Talabat Holding plc ($TALABAT)

All right. Hello, everyone, and welcome to Talabat's Analyst Call for the First Quarter of 2026. My name is Shadi Salman, and I lead Investor Relations at Talabat. I will also be hosting today's call. [Operator Instructions] As in the past, we will prioritize sell-side analyst questions and those being asked live. Please be aware that we are recording this webcast to offer a replay through our website afterwards at ir.talabat.com, where a copy of this presentation can also be found. So today, I'm pleased to be joined by Toon Gyssels, our CEO; and by Khaled Alfakesh, our CFO. But before I hand over some of the usual housekeeping points, I'd like to draw your attention to our disclaimer at the end of this presentation, which particularly highlights the section on forward-looking statements covering such items as our financial guidance, future investments, dividend policy and share buybacks. For today's agenda, Toon will kick off by presenting key highlights for the quarter, along with a business update, and then he will hand over to Khaled to run us through the period's financial highlights and outlook for the rest of the year. So with that, let me hand it over to Toon.

Guys, thank you for joining the call today. Let me start by talking about growth. Q1 had strong growth. We grew 18% GMV constant currency. And that strong because we managed to actually reaccelerate the growth in the markets first tackled by competition last year. Revenue grew faster as normal at 22% constant currency and adjusted EBITDA reached $130 million or 4.8% of GMV and net income at $87 million or 3.2% of GMV. These are quite strong results, especially taking into account the environment we faced in Q1. We had continued discount-driven competition, although intensity has temporarily reduced the second half of Q1. We also had a dynamic regional situation that required us to focus on safety as top priority and figure out operational continuity, which we managed well, and I'll elaborate later on that a bit. And also, during we successfully been executing on our $120 million investment program focused on building the Everyday App. I want to call out that we were doing all of that whilst returning capital to shareholders. Today, the eligible shareholders will have received a final dividend payment in respect of our second half performance last year, and we will continue to pay out 90% of net income in semiannual dividends. And also, we expect to commence share repurchases in the coming days following these results. Now we received a lot of questions about the situation in the region during Q1, and it was a bit of a mixed bag, some headwinds, some tailwinds. So I want to walk you through the dynamics of that Q1 performance. And let's start with Ramadan. As you can imagine, the start of Ramadan comes with a significant drop in demand for food orders, and it concentrates food demand with 2 peaks iftar and suhoor, which comes with its own operational challenges. Now what you can see here with orange being 26% and brown being 25% is that we're getting increasingly better at managing that drop in orders at the start of Ramadan. This reflects operational readiness, but also tailoring actually the food offering that we sell and it also covers a bit of diversification towards grocery and retail because that drops less in Ramadan. Now we come to February 28 when the conflict started. And initially, we had a peak in grocery orders from people stocking up, which I think all grocery stores online, offline quickly ran out of stock. Now we managed to fix supply chain and availability within a few days across everything, and we built 3-month inventory stock on critical items in 48 hours, right? Over this period, we also saw an increase of food orders initially as people were going out less. But we also saw the effect of less incoming people, both international and local tourism and a longer and more intense spring break, right? That one got extended. So more people holiday abroad. And what you can see is you see that slower recovery that typically happens during Ramadan versus the year before. Now we're going to come to Eid. And this is where we typically see a big uplift in orders. And also this year, you see that the jump is even bigger than last year. Again, this is operational readiness to cope with that. And this Eid uplift, it lasts a couple of days. It lasts like 5 or even up to 7 days depending on where the weekends fall. And this year, it fell entirely in Q1 versus last year, part of that fell in Q2. That drove the accelerated growth or the high growth, let's call it that, the 18% was partly because of that seasonality. Now our Eid momentum this year got disrupted, partly because of weather, we had a lot of rain, but also because of the shutdown of our retail and grocery business due to data center outage in Bahrain. Team responded quickly, managed to migrate that entire service served outside of the region within 24 hours, but still we were down for most of the day. So I hope this gives a bit of a flavor. And you can see that Q1 was a rather dynamic quarter, which we managed operationally very well, and we had great results considering. Now a bit more on that operational readiness. This required resilience of the teams on the ground, and it's reflected in all of our strategic pillars. Let's start with selection. Many supermarkets, as I mentioned, went out of stock, and we had to source products from different suppliers and get them into the country in different channels as well. I managed how quickly we recovered. Let me also highlight that we operate in several markets, which gives us an advantage. We had a green corridor in Oman that we established together in collaboration with the MOE in UAE. We also established a corridor in Saudi, and we've looked for the future into bringing produce from Jordan, Egypt because we operate there as well. So our multi-country setup gave us a unique advantage in managing that. If we look at experience, look, the first 24 hours is probably the most hectic. We had to figure out where it was safe to keep operating, also get the riders to understand it was safe and go on the road. So this was quite dynamic, especially since things evolve constantly, right? It was not a static situation. We established really quick connections with all the governments, and we were in touch with them, calls at midnight, calls at 3:00 a.m., calls at 5:00 a.m. It's quite impressive how the government was there for us to give that operational continuity. And during the whole time, we managed to even further increase the supply, both on the rider and the picker front, so we could continue delivering a great experience. Lastly is on affordability, which is also a tricky one because the supply chain constraints hit everybody. Luckily, again, government did really good on price regulations and supply guarantee that helped a lot to sustain. We've seen limited increase in prices on the restaurants and actually in the -- to achieve affordability, we've even been able to further increase discounts from the partners that we pass on to the customers. Then a topic asked about a lot is fuel, and the situation has not been too bad for us. In GCC, we almost had no increase besides UAE. And just for context, the direct impact of fuel on our business is limited because it makes up less than 10% of our cost of delivery. And we have operational levers to offset this increase on a driver level by increasing their earnings so that they have a higher utilization. So far, we have not had to increase our prices, and we even did not have to spend all the incentives we had budgeted for in light of the competitive dynamics. This page, you know it, we share it every time on top of the key business metrics for customer value proposition and at the bottom, the ecosystem. It's good progress across the board. I'm not going to walk you through all of them. I gave an update about riders and vendor deals already. And just highlight one thing, which is on NCR, which is up a small percentage year-on-year, but is actually quite an achievement if you know how much the business is growing and taking into account the tailwinds -- the headwinds on CPGs, right given the supply chain disruptions, there was not a lot of inventory. And so definitely, they were not very keen on advertising to sell more products because they were constrained by inventory. So even taking into account that, we managed to increase as a percentage, the NCR year-on-year. So with that being said, I want to hand it over to Khaled to go over our financials.

