Earnings Transcript for DELHY - Q1 Fiscal Year 2024

Operator: Ladies and gentlemen, welcome to the Delivery Hero Q1 2024 trading update conference call and live webcast. I'm the TV operator. I would like to remind you that all participants will be in listen-only mode, and 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 IR. Please go ahead, sir.

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

Niklas Ostberg: Thank you, Christoph, and hi, everyone, and thanks for listening in. We have a lot to cover. So let's jump straight into our Q1 highlights. Our business continued to show substantial growth with GMV increased 8% year-on-year in Q1 on constant currency and excluding effects of hyperinflation accounting. Growth, including hyperinflation accounting was marginally higher. Positive momentum was driven by healthy order growth, which has been in the double digits across our markets outside of Asia, where GMV has grown in aggregate by 20% year on year this quarter. Total segment revenues continue to significantly outgrow GMV with a 21% year-on-year increase in the quarter, driven by multiple levers, including ad tech revenues, service and subscription fees, higher commission for delivery as well as increase in the March contribution. This is also why we now increased the revenue guidance range from 15% to 17% year-on-year to 18% to 21% year-on-year on constant currency and excluding hyperinflation. We are further executing our profitable growth strategy, which means not only delivering strong revenue growth but also substantially enhancing profitability. In Q1, we reached a gross profit margin of 7.7%. That's a 60% -- or 60 basis points higher than last year. We expect to continue expanding margins further in the quarters ahead. I'm also very pleased to report that Glovo has been growing exponentially since acquisition, while simultaneously improving profitability. We anticipate that Glovo will achieve a positive adjusted EBITDA in the second half of this year, including group costs. Additionally, Dmart is progressing well as we continue to execute our optimization initiatives. We now anticipate a positive adjusted EBITDA for Dmart by the end of 2024. And we also executed a refinancing transaction during Q1, benefiting from highly supportive debt capital markets and very healthy investor interest from our debt investors. The transactions further enhance the maturity profile of our debt obligation while improving the associated interest rates. Our next upcoming debt outflow amounts to less than EUR100 million in July 2025. As mentioned before, we are in the comfortable position to repay all of our debt maturities organically over the coming years through our own cash flow, if so desired. Now on to the next slide, please. Both GMV and revenue continued their positive development as we had healthy order development in most of our segments. We continued to grow the business while delivering substantial profit and cash flow improvements. Next slide shows the strong momentum is come from almost all segments. If you take a look at slide 5 here, you can get a very good understanding of where our growth is coming from. During the quarter, four out of five segments were generating strong double digit revenue growth in constant currency and excluding hyperinflation accounting -- also including hyperinflation accounting, I believe, as it was even positively affected. And but mean here growing almost 30% year-on-year, again, including hyperinflation counting growth was marginally higher. Now let me hand it over to Emmanuel, who will give a deeper dive into the financials. Emmanuel?

