Talabat Holding plc (TALABAT) Q3 FY2025 Earnings Call Transcript & Summary

Okay. Hello, everyone, and welcome to Talabat's Earnings Call for the third quarter of 2025. My name is Shadi Salman, heading Investor Relations at Talabat, and I will also be hosting today's call. [Operator Instructions] Please be aware that we are recording this webcast to offer a replay through our website afterwards. This will be within the Investor Relations section of our website at ir.talabat.com, where a copy of this presentation can also be found. A replay can also be accessed by using the same registration link used to register for this call. For any members of the media, please be reminded to share your questions separately with our corporate communications team whose e-mail is [email protected]. So today, I'm pleased to be joined remotely by Tomaso Rodriguez, our CEO; and with me in person, Khaled Alfakesh, our CFO; and Toon Gyssels, our new incoming CEO. For this call, we've jumped on the AI trend of generating polaroid shots hugging our younger selves, but really aren't that vein. So instead, we've -- given the foodies we are, we've done it with our favorite dishes. So Tomaso, forever an Italian at heart, gets to hug his bowl of spaghetti Bolognese with an extra sprinkle of Parmigiano. Khaled shot here, betrays caffeine fueled love story. And for myself, well, Gemini might have slightly exaggerated my love for Vietnamese pho, but I'll take it. And we get to introduce Toon by sharing that he's a burger guy. So straightforward, satisfying and ready to sink his teeth into what's next. Okay. So before I hand over, a few of the usual housekeeping points and agenda. I'd like to draw your attention to our disclaimer, which is at the end of this slide deck. In particular, I would like to highlight the section on forward-looking statements, which covers such items as dividends and financial guidance. For today's agenda, Tomaso, our CEO, will take us through key highlights for another set of strong results this quarter, in line with our guidance and still carrying much of the momentum from the first half of the year. Tomaso will also run through how far we have progressed our growth strategy in the last 12 months, building up the Talabat experience and ecosystem across both our markets and product verticals. Following that, Khaled, our CFO, will go through our financial results and guidance, particularly the main pro forma line items that we have disclosed today. Lastly, Tomaso will speak on the CEO transition and introduce Toon Gyssels, who will officially take up the role of CEO on the 21st of November later this month. So with that, let me hand over to Tomaso.