Thanks, Toon. So walking through our financial results, Q1 has been a strong and resilient quarter for us. The growth momentum we saw in the last quarter has largely continued. At the top line, our GMV grew 18% year-on-year on a constant currency basis compared to 20% in Q4 last year. In terms of -- in nominal terms, this was higher at 19% with a weaker Egyptian pound being offset by stronger Kuwaiti dinar versus the comparison period. In all of our other markets, the currency are actually pegged to the USD dollars. GMV growth was driven by robust order volume growth supported by strong customer acquisition. And as previously mentioned, we've improved Ramadan operations with strong commercial execution, and we benefited from favorable Eid seasonality. And of course, during the conflict, we have also successfully positioned the platform as a reliable multi-vertical service provider during time of heightened demand and uncertainty, adapting quickly to changing conditions. This allow us to better capture eat at home consumption patterns, as employers adopted more flexible work-from-home arrangements and schools shifted to distance learning across most of our markets. GCC GMV grew 12% and now contributes to 79% of total GMV. Almost all of our markets grew by double digits, including the UAE, our largest market and Kuwait, our oldest. Non-GCC GMV grew faster to $563 million, up 52% and now contribute to 21% of total GMV compared to 16% last year. And our food vertical continued to grow at double-digit rates as well as grocery and retail continue to grow at a faster rate. When it comes to revenue, revenue growth continued to outpace GMV with 22% growth year-on-year constant currency. And this is basically a result of -- sorry, as a result of our GMV revenue take rate increased to 39% from 38% last year. The higher conversion ratio mainly reflected the higher share of Talabat Mart revenue, which is now 35% up from 29% for the same period last year. Now looking at profitability and cash flow. Our adjusted EBITDA came in at $130 million, 4.8% of GMV, which is $13 billion lower year-on-year. But I wanted to highlight what's behind the delta as the underlying profitability of the business has actually improved. The reduction is entirely explained by 2 deliberate decisions. First, approximately $10 million invested in competitive positioning. This is mainly due to higher customers incentive to defend our food leadership. This is fully controllable. We can dial it back at any time, of course, based on the competitive dynamics. Second, approximately $15 million from our investment program, which is mainly related to Talabat Mart density expansion and Talabat Pro value proposition enhancements that resulted in a higher engagement and retention. So if we strip out both of these items, the underlying EBITDA is up by $12 million year-on-year, and the core economics are strengthening even as we invest. To give you a bit more color on how this flows through the P&L for a year-over-year comparison, as we continue growing our grocery and retail vertical, the mix impact will reduce EBITDA margin. And we continue to benefit from operating leverage as our operational cost below gross profit continues to improve as a percentage of GMV. As Toon also mentioned, we are still able to increase AdTech margins at scale. So excluding this, our gross profit margin contraction is mainly due to the higher incentive for customer retention, tighter Talabat margins, Talabat Mart margins and enhanced Talabat Pro value proposition. Moving further down the P&L, our net income came at $87 million, 3.2% of GMV compared to 4.7% last year. Nonoperating expenses below adjusted EBITDA, such as depreciation and share-based compensation were largely stable as a percentage of GMV. Hence, net income margin reflected the same margin compression of 1.5 percentage points as for the adjusted EBITDA. I would like to highlight that in Q1 -- sorry, I would like to highlight that Q1 carries a lower share-based compensation burden as it's seasonally weighted towards Q2 based on our annual grant cycle. Finally, let's talk about our cash flow. We generated $104 million in free cash flow with a cash conversion ratio of 81%. Recall that this is the new definition of free cash flow and comparative have been adjusted for a like-for-like comparison. Ultimately, our strong cash generation ability reflects an asset-light model with low CapEx even with our ongoing investment program as we continue benefiting from positive net working capital changes due to preferable supplier payment terms compared to the number of days inventory outstanding. I want to give you an update on our investment program. As you recall during our previous earnings release, we announced additional investments planned for 2026, allocating $175 million across below key areas. First, defending and strengthening our food leadership against both new entrants and incumbents. We've allocated $55 million, 0.5% of GMV. And as Toon showed earlier, partner-funded savings has also increased to 7% of GMV. So all in, a substantial