Emmanuel Thomassin: Thank you, Niklas, and also warm welcome from my side. So very quickly on the European segment. With a GMV and revenue growth of 19% in respectively 26% year-on-year. In Q1 on a constant currency basis, driven by double-digit order growth. And this will have the as the above the market. Continue to enhance our operations across the region. For example, mobile improved adjusted EBITDA burn by around 55% year-on-year in Q1 and we project that it will be richer positive adjusted EBITDA in the second half of this year, including the allocation of central costs. Now moving on to MENA on the next slide. Here, we continue to see great momentum in MENA. We put strong growth on GMV of 24% in Q1 or constant currency and excluding the impact from hyperinflation in Turkey. For sustained double-digit growth, can be an attribute to our relentless focus on enhancing their customer experience with product offering like Dmart, the grocery subscriptions, the royalty programs, kitchen operations, but also credit cards and much more. So now on to Asia on slide 8. Despite the flat GMV on constant currency, we report revenue growth of 14% in Q1, driven by an uptick in on-delivery penetration in South Korea and positive developments across the region. And with our move to our free delivery mean margins in South Korea, we saw against a negative impact on our category position and all the growth in the following two weeks. We responded quickly and have regained some momentum but continue to witness an adverse impact on category share and also took top-line growth. So we continue with our several key initiatives in Q2 and potentially into H2. In addition, we are constantly improving the offering for our customers and that the exclusive partner of Starbucks in Korea, connecting around 700 Starbucks stores with our large customer base. This partnership is another testimony of our unique proposition to both our customers and our partners, and we are confident that we will be able to regain and defend a share the superior offering. Turning to APAC, we continue to progress our ad tech offering and enhanced vendor targeting. And this is leading to an all-time high revenue as percentage yield 3.4% in the quarter. This is currently the highest rates amongst the segments. Now moving to the Americas region on the next slide. Americas performed well in the quarter. The region grew GMV and revenues by 7% and respectively, 6% year-on-year on constant currency and excluding the hyperinflation adjustments in Argentina. Overall, we are very happy with the performance in the region. We saw double digit order growth across 12 out of 15 countries in which we operate. But Argentina is suffering from macroeconomic headwinds impacting consumptions, which has had some muted impact on the basket size while order volume showed a slight uptick. Now onto our integrated verticals on the next slide, please. Our integrated vertical segment generates strong GMV and revenue growth of 25% and respectively, 27% constant currency and also excluding hyperinflation adjustments. And this is an amazing achievement as we keep improving unique economics and our footprint. And despite that, we have managed to grow our top line fast while improving margins and reducing the numbers of stores with around 200 Dmarts during the last 12 months. And today, we operate in 895 Dmarts across the group. Integrated vertical is a very important aspect for us. It offers our customer base a multitude of use cases, which is a strong complement to our food offering at a competitive advantage against our peers. We provide a better customer experience while generating higher royalty rates across all customer cohorts and there -- as our operations scale, we generate higher profitability. For profitability now moved on to their gross profit margin on the next slide. The gross profit margin of the platform business reached 7.6% in the quarter, which represents an increase of 240 basis points since we doubled down on our profitability focus in early 2022. MENA America and the APACs region lead the group in terms of gross profit margin and are close to 10%. The continued positive development in the group gross profit margin is also supported by continued improvements in our ad tech business. In Q1 2024, our commission-based revenue or shortly amount to 2.2% of the group. E&P spending is expected to further interest from here. Flows are not also a matter, although not including this graph, I'd like to share that our generic Integrated Verticals continue to perform very well. Also an increased gross profit margin by basis points year-on-year to above 2% this quarter. And we expect a substantial margin expansion throughout 2024 with Q4 gross profit margin for the deal was estimated internally at around 7%. Now let's go ahead to slide 14. As we are not only publishing our Q1 figures today, but also our annual report. I would like to take the opportunity to present the key figures from the financial year 2023 based on the EFIS reports. Total segment revenue grew double digits year-on-year and continued to outpace the GDP development in 2023. As a result of the strong revenue growth and strict cost control, our adjusted EBITDA improved by more than EUR700 million to EUR254 million entered positive on the full year basis as promised in 2022. Also operating cash flow significantly improved by around EUR670 million and almost a positive on a full year basis. The improvement in operating cash flow is driven by the improvement in adjusted EBITDA, which is partly offset by a higher income tax as we where we are becoming more profitable in more countries. Let's now move to the next slide. The bridge here are presented on the slide tickers through the cash relevant and non-relevant items between adjusted EBITDA and the net income. So starting on the left-hand side of the slide with adjusted EBITDA of