Thank you, Shadi, and thank you, everyone, for joining this call. We're really pleased to report our third quarter for this year, which shows really continued momentum from the previous 2 quarters. For Talabat, as usual, excluding instashop, GMV grew 27% in the third quarter at constant currency and revenue grew at a faster pace, 32% year-over-year also at constant currency. Our adjusted EBITDA reached $154 million, which is 6.4% of GMV, in line with our full year guidance, and Khaled will go through the drivers of this in the next section. Adjusted net income was $112 million or 4.6% of GMV. Our reported net income was slightly higher, $119 million or 4.9% of GMV. This is the metric we are guiding for this year, and Khaled will go over the bridge between the 2 measures in the coming slides. As discussed previously, we remain on track to pay a minimum of $400 million in dividends for the full year 2025. We previously communicated that we intend to recommend to our Board a payout of 90% of our reported net income, which equates to approximately $425 million based on our full year guidance. If this is endorsed by the Board, this will be then subject to shareholder approval at the AGM in March next year. Next slide, please. So after almost 1 year from our IPO, we thought this is a good moment to look back at the priorities we discussed during our roadshow and how we're tracking against them. I think we're seeing very, very good momentum when it comes to growth and customer base. Our average MAUs were 23% higher this quarter versus a year ago and growing at a faster pace versus 19% of last year. This comes despite the impact of the 5-day administrative closure in Qatar in September, considering Qatar is also our fourth largest market by user base. On the right-hand side, you see that similarly, our order frequency has contributed to increase both for the overall platform and for our highest value customers. So we always like to look at our highest value customers, the ones that order the most and which we -- intuitively, we think they are the ones that grow the least. But actually, our top 5% cohort has been growing at 5% year-over-year and the average platform 4% year-over-year. So we see very strong momentum, both in increase of MAUs and in the increase of frequency of the MAUs. And I think there are really no tricks or shortcuts for this. We have to consistently offer the best consumer value proposition in our core online delivery business, which attracts new customers, retains them and drives their order frequency. This means that we always have to be expanding our selection, improving our experience and offering more value as we discussed many times, and which this is exactly what we have done, as you can see on the next slide, please. So when it comes to selection, we have been expanding our selection of vendors by almost 22% over the last 12 months. And we have now more than 80,000 active partners on the platform. We also continue to improve our experience with the largest fleet in the region. Our fleet now consists of more than 160,000 riders that is up more than 1/3 from a year ago. Lastly, when you have the best selection and you have the best experience, you need to make sure that you are very good at affordability and value for your customers as well. That's why we have been focusing very much as discussed many times, on partner-funded savings. And we've been pushing the boundary there as well. As a percentage of GMV, we have more -- we have around 6.3% of vendor-funded savings, which equates to around $0.5 billion over the last 12 months. This metric was 6.1% for the same period of last year and 5.1% for the full year of 2023. So as you see, we keep expanding on value as well. The second part -- sorry, next slide, please. Thank you. The second part of our strategy, once you build a super strong and core business is also to build a great ecosystem around it, right? And that drives stickiness and retention. On this point, we're mainly focused on multi-verticality, talbot pro, our loyalty subscription program and AdTech. When you look at multi-verticality, our adoption rate increased by around 3 percentage points. And now we have more than 1/3 of active customers that order across food and grocery and retail verticals. When you think that we continue to acquire all these customers as mono vertical food mostly, and then we work on converting them organically enough to become multi-vertical, then you can see that this is a great result, especially because like our MAUs have been growing faster this year than last year. But even more importantly, this 35% customers represent more than 70% of our GMV. And we believe this is a great moat to more engagement, loyalty and a moat to competition. As we discussed many times, multi-vertical customers have manyfold higher frequency than monovertical customers. On talabat pro, our subscription program, we now have more than doubled the adoption rate versus last year and almost half of our GMV now comes from order placed by talabat pro subscribers. In Q3, we launched the program in Iraq following the very successful launch in Egypt in Q1, and talabat pro now is live in all our 8 markets. We continue to enhance the program's offering beyond free delivery, and we're including exclusive discounts on hundreds of key value items on our tMart dark stores, booster discounts and on best sellers in the food vertical, exclusive dine-out discounts across all our restaurant partners and other exclusive discounts through partnerships such as online streaming services of ride-hailing, where we have partnered with the likes of Spotify and Bolt. Lastly, on AdTech, margins have increased from 3.5%, up from 3.3% of last year. And we continue to aspire to the leading e-commerce margins of 7.5% to 8% as a long-term ambition. And we see a lot of potential in 2 areas. The first one being CPGs as a key focus areas in the journey, especially as we grow our grocery and retail vertical and our no-margin revenue has been improving. And secondly, deal orchestration and further personalization is also development area as more targeted advertising improves our partners and CPGs ROS and can help us better price our ad solutions. Moving to next slide, please. So as we said, strong food business based on selection, experience, affordability, strong ecosystem, multi-verticality, talabat pro and AdTech. And finally, we go back to our initial thesis on how penetrated is the business. And when -- and we ask our third-party market consultants to kind of refresh a bit the market sizing exercise that we presented during our Capital Markets Day in October of last year. And I'm very pleased to say that the market opportunity today is even larger than before as our markets continue to grow. On the left -- the graph on the left shows the frequency of order per month per capita based on addressable population of our markets, which is defined as the people aged between 15 to 64 years old, living in urban areas. For Talabat, at the time of the IPO, we were 0.4 and now this has increased to 0.7. Also, there was an increase of 4% in the addressable population in our markets. This remains very far away from leading delivery market like China, where monthly order frequency per capita increased to 7x from 2.9 for a top layer. And this is not at all on account of free Boba Tea orders. And also very far from the daily or even biweekly ordering if we ignore the theoretical maximum of 90 because people eat 3 times a day, 30 days a month. With 2 orders per capita per week, this is still almost a 20x opportunity from where we are today just on food. But then when you look at grocery, the opportunity is even much higher. If you look on the right side, we show that the total addressable market for both food and grocery retail combined has grown to almost $140 million, up from the 125 -- sorry, $140 billion up from the $125 billion figure we've previously shown. For food, this is all eat-at-home food, whether order online or not. And for grocery retail, this is all grocery, both purchased off-line and order online, plus high potential retail categories such as flowers, pharmacy, health and beauty and small electronics. We increasingly look at this market opportunity as one because really the market for food delivery can grow to complement the grocery market as well. So as you see, the potential TAC has been expanding at a very rapid pace. And when we look at our GMV, there's definitely a massive headroom to grow into. So I will now hand it over to Khaled to go through our Talabat financial in more detail and come back later.