marketing budget. What we are doing with that rather than matching competitors' discounts, we are investing in the value proposition offering best selection, experience and affordability. Second, building the everyday app ecosystem. These are strategic investments of choice to capture higher long-term growth. We are allocating roughly $120 million, $75 million in operating investments, 0.7% of GMV, plus $45 million in capital investments. And finally, building out the new retail offering as additional services to cover customers' everyday needs. During the first quarter, we have advanced our investments plan across the mentioned focus area. Planned margin investments in marketing were tempered by stronger demand and less aggressive competitive environment, where we had to invest only 0.4% of GMV compared to our plan of 0.5%. This could change in the coming months as we stand ready to deploy further investments as required. Planned investments in our T-Mart and Talabat Pro value proposition as we have to invest 0.5% of GMV compared to the initial plan of 0.7%. And additionally, we have deployed $10 million in CapEx and incremental into our T-mart [ dark ] stores network with some natural phasing impact from Ramadan and the regional conflict. I just want to present a concrete example of our investments. This one comes from Egypt. Over the past year, we have significantly scaled our distribution infrastructure there, expanding our DC footprint to around 27,000 square meters. That single facility now handles up to 1 million items per day and serves our entire Egyptian Talabat Mart network. We have also expanded our city coverage from 12 to 17 cities, broadening our addressable market within the country. The operational results speaks for itself. Product availability is up 4 percentage points on a year-over-year basis and the DC capacity has tripled over the same period. Importantly, these infrastructure investments will translate into stronger customer retention, improved experience for larger basket sizes. Now over to our full year guidance. Just wanted to highlight the resilience of our operations and the business model that makes us confident of this outlook even as the macro backdrop remains less certain. For top line GMV growth, we continue to expect to be in the range of 11% to 14% at constant currency. This reflects the unwind of Eid pull forward effects, normalization following the April ceasefire and a conservative macro outlook. While GDP and population growth remain uncertain, we see on-demand delivery as a structural trend with significant runway ahead given still low penetration. In addition, our food and grocery and retail GMV naturally benefit from inflation through the higher order value. On competition intensity, during March, it was less intense with our spend tracking below budget, leaving us well positioned to invest if needed later in the year. For revenue growth, we expect faster growth of 14% to 17% at constant currency, which reflects strong growth of Talabat Mart within the product mix. We continue to guide towards adjusted EBITDA of $510 million to $540 million, free cash flow range of $370 million to $400 million, and we are raising net income range to $300 million to $350 million due to improved visibility on potential favorable tax adjustments, lower depreciation and amortization, while stores opening remains substantially in line with plans and lower share-based compensation spending. This outlook accounts for continued strategic investments as outlined in the previous slide, and it also accounts for 2 risk areas that we are frequently asked about, which we are comfortable where we stand. The first one is fuel cost. We wanted to highlight that fuel is a relatively modest component of our total delivery cost base. Our fleet order density means we are operating with some buffer before price increase start to be meaningfully impactful. With no clarity on the future oil prices, we can say that if costs do move materially from here, we have the ability to share these costs, adjusting delivery fees, repricing our subscription offering, increasing our order stacking, benefiting from our volume and density or revisiting vendor subscription program fees. The second risk is on Egypt currency. The Egyptian pound has been under pressure. The depreciation we have seen year-to-date, however, is already embedded in our guidance. Beyond this, that could be some impact. But again, the same inflation hedge dynamics we described earlier could mitigate and be a tailwind to that market stability. In conclusion, the full year guidance increased by $20 million for net income to a range of $300 million to $330 million, and we reaffirm the remaining metrics. We remain confident about our guidance for the rest of the year and the known unknowns that we can foresee. Our ability to achieve the higher end of this guidance range is certainly possible and will depend on both developments in the competitive landscape and our execution of this year's strategic investments. With that, I'll hand it over back to Shadi for the Q&A session.

