months. And yes, so to cover any weaknesses, and we had one weakness in Hong Kong and that's what's been covered now. Yes, now we're seeing recoveries. So we see, I don't know, numbers being pretty okay, and we expect to be back to growth in the next quarter or two. We are not very far away from growth again, and I -- it's a big market. It's still early stage. So I expect we'll get into good growth, and it will be a good market long term for us.

And the next question comes from Christopher Johnen from HSBC.

Yes. Perfect. I wanted to inquire about your cash position and how -- what we should read into that. So out of the EUR 1.8 billion proceeds from Talabat, you are taking EUR 1 billion [indiscernible] so to speak. But at the same time, the RCF is up by EUR 600 million. So that begs the question around signaling. What does that tell us about your ambitions on M&A? Would you say that you are rather on the buying or still on the selling side of M&A? Any sort of update on that, please?

And anything still to be answered on the cash flow side? Or was it more on the M&A side or otherwise?

I mean more on the M&A side. I'm just curious why you...

Then I'll cover. Then otherwise, I'll let Marie-Anne then cover. But look, yes, we have a good cash position. We have a good balance sheet, it's a low leverage. But I think we are -- we also like to keep it that way. And right now, we have so much good momentum in our own business, and we have a super good focus and clarity and we are very optimistic when we look at the next 3 years, seeing how much we improved profitability over the last 3 years despite having all the challenges that we had that, that makes us very excited by the next 3 years. So I think we just want to keep that momentum and not be distracted by M&A and so on. So yes, I think our focus will rather be organically growing our business at this point in time.

The next question comes from Monique Pollard from Citi.

On a slightly different topic, I've seen some press articles that there was a Glovo employee in Romania, who's been externally investigated for corruption, accused of taking bribes to modify overtime, et cetera, for couriers. I'm just hoping you could provide us any color you could give on that would be helpful.

I actually haven't read that article and have not heard anything internally. Marie-Anne, have you heard about this?

No, I haven't.

Sorry, then we are not able to comment on that. I guess our Romania team is working hard to make sure that this is getting solved, but nothing that we have heard of. I'll read the article after this.

Then the next question comes from Silvia Cuneo from Deutsche Bank.

My question is on the take rate. We observed a sequential improvement in Q4 compared to Q3. And I wanted to ask if you could provide more detail on the underlying trends driving improvement? Is it specifically coming more from commissions paid by restaurants? Or on the other hand, is it more driven by revenues coming from consumers, like the delivery fees, service fees or subscriptions or perhaps it is still a mix effect from increasing delivery share at higher take rates? This would be helpful also for thinking about the drivers of faster than GMV revenue growth in your 2025 guidance.

Marie-Anne, do you want to cover?

Well, I'll start and then you can add, Niklas. I think the improvement in take rate is indeed a mix. So I think it's a bit of several elements that you mentioned there, right? So there is certainly an element that we are improving subscriptions and or increasing subscription rates in a number of the markets, right? There's something around deliveries. I mean I think it's really a mix effect that you see here.

Okay. If I might ask another quick one then, just regarding the changes upcoming in Spain with the riders employment model. Can you perhaps outline what are the key steps involved in the process? And do you have any views about how many riders will you need to employ?

Marie-Anne, do you cover this or shall I?

Yes, I'll do it. I mean we basically, as we have announced, right, started moving to the employment-based model in Spain. And that's really ongoing, right? So the details of the model are currently being finalized. And Glovo has started to pay social security contributions for the riders, and therefore, satisfies the request of the authorities. And so that's really a work in progress as we speak, right, and will be a transition over the next month with the focus really being on making it a smooth transition, right, safeguarding the customer experience. And then obviously, the cost side of it we spoke about already, so that's EUR 100 million that we have already announced for the new model.

And we do have a follow-up question from Andrew Ross from Barclays.

I guess mine is a bigger picture one. So the implied market cap of Delivery Hero, kind of excluding your 80% stake in Talabat is not much, as I'm sure you're keenly aware. Can you just give us like a bigger picture view as to how the company realizes more value to shareholders in the next couple of years? Clearly, there's a story of kind of accelerating GMV growth and free cash flow improvement. But I would really like to get your take on things like more asset sales, closure of markets thinking around the Talabat stake when the lock-up expires. Just like what can you do to help that situation?

Thanks, Andrew. So well, we are not the ones setting the share price, but we do try to focus on delivering both profit and growth. And that's really also what we want to focus on, rather than short term try to make something that take the share price up, but we rather want to see this long term and keep delivering on that strategy. And if we deliver well, then the share price is going to be up. So that's our main priority. And as I mentioned before, last 3 years, we managed to drive EUR 2 billion in profit improvements and this despite a low growth coming out of COVID. So we feel pretty good about the next 3 years. It definitely feels much easier to drive a profit now than what it has done in the last 3 years. Yes, and then hopefully, that will be reflected in the share price and the value of the business -- underlying value of the business. So that's our focus. Yes, we love Talabat. I want to have as much as I can on Talabat. We are happy with it. And we also understood that there is a value for us to take some local investors on board and all of that. But I want to have every single share I can hold of that company. So no intention there. And look, as you said, look, we are focusing on driving value for shareholder, underlying value. That doesn't mean that we will not engage on transactions. And we surely will, if we think that it enhances shareholder value and is accretive for shareholders -- for the long-term shareholders. But it's not our business to try to drive share price up short term by doing one or another thing. That's not our focus. But our focus is to really drive things that generate value for shareholders. If that also drives share price, then that's great, but that's the focus.