Thanks, Tomaso. So as before, our reported financials cover the Talabat asset perimeter that IPO-ed and includes instashop performance starting from February '25. What we are presenting today are pro forma financials for Talabat, but excluding instahop. The pro forma financials given the listed company was only incorporated in September '24, and so reported financials do not include historicals. Also, we're excluding instashop to allow for a like-for-like comparison of our performance and easier comparison with the previous Talabat-only guidance. However, stand-alone instashop performance is included in the appendix. So now let's walk you through our financial results. Q3 has been another strong quarter for us. The momentum we saw in the first half of the year has continued. At the top line, our GMV grew by 27% on a year-over-year basis at constant currency. This was driven by a stronger order volume across all markets, which in turn was fueled by a strong growth in our monthly active users and as well as the increase in the order frequency. GCC markets remained strong, growing at double-digit rate of 20% on a year-over-year basis and still contributing to more than 80% of our overall GMV. UAE, our largest market, maintained its robust growth trajectory, growing in line with the group's overall pace. And Kuwait, our most established market, continues to deliver strong double-digit growth for both the quarter and for the first 9 months of the year. Likewise, our food vertical is growing at 20% growth on a year-over-year basis, strongly contributing to the overall growth of the business and our grocery and retail vertical grew even faster at 43% on a year-over-year basis. Q3 27% growth was in line with expectation and our revised guidance that we have shared in August '25. The guidance took into account market dynamics, competition and summer seasonality. The only unanticipated event was the administrative closure in Qatar that lasted for only 5 days in middle of September. This one-off event accounted for an approximately 1% loss of the overall GMV of the group during the quarter. The good news is that in a very short time frame since reopening, the team were able to recover more than 90% of the order volume. Revenue growth continued to outpace GMV with 30% growth on a year-over-year basis at constant currency. This is largely due to an increase of the share of the tMart GMV. As a reminder, tMart, our own grocery dark stores and their GMV flows directly to revenue at effectively 100% take rate. tMart share of revenue increased to 31% this quarter, up from 28% for the same period last year. We have also seen an increase in subscription revenue, reflecting the increase in talabat pro adoption rate. Now turning into profitability and cash flow. Our adjusted EBITDA came in at $154 million, 6.4% of GMV. This is slightly lower than the prior year period by 0.2 percentage points and largely due to lower gross profit margins that were partially offset by improved OpEx margins. The slight softness in gross profit margin is primarily due to the fact that commission rates were lower by 0.4 percentage points as our product mix continued to shift towards the lower-margin grocery and retail vertical. Yet it's worth highlighting that our AdTech margins improved by 0.2. -- sorry, by 0.2 percentage points to reach 3.5% of GMV this quarter, and this remains amongst the highest in the industry. Looking at below gross profit, we continue demonstrating operating leverage where our OpEx margins improved by 0.2 percentage points. Despite an increase in our marketing costs, both on the customer and the vendor side, our tech and SG&A margins reduced as a percentage of GMV. Moving further down the P&L, our adjusted net income grew by 15% on a year-over-year basis for this quarter with a GMV margin of 4.6% compared to 5.1% in last year. This change reflects slightly the lower adjusted EBITDA margin that we have just discussed as well as the year's impact of higher corporate income tax rate in the GCC, which we have flagged in previous earnings calls. On a reported basis, net income was higher at 4.9% of GMV versus 4.7% of GMV for the last year. Reported net income is the measure that we are guiding toward this year. As a quick reminder for everyone, our adjusted EBITDA measure is designed to allow a comparison of our true underlying performance by removing nonoperational and often nonrecurring items. For this quarter, the main adjustments were excluding net income interest earned on our cash balances and also excluding foreign currency losses in last year comparison related to the intercompany shareholder loan in Egypt. Finally, talking about cash flow. Our adjusted free cash flow margin was lower at 4.1% of GMV. Yet on a 9-month period, our free cash flow remains strong at 6.1% of GMV. This is still based on the same adjusted free cash flow definition we have used since the IPO. And the lower margin reflects new tax payment as well as the reversal of the one-off net income -- sorry, the one-off net working capital cash flow that booked in the second quarter, which was related to the timing of payments and was previously flagged in previous earnings calls. Finally, we reiterate our guidance for the full year. You will be remembered that this was revised upward in August as part of our Q2 earnings release to reflect our strong first half performance. While our guiding towards the lower end of the original margin ranges, the faster top line growth means we have higher minimum dollar value across all metrics and tighter ranges. For the remainder of this year, we continue to expect GMV to grow in the range of 27% to 29% at constant currency. This takes into consideration the entry of a new competition in our GCC markets by end of year. Our guidance also reflects slightly stronger year-over-year growth in the first half of the year due to the softer comparison in the last year, where we still had some boycott headwinds when it comes to the Global American brands. We also expect faster revenue growth of 29% to 32% at constant currency, reflecting growth of tMart GMV within the product mix. Adjusted EBITDA margin of 6.5%, net income of 5% and adjusted free cash flow at 6%, reflecting further investments in growth, multi-verticality, enhancing our talabat pro proposition and further expansion of our tMart dark stores network. Lastly, for dividends, we are on track to pay out a minimum of USD 400 million as per shareholder approved dividend policy. In September, the Board approved an interim dividend payment of $202 million, equivalent to 90% of net income in the first half of the year. Management intends to recommend the same payout ratio of 90% for net income for the full year, subject to Board and shareholders' approval. If this approved, this would equate to approximately $425 million based on the minimum Talabat only guidance figures on this slide. With that, let me hand it over back to Tomaso to say a few words on the CEO transition underway.