Great. Thank you, Toon and Khaled. [Operator Instructions] So I will start with Ankur Agarwal at HSBC. Over to you.

A couple of questions from my end. My first question is, can you elaborate a bit further on the net income guidance upgrade, which is not -- I mean, you've not upgraded the EBITDA guidance. So I know you spoke about the everyday app investment leading to the net income guidance upgrade, but why is the EBITDA guidance still intact? So that's my first question. My second question is during this period of uncertainty, difficult macro backdrop, have you seen that the competitive intensity has somewhat eased? And do you -- would you say that the scale advantage helped during this crisis? So -- these 2 questions from my end.

Sure. Thanks, Ankur. Maybe I'll quickly cover the guidance one and then maybe the competitive dynamics with Toon. So basically, we're only revising the net income because we -- as I mentioned earlier, we have more certainly on some favorable improvements on the line items below EBITDA, mainly around taxes, corporate income taxes, where we have some positive developments that some carryforward losses from the past will be able to be allowable in the corporate income tax. The second one is about the share-based compensation, where we believe that we will spend less than what we anticipated initially. And lastly, is depreciation for new stores. We remain on track on deploying and with our plans and going live with all the stores. However, because of certain delays, the stores go live might be delayed, which would result in lower depreciation for the year. So with this clarity, we are only revising net income at this stage, but we remain very confident on achieving the guidance. And as I mentioned earlier, we are actually optimistic to hit the top end of the range, of course, based on the competitive dynamics and the macro applications.

Look to your question on the competitive pressure during the conflict, we indeed saw an easing of that pressure, which starting Q2 has increased a little bit again. But during Q1, definitely, it was lower. To your question on if our scale helped us navigate the conflict, I do think so. Not only do we have the multi-country setup where we could help each other out, our size also gave us direct access to the government, and we got a lot of help from them. So I think it played to our advantage.