And we have one more follow-up question from Marcus Diebel from JPMorgan.

I have two financial questions for Marie-Anne. The first one is on the free cash flow. Clearly, you sort of like changes to the working capital management. What are actually your tools to kind of like smoothen out -- smoothening the working capital, i.e., the restaurant payments, can we assume that it will be sort of like always done before the quarter ends? Or is there now a risk that we will have different free cash flow numbers in different quarters only because of the date of restaurant payments? That would be very interesting how you manage this. And then secondly, on the bond repurchases. What is the driver of buying the bonds over repaying the senior notes? Is it just math? Is it just really better when you take into account potential extra fees in it? The bond is obviously not trading at par. Is it just this? Or are there other considerations why you prioritize the bonds over the senior notes? Just if you can just give me at least a high-level answer on this, that would be great.

Yes, sure. I'll start with the second one, actually. I think in terms of prioritizing the bonds versus the term loan, it aligns with the long-standing practice we've had of addressing the near-term maturities first, and we felt this was a good opportunity to address maturities that come up in '25, '26 and '27, also to buyback those bonds at an attractive price rather than repaying them at the time of maturity. So that was the primary consideration with maybe another consideration that for the term loan, we can only, at the moment, repay it at a premium to [ pass ] as a 1% prepayment penalty. So I think the mix of that. But mostly the fact that we have historically addressed near-term maturity first. I think that's still the right approach and therefore made that kind of the instrument of choice at this stage.

Just so that I understand the prioritization of the maturities, but obviously, we have very different interest rates. But still, all in all, the priority is just the maturity.

Yes. All in all, the priority is the maturity as a first step. And I think -- we think it does result for us in a much better and much more optimized balance sheet. And obviously, it's something we're going to continue to have a look at regularly because we're keenly aware that, that's something that we have to improve and get right. With this first step, we certainly have improved and gotten right.

As you mentioned, yes, the term loan higher interest rate than the bonds, but we are also buying the bonds at a discount. So that means that's implied interest rate in there that we are gaining. And as Marie-Anne also said, there is also a prepayment fee right now. But there is -- we don't exclude the possibility that there was going to be [indiscernible] on the term loan. But yes, Marie-Anne said, now we'll focus on this first.

Yes. And then regarding your second question on working capital. So I would say there's 2 elements to this, right? I think one is more generally having better and more efficient working capital management by also having more and more focus on it, and that's something we certainly introduced over the last year. And then there's obviously that very specific element of it relating to PSP and restaurant debt, right? And think that's something where, indeed, and I think you also see it across the industry and with our competitors, right, that there is certainly a timing effect there potentially due to calendar days at year-end, right, or at quarter end, and that's probably not something we would then very actively manage, but we could definitely explain, right? But overall, I think, certainly, there will be also, with the new definition of working capital -- of free cash flow, much more focused on working capital and of explaining those movements.

I think we're up on time.

We have one more question coming from Jurgen Kolb from Kepler Cheuvreux.

On Slide 12, where you're showing the gross profit margin improvement and trends by the individual regions. And we can see obviously that MENA and Americas are already at your target level. Which of the other 2 regions, Asia and Europe, you think will be the next to get back to this 9% or so level? And specifically on Europe, maybe what's the share of AdTech that you have in Europe, just a little bit of an indication.

Sure. I can cover and you can pitch in, Marie-Anne. So I think if you look at Asia, that's, of course, Korea and APAC. APAC is already fairly high on that graph, but Korea is pulling down the data. As you know, we do have lower take rate there at that point in time because we have a marketplace business with a low, but as we move to own delivery, and that's the improved efficiency of that and as well as driving AdTech. AdTech is still very low there. That will move things up as well. So I think we will -- that one should come there. It will take a few years, maybe a couple of years, a few years and maybe we will -- getting to 8% will be probably fast, getting to the other markets, and the market probably also increase from that point. It will maybe take a little bit longer. Europe, Yes, that's -- I don't want to say a timeline here to give any additional guidance on which one will be first there. It depends a little bit how we prioritize. And some markets are already there. Other markets are not there. Europe is also a segment where a lot of early stage markets. So it also -- some markets that have lower take rates because we used very early. As also mentioned, Glovo is also very early when it comes to AdTech. So we are replacing their AdTech engine with Delivery Hero AdTech engine. That's a substantial increase amount of AdTech in Glovo. So that will also drive the graph up. But I can't really say which one will get first to that kind of MENA LatAm level. It's a little bit how we prioritize. I can't say. APAC is definitely there very soon.

Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to Niklas Oestberg for any closing remarks.

Yes. Thank you, everyone, for your support and for listening in. And particular big thanks for all heroes. I know how much you're working. And yes, keep it up. Thank you, everyone.