Thank you. Thank you very much, Khaled. And before we introduce Toon and before we wrap up our presentation, I'd really like to just share a personal note. I really want to thank all of you for the opportunity that has been given me to serve this company for the last 6 years. It's truly been a real honor. My time here at Talabat has been filled with countless days of really profound joy, learning and growth. We also had our share of sleepless nights, challenges and pushing boundaries. But all in all, through it all, I had the privilege to really working alongside incredibly talented and dedicated people, and I consider many of them really true friends today. Beyond the milestones and the fantastic business grow and the metrics that show it all, I think it's the human impact what really makes me proud. We've seen our efforts and impacting the lives of 160,000 riders, providing them not just with jobs, opportunities, livelihood and a pathway to a better future for themselves and their families. And I think this is really what we do at Talabat. We don't just deliver food and groceries. We unite families, bringing together over meals. We make people dreams come true by empowering entrepreneurs and providing opportunities and we build communities by connecting people across the region. And that really, in essence, is what makes this place so incredibly special and unique. I will still remain on the Board of Talabat as a Nonexecutive Director, and I will continue to help and support the company in any possible way I can. And at the same time, I'm equally excited to announce that Toon will be taking over as the new CEO. Toon is not new to the Talabat family. We have a saying, once a Talabati always a Talabati. He served as our COO. And during that time, we spent countless days together. We navigated through crisis like COVID, celebrated victories and shared good times. He's an exceptional leader. I have full faith and trust in his vision and capabilities to lead Talabat into its next chapter of success. With that, let me hand it over to Toon to speak of his journey so far and maybe share some early thoughts on the future direction of Talabat.

Thank you, Tomaso. Hi, guys. So I'm Toon, really excited to be here today and to be joining -- rejoining Talabat in 11 days. I want to use this opportunity to briefly talk about who I am and why I'm here. So I'm from Belgium. I'm engineer by education, worked at McKinsey and then I left to cofound the company that delivers food from restaurants, right? And back in the days, that was actually new because only marketplace solutions existed where the restaurant delivers. And so that company was acquired by Delivery Hero, and that brought me about a decade ago now, that brought me to the region to then lead Talabat. And back then, Talabat was a very different company. It was also just a marketplace model, and it was not the #1 in all the markets. You had strong competition from Delivery Hero, Careem, several others in other markets. And so I was there for 5 years, had an amazing time with the team. Many of those are still here today. And we delivered massive growth. Like we grew the company 20x, made it the uncontested leader in its 8 markets. And we also built the foundations of what Talabat stands for today, right, starting with the logistics. Back then, there was no logistics. And I think the team, we built the technology, we built pretty much everything until then, there were like 60,000 riders at the end, something like that. We also built the quick commerce business, right? That 15-minute delivery concept, we pioneered it. And that was before COVID already. And during COVID, we built out more than 100 tMarts regionally while in lockdowns. And we built many more things, right? We built the AdTech suite, the Kitchens, we launched talabat pro. So that was -- that's been a crazy and a fun time. Afterwards, I joined my friend, Moh Ballout at Kitopi . That was the leading cloud kitchen operator, and he just raised $700 million to pivot towards becoming a tech-powered F&B player, which was a massive undertaking. We bought and built 80 brands, opened more than 200 restaurants across the region. And we built also a lot of technology, right, to manage all these brands on the marketing side of it, on the operations side of it. So by now, I know a thing or 2 about the restaurant business and how to improve that with technology. And after Talabat, I've also been helping founders, predominantly AI founders in building and scaling their companies, right? I worked with companies that have AI in the core of the product, for example, in education tech, but also AI ops companies that actually use AI to automate, streamline back-office operations. So a great learning experience. I see huge opportunity for Talabat to benefit from that. And that kind of brings me to why I'm here, right? And I'm very excited about the future for Talabat. It's a household brand serving millions of customers, and Talabat has done fantastic under Tomaso's leadership. So my first priority will be to continue that strategy, right? To focus on choice, affordability, experience and also driving that ecosystem value. We should continue that push. And secondly, I see a lot of opportunity to accelerate innovation and further expand the value for our customers and our partners. Today, the world of AI, we can think bigger and we can deliver value even faster. And for example, I see huge potential on smart targeting and personalization not just for the customer experience, but to improve the returns on that $0.5 billion of partnership deals that we have, right? So there's a lot we can do to improve that effectiveness. And finally, my third priority is I'm a strong advocate for culture and people. And I really want to unlock the full potential of all our employees, the Talabatis with an even more empowered culture and agile organization, where everybody is truly going to be part of shaping this next chapter for Talabat. So I'm really excited to be rejoining. I'm sure we get more chance in the future to talk about all these exciting things we're going to do. But I'll keep it at that for now and hand it over to Shadi for the Q&A.