EUR254 million, the Management assignments totaling EUR148 million include one-off expense for corporate transactions. From financing measures, legal matters from earn out and also restructuring in connection with their headcount reduction. In addition, there are some lease payments, which is in alignment with our IFRS 16 are below adjusted EBITDA. I think the types of self-explanatory. And we have a negative financial results coming from net interest income and expenses. So adding all cash relevant items together here at the cash level expenses of EUR580 million. On the right-hand side, you can see all the cost items that are not cash flow relevant or cash flow event. Besides the share-based compensation, they are permanently one-off goodwill impairment of EUR858 million, depreciation amortization of EUR485 million, and the financial results of EUR397 million. Let me explain these positions in more detail. So the goodwill impairment is driven by higher interest rates, leading to a higher cost of capital, combined with a review of our long-term assessment on growth and margin, which are then apply in the annual impairment testing. And then is a large extent related to global, but also Americas and Europe segments. Depreciation amortization include a branch impairment of a jerky of the amount of EUR140 million. And the financial result includes the remeasurement of financial instruments of EUR164 million, which includes fair value losses both from public and private assets, but also FX losses of EUR144 million and EUR130 million in the amortisation of financial liabilities in connection with covertible bonds. So to summarize these cost items to generate at EUR2 billion of noncash relevant expenses within the other net income. So now let's review how this was involved compared to the last year on the next slide. As already mentioned that in 2023, the adjusted EBITDA has improved by EUR721 million compared to last year 2022. The management adjustments have improved by EUR47 million and not account for only . Assuming there are no further M&A transactions or financial transactions, this cost line should, of course, considerably decline this year. The share-based compensation program declined by EUR79 million to of GMV, and we expect it to remain at this ratio in 2024. When it comes to goodwill, the vast majority of their remaining goodwill comes from Korea and Canada. Depreciation and amortization has increased year-on-year, but only due to the impairment I mentioned before in regard to the turkey brand depreciation. So excluding this one-off DNA in item, our depreciation, amortization was stable. So let us now have a total care of debt maturity profile on the next slide. As you might remember, we successfully executed on our refinancing transaction last month. We extended the maturity of the term loan by more than two years from August 2027 to now December 2029. And at the same time, we reduced the cost of debt associated with the term loan by 75 basis points. So we improved two metrics at the same time, and this is in line with our approach to optimize our capital structure whenever possible and also in the best interest of our shareholders. In addition, we benefit from a highly supportive financial market environment and increased the term loan bonds that are likely to benefit of EUR740 million. And from the proceeds, we repurchased EUR409 million principal amount of bonds due in 2025, but also EUR100 million principal amount of bonds due to 2026. And we have tendered the full amount of EUR500 million principle the months of the year 2025, but not let's accept offers. So we may do additional buyback of outstanding convertible bonds in the future. And last but not least, we had to switch the currency of our EUR540 million trench into South Korea one to better match the currency of our cash generating assets to adapt our currency. We have a very balanced debt maturity profile with an average debt maturity of 4.5 years as an average interest rate of around 4.2% and that can be addressed by our sufficient cash flow generation over the next few years. And then let's look at the next slide how the debt maturity match up to our cash flow generation. This slide was already introduced last quarter and has been updated here to reflect the latest debt refinancing. It has also been extended from or 23 to match our current debt maturities. To be clear, I will not update this slide, and we will not update this slide on a consistent basis for all coming quarters. As you can see, organic growth generation comfortably exceed all oncoming coverage with debt and also timing of maturities. We have nearly EUR1.8 billion in free available cash and cash equivalents on a pro forma basis for the quarter. This is the cash balance as of the end of 2023 after the investments of the reinsurance upsize of term loans and repayment of convertible bonds. Both the 2024 maturity as well as the partial repurchase of 2025 and 2023 maturities. Just to be clear, we must not have initial conservative assumptions underlie that have delivered free cash flow projections and expanded to 2023. But that is that the GMV cargo are below our long-term is below our long-term ambitious and adjusted EBITDA margin conservatively expanding towards the lower end of our long-term margin ambition range of 5% to 8% by 2030. We adjust the high interest repayments of our funding debts as well. They also have potential upside to our projections as we will not hesitate to engage in further portfolio rationalization or pursue additional efficiency gains in operations. And this approach has been instrumental in distinguishing altering their financial trajectory of the company in recent years and ready to get it through the continuing on this path in the future. But let me hand over back to Niklas who will take you through some case studies or it's starting on the next slide. Niklas?