Next question from Evgenii at Jefferies.

I have 2 questions, please. My first question is on AdTech revenue. In Q1, it was 3.4% of GMV, relatively flattish Q-on-Q. Do you believe that the current situation and shift to online can allow you to accelerate AdTech penetration? And here, I'm talking about not only QSRs, but also groceries and dine-out advertising as fine dining and casual dining players are clearly facing pressure from lower tourism. And if this is the case, would you consider raising pricing of your AdTech products? And my second question, please, is on regulation. Can you please give an update on it across your various markets? Can we see any developments this year, including in the UAE at the federal level? And specifically on the predatory pricing in Dubai, have you seen any improvements since April?

Okay. I'll take the one on NCR. Look, when we're looking at NCR, first of all, there is food and there is nonfood. On food, on the restaurants, it's important to give a good ROI. So I think that's most important to make sure that when restaurants invest, they get good returns on that money. So even if there's a higher need from them now, it doesn't translate into higher prices because we need to make sure there is a good ROI. Secondly, and I think this is the thing I hinted towards earlier, grocery starts to become a very sizable part of the business and generating NCR on that we believe there is a lot of opportunity there. But in Q1, we had some headwinds because of the supply chain issues. And if there is not a lot of inventory, CPGs are not really inclined to push a lot of advertising to sell more.

Yes. And on the regulatory front, I think generally speaking, the good thing in our region is that governments acknowledge and understand the importance of tackling the predatory pricing and tackling bad practices. And we've seen them actually developing and progressing much faster compared to the rest of the region. The latest update we can see is, as probably you would know, the new regulation, the code of conduct in Qatar, which now is in place and in effect, which is a good thing because it limits predatory pricing given the fact that they are the Qatari government are not issuing promotional license until they understand the pricing around it. When it comes to UAE also, we are expecting on the federal level potentially positive development around regulations that tackles also the predatory pricing hopefully in the coming weeks. And that is also on the back of what the DET in Dubai had issued in terms of guidelines. So the moment the regulation is out, it's much better position for us compared to the guidelines because that should help us, I would say.

Sorry, did you say coming weeks?

Yes.

Next question from Casey McKenzie at UBS.

Can you hear me okay? Great. I have 2, if I may. Just firstly, could you provide some more quantification around the extent to which the GMV beat at 1Q versus full year guidance is a function of conservative guidance and temporary tailwind versus or is it a positive shift in competitive dynamics? And then secondly, if I may, if the planned margin investments in marketing and pricing continue to be tempered by stronger demand and a less aggressive competitive environment, would you expect upside to your EBITDA guidance? Or would you look to reallocate this spending to another investment area?

I'll take both. So the growth in Q1 -- what we can allocate to that high growth, so the 18%, about 2% to 3% of that is because of the Eid seasonality, which now fell entirely in Q1 and not Q2. So that got pulled forward. And you will see then in the Q2 year-on-year, a similar effect in the negative sense, of course. So that is on the growth of Q1, why it looked so high. On the competitive pressure, if it continues to ease, how much we will reinvest of that versus pay it out. So this is something where it depends, right? And it's difficult to say because competition is also not just one vertical or one market. And I think in generally, if we get good returns, we will try to overachieve maybe on the top line additionally to paying more on EBITDA. So it's not that we have a clear view on we will bank everything on EBITDA or we will reinvest everything on top line. It's a little bit more nuanced across verticals and markets.

Next question from Maksim Nekrasov at Citi.

I have a couple of questions. So the first one, in the investor communication this morning, you mentioned that almost all markets grew at double-digit rates, including the UAE and Kuwait, but I'm interesting what markets were not growing at double digit in the first quarter? And also, if we exclude those effects from Eid 2, 3 percentage points, would that mean that GCC was more in the high single-digit territory? And is that the growth you would expect GCC markets to kind of grow in the remaining part of the year? And the second question, sorry, I couldn't find like the growth of the food vertical versus grocery. Is that something that you're not disclosing anymore? Or like maybe if you can highlight what was the growth in grocery specifically?