[Operator Instructions] So with that, let me hand the floor over to Joseph Barnet-Lamb from UBS.

Are you able to hear me?

We can, yes.

Three questions from me, if I may. Firstly, can you provide color on the latest trading environment in the regions where Qatar has entered? What impacts are you seeing? And how does that impact your thinking for FY '26 GMV growth? Second question, the 1-week closure that you faced in Qatar in September, you said you'd regained greater than 90% of the order volume. Did that simply happen organically? Or did you do anything specific? What was the adjusted EBITDA impact of that closure and the related response. And then finally, albeit related to question 2, I guess, where there's been a number of sort of moving parts in terms of regulation in some of your key regions, namely Dubai and Qatar. Have there been any other -- any impactful developments lately? And has your thinking around those shifts changed at all?

Maybe I can start from Keeta and Khaled maybe you can take the one on Qatar numbers. Feel free to add if you want. So as you know, Keeta has been entering a few of our markets and Qatar being the one where they've been the longest now. I would say that what they've been doing is exactly what we expected in terms of heavy promotions and discounts and really, really focusing on affordability. And I think to the point that is almost about giving food for free. But the good news is that although they've been growing, but everybody will be growing like by providing food for free. We see very, very, very limited impact on what we define high-value and medium value customers, i.e., the ones that are the most profitable and the ones that generate more orders on the platform, right? So I would make sure that what's really important for us is when we look at our growth, right, and making sure that our growth is not impacted or marginally impacted, right? And I think like focusing on metrics like market share or whatever, I think at this point, at this specific time is not that relevant, right? And when we look at our growth, I see that we have a sustained momentum across the region. And I think this really proves that our ecosystem strategy works. As I was saying before, 70% of our GMV is customers with multi-vertical GMV, so using both food and groceries. And as we said before many times, like the frequency of these customers is much, much higher than the mono vertical customers, right? Talabat pro already 50% of our GMV in terms of customer penetration. And our selection, of course, is much bigger than Keeta's selection. Our experience is much better because of a larger fleet, more efficiency, better delivery times, et cetera. So I think that everything we've been preparing for, for so long, I think, is really playing out well, and it's working.

Maybe on Qatar. So basically, I think, first of all, we've seen tremendous growth from customers, from all stakeholders during this period. The team did amazing work with the Qatar authorities who were very collaborative. And actually, the shutdown was only for 3 working days. I think in terms of financial impact, as I mentioned earlier, on the GMV front is around 1% of the overall GMV. But I think on profitability, there is no really significant impact. And hence, we are reiterating the full year guidance despite the shutdown that took place as well. And I think in general, when it comes to regulations, we -- definitely, we keep an eye on the regulations on what's happening. I think now probably Saudi would be a good proxy on the implementation of GAC that we would expect to take place probably very soon. Nothing really new. In general, we see these guidelines as positive for us because it encourage fair competition, but really nothing new on that front. And I don't know if you want to add anything, Shadi, on other government also.