Niklas Ostberg: Thanks, Emmanuel. We have a lot of complementary materials for this quarter. So starting off with our leadership position, over the last year, we've been competing with many players across our business. Some of these are global players, while others have been deep, pocketed, local and regional players that have invested heavily in our shared markets over the past years. You have seen total investments by our competitors of the EUR12 billion to EUR15 billion in our markets alone plus cross selling to large customer bases from ride-hailing and e-commerce companies. Despite this, you will see on the next slide that we have managed to gain leadership in markets representing over 90% of our GMV. If we look here, you can also see that the remaining 10% can be divided in half between countries where we are fighting for the number one position such as Italy and Peru in countries where we are clearly behind such as in Thailand, and Finland. There are many reasons for our leadership position. One of them is our operating model, which is our next case study. There are three components of our central operations based in Berlin. First bucket is our global tech stack, which is around 85% of our billing team. These teams, our focus is to optimize for conversion rates, revenue and cost across all markets. Examples of this are all logistics tech, vendor applications, devices, ad tech, pick your applications, but also on the consumer side when it comes to data focused applications such as search or discovery. The second group of our central operation is to drive performance management, quick commerce and marketing. This represents a bit less than 10% of our team. And the third group is finance, legal and HR, all these functions are global. However, the core of our model is that we also enable regional and local teams to fully own brand and consumer interface. This enables more localized applications and stronger execution teams. So now let's move to the following slide where I intend to focus on the cost efficiency achieved through the centralization of the shared activities. So in the past two years, we've focused our efforts on increasing efficiencies within the group while simultaneously decreased headcount in our central office. In this time frame, we have decreased our base by 21% and increased our share of product and tech focused FTEs to 85% of the central team. The central team is now responsible for over 50 services that are provided to all our regional entities and their scope has continuously increased as the onboarding of group and global generating additional synergies for the group. This has led G&A expenses as a percent of GMV to decline over the years. So let's move to the next slide where I can address this further. Our GMV, including R&D and stock-based comp, has decreased from 4.4% to 4.0% as a percent of our GMV last year, or last year and this year. This is second place among our global peer group despite a larger market scope. I've been -- we have never been happy about being number two, and we have continued to optimize our cost during 2024 and beyond. We are therefore expecting this ratio to further improve. The improvement is coming from strong cost control while growing our GMV, adding operational leverage. Now let's move to the next slide where I'll give an update on global. Global has consistently delivered profitable growth as it scales its operation. GMV directory since acquisition has been very strong across all its regions, achieving an expected GMV uptake of at least 40% from 2022 to 2024. We expect to continue to grow above the industry. At the same time, we anticipate global to improve adjusted EBITDA substantially by around 10 percentage points from 2022 to 2024 on a GMV basis. We expect to achieve positive adjusted EBITDA in the second half of this year, including central costs. Global profitable growth path has been unlocked by a sharp focus on scaling its operation with leveraging synergies we delivered here ecosystem. This is only the start with further acceleration in both growth and profitability expected for the years ahead. Now to the next slide where we will deep dive into the development of global post-acquisition. So as you can see, not only have we been seeing strong growth and profitability improvements, but also clear improvement in leadership. This is quite a transformational story. We acquired Global in 2022 when the business generate an adjusted EBITDA burn of more than EUR300 million and in two years' time, we are on track to generate positive adjusted EBITDA in H2. Now to slide 31, where I'd like to update you in more details on our Dmart business. We continue to optimize our Dmart footprint and cut our unprofitable stores together with further optimization efforts, we aim to achieve positive adjusted EBITDA by the end of this year. Over the coming quarters, we will continue to consistently track the performance of our stores and move quickly to shut all stores for which we do not see a clear path to short-term profitability. We will also work on consolidating stores with focus on improving SKU and enhancing operational performance despite reaching breakeven already by the end of 2024, we believe there is a lot more to come as we continue to grow GMV per store, increasing advertisement from FMCG companies, better procurement pricing and more. Now to the next slide, which shows our best performing country and our North Star for other countries. Here you see on the left side, we can see this country achieved quite nicely in the development of the last years. On the right-hand, you can see the positive profitability developments that can be achieved when you get things right. Even if this market shows great profitability and cash flow generation, we think there are still areas for this country to improve. Advertisement from FMCG is one of those big levers. Now to slide 34, where I like to cover our profitability path. As you can see on the slide, we have made tremendous progress since doubling down on our profitability focus in early 2022. We have maintained the grouping of countries consistent to demonstrate the progression over time. We executed in our profitability growth strategies, emphasizing profitability, cash generation and disciplined capital allocation of the past years. This has taken us from a negative EUR0.1 billion in annualized group adjusted EBITDA in Q4 2022 to an expected positive EUR1.2 billion in annualized adjusted EBITDA by Q4 2024 and this breaks down as follows. Our profitable platform business continues to perform well. We will expand adjusted EBITDA from EUR1.2 billion to EUR1.3 billion in Q4 2024 on an annualized basis. This will be achieved despite increased investments in Korea. This number does not include profitable markets within the unprofitable platform cohort. If you go for the unprofitable platform business, we will continue to see a significant improvement in adjusted EBITDA as markets scale and additional efficiency gains are pursued with adjusted EBITDA losses expected to reduce by 90% from Q4 2022. The unprofitable platform grouping is expected to reach breakeven in December this year. And last but not least, we expect Integrated Verticals to progress considerably. We expect adjusted EBITDA losses to improve by more than 50% year-on-year in Q2 in 2024, with operations reaching breakeven, including group cost by year end. Moving forward we will continue enhancing our operations with adjusted EBITDA gradually moving towards our 5% to 8% long-term margin range. Simultaneously, we expect total cash flow to be significant in Q4 this year and grows substantially from there. Now I turn it back to Emmanuel, who will take us through the full year guidance.