Maybe let me take the second question quickly. I think if you look at our disclosures, we disclosed vertical and we disclose geographic at end of year on a quarterly basis, we don't. I can say that on food, we are still growing at double digit, which is a healthy growth compared to Q4 of last year. For the first question.

Yes. Look, the question on which market -- by the way, it's one market that didn't grow double digits, just one. And to your question on if the Eid impact, if you bring that back to food, yes, indeed, it would mean that food is more high singles percentages year-on-year growth.

Yes, I was referring to the GCC market growth that was 12% in the first quarter, right? So we exclude the Eid effect, right.

Yes. Sorry the GCC markets, yes.

Yes. Okay. And that's the growth, like the second part of the question, like the kind of normal growth you expect.

Look full year, we are confident in the guidance, and we're optimistic we might land at the high end range of that guidance.

Okay. Another -- this one is from an investor, Ankur [indiscernible]. Go ahead. Can you also announce your firm as well? Over to you, Ankur, you're on mute. Okay. We might come back to Ankur. Another investor asking orally, [indiscernible]. You can ask your question. You're also on mute. Okay. Let's come back to [indiscernible] as well. There are some questions asked in the Q&A box. First one, which is, I think, quite timely from Ahmed Kamal at Azimut. I'll just read it out loud and you can answer this question, Toon. Any comments on the Delivery Hero management change news, which I think came out maybe half an hour before this call.

Yes. Look, let me take that one. I've known Nicolas for almost 10 years, right? And so obviously, I'm really sad to see him go. I think it's a big loss for Delivery Hero. His belief in local entrepreneurship was brought us together around the world. So he'll definitely be missed for Talabat. I don't think -- I don't expect much to change. Nicolas will still be around for almost a year. So I'm sure there will be a smooth transition. And Talabat has a great relationship with Delivery Hero and the Board of Delivery Hero, which is also supportive of our strategy. So I expect us to continue to receive the full backing on what we want to do.

Thank you, Toon. Let's try [indiscernible] Go ahead [indiscernible], you can ask your question. Okay not getting to [indiscernible]. Another question from [ Guillaume ] at Barclays. You previously talked about antimonopoly regulation across GCC markets. Can you share what changes you've observed since implementation in the UAE, if any? And where things currently stand in Kuwait and Qatar in terms of timing and the expected impact? That's the first part of the question. Second part, you mentioned that competition intensity eased in March, but has reintensified in April and May. Can you help us understand what drove that shift and how competitive behavior looks today across your core GCC markets? And then I think the third part of the question is on group costs, shared services with Delivery Hero. Any update there?

Yes. I think the first one we already tackled when we talked about the update of the regulations. But maybe just to reiterate, so far, hopefully, positive developments the code of conduct in Qatar. Kuwait, I think it's on pause due to the current conflict. And UAE, we are hopeful maybe in the coming weeks, the federal level would come up with something. On the group costs, we are still working with Delivery Hero on the periodic review. It's very technical, and it's a heavy exercise because it's related to the transfer pricing across all of their brands across the 4 continents. So it's expected to take some more time.

And about the competitive pressure easing in March, this was mainly less discounts. So during that period, they were down and now they have reinstated more discounts.

I think it's fair to say that both new entrants and incumbents. I think probably also some sort of easing from existing incumbents. An oral question from Harsh Mehta at Goldman.

So just going back to the regulations, right, if UAE implement the regulation, if there's more clarity around the Qatari regulations, would that impact your guidance? Or do you think it doesn't really -- it wouldn't really make a big difference this year?

Loo, it depends. It really depends on how -- not just what gets agreed, but how strict is enforcement. I believe if there is very strict enforcement, we could see upside to our guidance, right? But today, it's too early to speculate on that and to say today, we just know that with what we know today, we're confident on hitting the guidance and optimistic about going to the higher range of it.

Maybe just to add, I think one guidance. We it's very important for us, and I think we've shown this in the previous quarters that as a management, whenever we look at the guidance, we remain confident. And I think we are -- we don't shy away from revising the guidance when it's necessary, right? We just do it now on the net income. We did it last year in August as well. As of now, to what Toon mentioned, we are -- remain fully confident in the guidance and optimistic to hit top end of the range, depends on, of course, the guidance.