Yes. No, I think -- I mean, we've mentioned this before, I think on previous calls with investors as well. There's generally a greater focus and scrutiny from regulators on the sector as a whole. There's something for everybody in these guidelines, and they do prohibit predatory pricing by and large. I mean, even without the specific sector guidelines, predatory pricing is generally prohibited anyway, but they apply specifics to our sector. And we think that there should be some greater scrutiny on this predatory pricing in time. They don't -- they preclude launch offers and time-limited campaigns, et cetera. So we probably need to give them a bit more time to see how they get implemented in our markets. And we think this could be something positive for the UAE market, Kuwait markets, and we'll see if other jurisdictions also look to implement something similar. I don't know, Tomaso, if you have anything to add before we go to the next question?

Next question.

Next question from Andrew Ross at Barclays.

I've got 2, if that's okay. First one is for Tomaso and I hate to ask, but I wanted to maybe get a bit more color from you around the timing of your departure as CEO. I think it was a bit of a surprise to investors a year after the IPO and in the context of new competition. So if there's anything else you could share around the timing of why you made that decision from your perspective? And I guess anything from Board's perspective, that would be helpful. That's the first question. The second one is to follow up on Joe's one about regulation. So clearly, there are things live in Saudi. There's a new legislation which come into place in Dubai. What's your expectation in terms of where we're going in the rest of the UAE and elsewhere in the GCC? Is there kind of anything in the pipeline that you're aware of or as it stands today, could kind of Meituan continue to offer big subsidies in some of those other regions?

Sure. On my -- on the first question, Andrew, I -- so this was, as we said before, kind of a planned transition. We've been in discussion about this since a while, I would say. It's been an incredible run. I'm very grateful for the last 6 years at Talabat. I feel everything we could do, it was done leading to the IPO was really defining moment for the company and for myself. And again, I'm going to stay on the Board. So we want to make sure that we ensure as much continuity as possible. Toon has been ramping up for a while. The team is still there. The strategy will continue as it is, and there's absolutely no -- the ball will not drop at all and nothing is going to fall in between the cracks. This was planned over time. And the company priority is the one thing that is the most important to all of us.

Maybe on -- Andrew, on the regulations, I think in general, we would expect probably UAE would potentially adopt a similar guidelines at the federal level. In fact, we had some conversation with the authorities in Abu Dhabi as well. The one that also Shadi was referring to is basically Kuwait. So also Kuwait, the Ministry of Commerce also had a meeting with the industry players. We already participated in that meeting, and they share similar interest in potentially applying similar guidelines as well. This is basically the one that we are so far aware of. But I think in general in GCC, if between Saudi, UAE and most likely Kuwait, if there will be a regulation, we would expect most likely the rest of the GCC to follow.

Next one, I guess, is going to be Luke. Luke, over to you.

Hopefully, you can hear me. I've got 3 questions as well. My first question is just have you seen any growth actually accelerate after Keeta entered the market like we saw in Saudi with HungerStation in the first quarter after they launched. I'm particularly interested in Kuwait. It looks like some of the data looks like you're doing relatively well in that market. My second question is just on driver supply here and just whether you're seeing any issues around whether you're needing to incentivize your drivers more or any other measures that you've had to take to retain driver supply. I know the stat that you just gave in the presentation was up 1/3, but any more context around that? And then the final question was just around the partner-funded savings and whether there's been any shift, any move over the last couple of months as well?

I can probably cover the first 2, Tomaso, if you don't mind, and maybe you take the third one. So I think in general, when it comes to growth, I think probably the timing of competition and certain economic slowdowns we are seeing. So there is a bit of -- we've seen a bit of deceleration in the growth in general. And I think that's also expected to what Tomaso mentioned earlier. I think what matters the most now is to continue growing at double digit. I think this is very important for us. When it comes to riders, I think all the measures that we have taken probably 6 months, 9 months ago has started to yield now. So if you see our fleet has already grew more than 30%, I think 36%, if I recall correctly, we're already at 160,000 riders. So we don't see any major issue when it comes to supply. There might be slightly an increase, of course, on the cost per delivery because you need to do probably some incentivization, but largely because of the size of the fleet and the measures that we previously have taken into account, we don't see a massive increase in logistics cost.