Emmanuel Thomassin: Well, thanks, Niklas. So for the full year 2024, I will mention our initial guidance that GDP growth will accelerate and reach your 7% to 9% year-on-year. We currently expect that these headwinds to be around 2% to 3% for the year. On the back of the stronger Q1 result, we now expect total segment revenues to grow even faster and reached 18% to 21% year-on-year. Both the growth rates for GMV and revenue are in constant currency and excludes the effects on hyperinflation accounting. In addition, our gross profit margin continued to expand further and during the quarter and for the end of the year, which resulted in our adjusted EBITDA guidance range of EUR725 million to EUR775 million, which we have maintained despite increased investments in South Korea. The positive development on adjusted EBITDA, but immediately translates into a positive free cash flow before interest payments for the full year 2024. So just to be clear, we will continue to focus on delivering a highly profitable and also cash-generative business going forward. Lastly, as you know, our upcoming AGM in 2024 will take place on June 19. We have been working diligently with our Supervisory Board to ensure that we have the right set of skills and experience to oversee the execution of the company strategy and we will follow our AGM to commence shortly and look forward to discussing them with you then. So we now look forward to taking your questions. I hand over to Christoph.

A - Christoph Bast: Thanks, Emmanuel. Before we start the Q&A, I would like to ask you to limit your questions to one per analyst. Because this way we can ensure that every analyst has the question sorry, has the opportunity to ask the questions. Thank you.