Investor question on category position from Sriram at Yateem. Congrats on the good performance. Can we understand the overall market share trend of food delivery business and how Keeta's introduction in these markets has impacted market share? How is the trend in other segments such as grocery?

Look, on market share, we remain a very strong leader in all of our markets. And what we've seen in Q1 in most markets, we actually strengthened our competitive position, only not, for example, Bahrain, which is a new market where we just launched in January.

Okay. Another question written down from Aditya at Bahrain National Holding. Does the management think that the core GCC food delivery market is getting saturated? Or is there still much more room for GMV growth over the mid- to long term?

I mean we are very bullish about the region in general. I think it's a fantastic region given the fact that still very low penetration, high Internet penetration, young population, et cetera. So we still believe that the TAM is large on both food as well as the grocery, which is much, much larger TAM. So we remain very bullish around the GCC market.

Great. Thank you, Khaled. A question from Shahrukh Saleem at Mashreq. How is the rider supply these days? Are you witnessing increase in rider costs because of increased competition or shortage of supply?

So actually, none of those, what we are seeing is increase in rider coming to Talabat. So I think we are an attractive platform to work with. We are consistent in how we treat riders. We deliver what we promise, and we look after them. I think we're the ones leading in terms of safety, in terms of many initiatives. And it's showing. We saw our numbers were up quarter-on-quarter quite a bit. We have not had concerns on rider supply, quite the opposite.

Okay. And just a follow-up question from Shahrukh as well and in a similar vein. Do we have any updated views on automated deliveries with drones -- is this something significant in the medium term?

So drones will not -- at least not immediately.

Have to be careful what we say about drones, right?

No. But if you look at our setup of our cities and end-to-end delivery with a drone is very, very, very difficult, right? Think of UAE, some drone needs to go to a restaurant in city walk, then get on to Sheikh Zayed, then drive into a villa community. So end-to-end delivery with drones is not very immediate. We do see an opportunity at mid-mile where drones can support that, but that's also limited use cases.

Great. Thank you, Toon. Another follow-up question from Guillaume at Barclays. With the buyback now announced and some balance sheet flexibility, how are you thinking about capital allocation more broadly? Specifically, what's your appetite for M&A?

I mean, generally speaking, we've always said this, we will -- we always explore potential M&As, right, when it's possible. Good thing is, as you mentioned, we have a strong financial position even while returning capital through the share buyback program or paying dividend. We're still cash rich with high cash conversion, 81% in this quarter with unlevered balance sheet. So if there's an M&A opportunity, of course, we will evaluate. And if it's accretive to the shareholders, we will definitely explore and take it to the board.

Thank you, Khaled. Question from Rakan Alomran at Jadwa. Thanks for your time and comprehensive presentation. The other direct cost items within COGS, cost of sales massively outpaced revenue or GMV growth. Can you help us understand the reason? And if you could provide growth by sub items such as grocery cost of sales or customer and partner care cost of sales?

I can quickly take that. If you look at the disclosure within the financial statement, you would see other revenue and other direct costs. This is the vast majority of this line item is actually related to the Talabat Mart. So the fact that Talabat Mart share of revenue is growing faster, you will see both revenue and the other direct cost is growing at the same pace.

Yes. And I think I'll just add to Khaled's point that we -- as part of the strategic investments, we are looking to have more attractive margins for Talabat Mart to drive customer adoption on multi-verticality and grocery. So that if you see maybe slightly slower growth in revenues and COGS as the percentage or the COGS for T-mart, that's signifying a slightly tighter margin for Talabat Mart. A question from Ahmed Kamal from Azimut as well. It might not be easy to answer. Any guidance we can provide about percentage of orders coming from tourism? How is that developing at the moment?

So what we can see is that orders from international phone numbers, which I guess is a similar metric or at least an indicator, we've seen a drop in that, especially on our acquisitions, our new customers, it represents a fair chunk of those, especially for Bahrain and a bit for the UAE. That has been down significantly. Now again, this is only in the acquisitions of the new customers, which contributes a small share of our active base, right, because we have a very big customer base already, but we do see that.