I think on the growth side, maybe I can add one point. I think Hong Kong and Saudi were kind of quite different markets, right, when Keeta entered. And I believe Hong Kong, it was kind of a high MOV type of market and Saudi was kind of more of a high delivery fee market. And so when Keeta entered with a massive affordable value proposition, you've seen unlocking kind of a chunk of demand that probably was not ordering before. I think in our market that's quite different. Our delivery fees are as a percentage of the basket are not high. And also when you look at affordability, we offer a lot of affordability, as we said before, 6.4% of our GMV, $0.5 billion of vendor-funded deals. And I think it's a much more mature market, right? And I think that's why you don't see the same probably happening. And our growth has been very, very healthy over the last years already.

Is there another question?

No, those are the 3.

Next one from Maksim at Citi.

A few questions on my side. The first one, maybe a little bit on -- if you can share some of the trends regarding instashop because I think the details were missing from the press release and presentation just in terms of the contribution, profitability and the kind of pro forma growth there. And another -- just a follow-up on the delivery question, right, more on the delivery fees and delivery revenues, right? So as I can see from the financials, delivery fees declined, I think, about 5% quarter-on-quarter. And I think there is some deceleration year-on-year in terms of the delivery fees. Maybe if you can talk a little bit about the drivers of that deceleration, right, in the quarter-on-quarter decline. And finally, on Saudi, right, as I think has been mentioned before, where they saw the entrance of Meituan a bit earlier. But we see that the leading platform there, HungerStation had to -- well, as you can see on the app, basically offer a very affordable subscription, right? I think it's SAR 6 for 6 months, right? So just about $2 for 6 months with the vouchers, right, and the delivery promise. And I wonder if you would consider -- if you are considering implementing similar measures, right, such as heavily subsidized subscription in response to higher competition? Or what potentially could make you consider that or you will not consider that at all? Just any thoughts on that would be really appreciated.

Maybe I can quickly cover those. So I think let me start first with the delivery fee and then I will take you through the subscription, and then I'll answer on instashop. So I think on the delivery fee, it's very important, Maksim, to look at the delivery fee line items within the financials, the service fee as well as the subscription fee. Because the more the t pro penetration, you would see the delivery fee is going down because of the free delivery fee that the subscribers enjoy, but the subscription revenue is increasing. In fact, if you look at the effective fee, the way we look at it, we look at the delivery fee plus service fee, I think it remains within the range of 9 percentage points of GMV. I think on the subscription and Tomaso, please feel free to add, but I think we strongly believe that our subscription is fairly priced. We don't believe in providing like really free subscription because it's beyond just free delivery. Yes, it's free delivery for food, but you have -- you enjoy free delivery on grocery. Almost 1/3 of our GMV is grocery and it has really a great additional value for consumers such as the order booster deals, the discounts, the exclusive discounts on really 300 to 500 key value items on the dark store business. So I think we are not into that camp. Lastly, on instashop, from next year, of course, we will include instashop in the reporting for easier comparison. But in general, instashop is still growing at 8% on a year-over-year basis. GMV is around $157 million for the third quarter and still contributing positively to the bottom line, whether on EBITDA or net income.

Yes. And I can maybe add on subscription. I really believe that customers when they buy a subscription, they have to have a bit of a skin in the game. And our answer when it comes to making customers more loyal, I would say, is never to lower the price of the subscription, but to maybe increase the benefits and the value we provide with that subscription. And it's something we may increase the price in the future, who knows if we can provide even more benefits and even more value in the subscription. And I think the luxury we have as opposed to other players is that we can play among different verticals. We can provide benefits not just on food, but also on grocery and retail and fintech and dine out. And then we have amazing partnerships like the one with Bolt or with Spotify. And so the direction is to increase the value and announce the benefits and not reduce the cost -- the price, sorry.

I'll just add one quick point on the delivery net take rate. So net take rate has gone a little bit more negative, that means kind of subsidizing get a bit more from commission rate. But as Khaled mentioned, the subscription fees increased. So the net effect, if you take delivery fees, service fees plus delivery costs and subscription fees is only a 0.2 percentage point reduction in total. Just a question, I guess, from [ Mohammed Kamel ] on the investor side, on the buy side from [ Entrust ]. Can you hear us? Might come back to you. Ankur Agarwal from HSBC.

So my question is around the limits to which discounting can help in the UAE, for example, right? So we've already seen the Saudi market third quarter, basically the market gross booking value declined in quick commerce. So do you think the UAE, Kuwait, Qatar would follow the same trajectory as Saudi that there would be a few quarters of disruption before it settles down? Because I mean, it's just been 1 month of Keeta, right? So in your numbers, the impact of Keeta is only for 1 month in this quarter, right?

So I'm not sure I understood the question fully.