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

Joe Barnet-Lamb: Good morning, team. Thank you for taking my question. You've clearly had a very strong quarter, and GMV and then beating even more on revenues. On the back of that, you've raised revenue guidance by three to four percentage points, but you've left profit guidance unchanged. Can you talk about why you have an increased adjusted EBITDA guidance at this juncture? Is that simply inherent conservatism or are you expecting to invest more in other areas in the business, perhaps in Korea, for example. Thank you.

Emmanuel Thomassin: Yeah. I mean, it's not because they are decided and complete by my answer. So yes, you're right, Joe. I mean, Q1 on the report shows a very strong momentum of our revenue growth. And basically, it was illustrating our capacity to monetize while services such as AdTech, service fee and so and so forth. And that's what we are also seeing an acceleration of the revenue group competitive to GMV. There's also kind of a bit of market mix that we should take into consideration. And we expect this trend of revenue growth to continue for the next quarters. So this increase of revenue should -- could translate into an improvement of EBITDA. But at this point, we will continue to reinvest any EBITDA improvement to defend and regain market share in South Korea. So we increased our revenue, as you rightly said, revenue guidance and why culture is what EBITDA, which will reinvest on nitrate vest and again that we see here an improvement in the market in South Korea, especially.

Operator: The next question is from Andrew Ross, Barclays.

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

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

Operator: The next question is from Marcus Diebel, JPM.

Marcus Diebel: Hi, good morning. Just get on your EBITDA, you highlighted an EBITDA margin 0.6% in Q1. That implies roughly EUR17 million midpoint of guidance of . I'm clearly having the seasonality and then Q1 is always the weakest quarter, but then you invest or reinvest also in Korea, could you help us understand maybe about the weighting of these investments throughout the year. I mean, how broad your contractually do we get from Q1 EBITDA to really the 750, is that will be the age to weighted, how shall we actually think about it, I mean, if you can give an indication about Q2, EBITDA or H1, that would be helpful. But if not, then at least conceptually, that would be great. Thank you.

Niklas Ostberg: Yeah. I mean, like your -- in general the first quarter is always the weakest, businessā as you know, we also have the impact of other than this year, we took 12 days more in the first quarter. So what it shows is basically that there we generated positive EBITDA for the first quarter of 2024. And you're right, I mean the ramp-up of EBITDA through the year. As I said, the first quarter is usually the weakest. And we also start some up-front loaded their investments a bit in terms of marketing that was the case of the people of Europe. And in Korea, we spend, we have also some initiatives, where we invest a little bit more. Having said that, I must say that we are very close to our budget initial budget in terms of EBITDA, very positive, but the outcome for this quarter. This will accelerate through the year and that's where you'll be -- we have this trajectory. We know there are new in the fourth quarter. As you see last year in H2, H3 and very strong and that would be exactly the same, what we expect exactly the same for 2024. I'm afraid I can't say too much more of Q2 data and H1, but the way to highlight this because you were probably referring to the slide 41 when you see the trajectory and the conversion from the gross profit improvement to our repeat, I think.

Operator: The next question is from Lisa Yang, Goldman Sachs.

Lisa Yang: Yes, good afternoon. I'm just curious, obviously, I think it was a naturally showed a has declare their deposition recently. I'm just curious if you could maybe share whether you have engaged with that shoulder. What is it that they really want? What do you think is feasible or not and basically just how you how you think about demands and what do you agree and what do you disagree on? Thank you.

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

Operator: The next question is from Christopher Johnen, HSBC.

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

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

Operator: The next question is from Giles Thorne, Jefferies.

Giles Thorne: Thank you. It was a question back on Korea. Are you in a position to confirm whether you will or won't be launching a subscription program this year? And if you are given the investments in the period that you signaled at the Q4 and the extra room for investment you've now got and the results of the revenue outperformance. And fair to say to assume that the subscription program will come at a pretty aggressive promotion. Thanks.