Great. Thank you, Toon. There are no other questions or hands raised at the moment in the queue. So maybe we just give another minute and then we can wrap up if there are no further questions. So we have a quick question from Youssef at CI Capital in Egypt. And he's asking, can you shed light on the competitive landscape in Egypt?

Yes, sure. Look, Egypt is a market where -- and I think we've disclosed that for the longest time, we have a very strong position, and that's not changing. There is maybe a bit increased competitive pressure, but it doesn't change our position or our share in any meaningful way.

Thank you, Toon. Okay. I think there are no further questions at this time. If you do have questions, do e-mail us separately, oh, hold on. Okay. Last question from maybe [ Guillaume ] at Barclays. Last time you spoke about full year investments being more weighted in the first half of the year. How should we think about the investment run rate through the rest of the year?

I don't recall we said that. But I think in general, as I mentioned earlier, I think the best proxy on the investments is to look at it as a percentage of GMV even per quarter. If you look at Q1, we've already invested 0.4% than the competitive positioning for food and the initial plan was 0.5%. And when it comes to the overall investments program in building the Everyday App and the future growth, we've spent 0.5% to 0.7%. So I think same proxy as a percent of GMV should be fair.

A follow-up question from Harsh at Goldman.

So just a bit earlier, we heard from Jahez's management that they're rebranding their international operations in Snoonu, which has been successful in Qatar, and that's what they want to kind of replicate in other international markets outside of Saudi, where effectively they'll compete with you. I was just hoping to know if management has looked into it? And do they feel that competing with Jahez is different than competing with Snoonu if it takes over all the other international markets where Jahez operates? And how do you see that impacting the business or generally the market?

So I think it's interesting to look at these markets now. You see Keeta has come in and has competed hard, especially against Jahez. Now Snoonu will come in as well to see how much they can salvage of that, how much they can recover and then join that fight as well, right? So I feel the biggest intensity in competitive pressure we received already before from Keeta, who spends a lot of money in our markets. It's going to be interesting to see how Snoonu wants to add on top of that.

A follow-up question from Youssef at CI Capital again about Egypt. Which vertical drives your Egypt business growth, grocery or food?

It's both. Egypt food is still pretty small for what it can be. It's a huge market. So food is growing really fast and grocery even faster. So I think both have massive opportunities in Egypt.

Great. Excellent. A question in writing from Ashar. Talabat seems to be betting on the T-mart revenue line. But in the longer horizon, are you planning to explore at-home services, which some of your competitors are offering?

I'm not sure I get the question, but at-home services.

I think it's a bit more like.

Like laundry and stuff. Yes. Look, maybe on that, the [ super app value ] proposition where we offer a lot of things, and it's a collection of services integrated with a third party, giving you a rather clunky experience. That's not something we look into exploring. When we talk about the Everyday App, we are talking about adding additional services, but we're also talking about adding depth. So it's not just about the breadth of what we offer, but also the depth. And there is a lot of opportunity for us to really double down on that. If you think about it, a food order is considered a food order from a restaurant, but actually, the experience of what you want when you do a quick lunch order versus if you want to order for a group at home or with your friends, it's a very different experience. And in the past, it was kind of costly to build unique product experiences for that. But now with AI, it's not. So I think with AI, we can unlock building all these particular food occasions or grocery occasions or other verticals, and that's where we want to invest in and see a lot of growth. So it's not building a super app with a collection of integrations with home services, et cetera. No, it's deepening the value proposition that we want to offer to our customers.

I think there are no further questions at this time. Of course, any further questions, please direct them to the IR team using the e-mail [email protected], and we will get back to you there. Before we completely conclude, I'd like to hand over back to Toon for some closing remarks.

Look, first quarter proved to be a resilient start of the year, delivered in a dynamic environment where our teams focus on execution and delivered continuity across all markets. And I'm very proud of how our teams showed up during this period and very grateful for what they did. And on the back of that amazing performance, we are confident in our performance going forward. We've reaffirmed the guidance for the full year. We've increased net income, and we're very optimistic on what we can do. So thank you all for joining this call and see you in the quarter.

Thanks, everyone.

Thank you, everyone.