So question is that basically, if we look at the Saudi market, right, so the incremental benefit that Keeta has seen between Q2 and Q3 of discounting, the market share hasn't really gone up that much despite significant discounting. So should we expect that trajectory even in the UAE and other markets is the question?

So you mean Keeta's market share hasn't been going up in Saudi?

So I think between Q2 and Q3, the gain has been very limited despite continued discounting is the point.

No, I think -- yes, but that's exactly what happens when you are giving very, very, very aggressive discounting, right? So you have the low base of customers, the low-value customers that are the ones that kind of place these orders. And honestly, also, there's a big chunk of customers that are not potential customers for the future that also place orders. Customers that once the discounts are over, they will not be eligible, they will not be addressable market for food delivery, right? And so the moment you start slowing down these discounts, like all that big chunk of customers stops ordering from you, right? So I think the hope is that, that some of them will stay. But actually, if you have another platform that offers already a very wide selection, better experience and great affordability nevertheless, plus a strong ecosystem like Talabat does, I think the alternative, the moment the discount goes away, Tala is a much stronger platform, much stronger value proposition than what Keeta can offer today, right? So that's how we see it.

All right. My second question is on the expected regulation in all the GCC markets, right, or the regulation which were being discussed earlier. So how do you see this regulation impacting you versus Keeta, right? So what is the underlying theme of these regulations, right? In Saudi, we know that they basically affect players which are selling below variable cost. but in the UAE and other markets, would the regulations favor the currently well entrenched players?

I can take this. Do you want to take it or should I take it?

Go ahead, Khaled.

Yes. No, I think the answer is just simple. I think the impact on us would be positive, right? Because I think the main point of this regulation is around predatory pricing. And if you look at the way that the competition is operating now is basically with a really negative -- massive negative gross profit margin, which means this is the clear definition in my view, at least, is the predatory pricing. Probably just a period of time, but we believe that the regulators would interfere. This does not apply to us because we are already running the business at healthy unit economics. And the reason is that we have an efficient fleet. We have the AdTech penetration of 3.5%. We have all the partner funded, et cetera. So simple answer, we would expect the regulation of this -- sorry, the impact of this regulation is rather positive for us than negative.

Maybe a final question from the buy side. [ Yacoub AlGhunaim from Markaz ] if I recall.

Just some questions. First of all, the year-to-date EBITDA margin is at 6.6%. And given the guidance, it implies just a few basis points of contraction from Q3 to Q4, that it's much less than the sequential and year-on-year compression we saw this quarter. So should we expect the GMV mix shift to normalize? Or should we expect an offsetting impact from the efficiencies from the OpEx level? I'll then go to the second question later.

Yes. So thanks, Yacoub, for the question. Yes, I think in general, Q4, there's a bit of seasonality on the profitability side, primarily related to the dark stores business, the tMart business where we enjoy all the progressive rebates by end of year. And that's why you see slightly higher EBITDA margin in Q4. That's primarily the only reason. Plus, of course, usually with year-end reconciliations, we usually get some reversals of certain accruals that has been also taken into account. But I would say the primary reason of Q4 is just the rebates on the dark stores business.

Makes sense. And then regarding commission rates in the GCC, how is that trending so far? And also, if you can provide an update regarding shared group costs and the transfer pricing if there are any updates?

Yes, sure. I think on commission rates, if you look at the financials, the commission rates year-over-year deceleration is just primarily driven by the product mix, 0.4 percentage points just because of the product mix. So I think generally speaking, commissions trending is rather than stable or slightly positive. We don't see a decline in commission rates. On, group cost I was expecting then the moment he said, Yacoub, the, I said, okay, Yacoub was asking about the group cost. This is still under discussion for sure. It will only -- I would only tell you that it will take time because updating the transfer pricing model is really a big exercise. We want to make sure that we do it properly. We're engaging with the third-party big force to help us in revising this. Hopefully, in the coming month, we will have an update on this. The only thing that I can assure you that this is already in discussion as of now.

Perfect. If I may, just a follow-up on commission. I just meant specifically the GCC. Can you give us color on that?

We did not really report this level of details between GCC versus non-GCC. But I can tell you, generally speaking, there's no -- so far, we don't see any contraction on the commission rates across the borders rather than stable or slightly improving.

This brings us to the end of our time and this presentation. So thank you very much for tuning in. If you do have any further questions, you can always reach out to us and the IR team at [email protected]. And until the next earnings call, so please stay well. Thank you very much.

Thank you all.

Thank you all. Thank you very much.