Niklas Ostberg: Thanks. So I know we don't go into detail on features and I things that we're launching. I would say there is no silver bullet in things. There are a number of things that drive forward. And of course, subscription is one part, but by no means is that in the way, of course, it will recapture some of the free delivery and other things that could be a slight improvement in profitability by larger subscription in that sense. But from a user point of view, it has very little impact to us right now as free delivery anyways. So but again, I can't comment on necessarily 100 features noting silver planning. We like to keep ourselves. In terms of investments, we always plan to invest a little bit more in the Q2 because there are a number of exciting things that we are launching in Q2, this has nothing to do with coupon. So that was always the plan. But yeah, and of course, now we are responding also in addition to that a little bit to what we're seeing in the market. So there are two aspects of our investments at the moment there. I hope that helps somewhat even if I didn't give clear straight answer there. Gile.

Operator: The next question is from Joseph McNamara, Citi.

Joseph McNamara: Hi. Thanks for taking my question. I was hoping you could help me better understand the moving parts within the profit food platform, EBITDA guidance you've given I guess you mentioned Q4 '23 had a run rate of over EUR1.3 billion, were they kind of narrow assessment countries and now Q4 '24 when this despite especially countries that again be profitable, you're expecting a EUR1.3 billion run rate again, I guess -- could you help me with the right explanation with this? These kind of new countries that have been added in -- are they more like breakeven or are these kind of the core countries that were in the definition last year? Any of them going backwards in terms of profitability?

Niklas Ostberg: Right. So what we tried to avoid here is that we have any double counting because we showed this on different slides and of course at the crossover part. And as soon as a loss-making market unprofitable, we include them in the profit part, but we still kept them in the process. Of course, that was a little bit confusing, but you have to decide let's just keep the core profitable markets, loss-making market, such as clear what is the true direction here? And so as we did that it, we Q4 2023 moved from EUR1.3 billion, as I said, to EUR1.2 billion. Now ISO that is the real and the correct comparison. So taking those profitable markets out of that belongs in that profitable part, you were at EUR1.2 billion and that grows to EUR1.3 billion. So there is a growth. That growth is again common despite the Korea. So you can assume that the growth is coming from the other profitable parts of the business, and that is continuing to grow fairly fast. Well, yeah. So that's the best way to see it. And yeah, I think on a taking Korea aside, I think the profitable business continued to increase its profitability as it continues to grow and have a more operational leverage are the benefits that we have of growth.

Christoph Bast: Excellent. I guess just for -- is Korea backward potentially, I guess going backward in terms of profitability this year.

Niklas Ostberg: We don't give the disclosure on individual countries, so I can't comment on that, but will also have to see and see how things are evolving. So I can only reiterate that on regardless of Korea in investments, we will be hitting our guidance of , because we are doing better than expected in many other places across the world as we've been pushing our own profit and operational efficiencies in every aspect to making sure that we take everything of our business into profitability. I can also confirm like regardless of the investment levels that we do in Korea, we will be at the EUR1.2 billion annualized EBITDA in Q4. And that results in a substantial positive total cash flow, including interest payments, et cetera, a substantial amount there. So that's the only thing I can share there. Hope that helped.

Operator: The next question is from Silvia Cuneo, Deutsche Bank.

Silvia Cuneo: Good afternoon, everyone. I'd like to ask a question on the other trend, you commented about our data in some of the segment’s slide? So I wanted to ask if you could please share another view of our trends and how demand for delivery in setting up now that the project comes it behind. And so for example, where the growth is coming from food delivery generally or the category and whether it's new or existing customers? That would be helpful. Thank you.

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

Operator: The next question is from Annick Maas, Bernstein.

Annick Maas: Good afternoon. So my question is also on Korea. I understand it's difficult to really tell us how much more you plan to invest, but I guess you're looking for KBR signal at which point you think, okay, investment is now enough. Can you maybe tell us what that is? And with that in mind, how much of the to EUR150 million have you already invested?

Niklas Ostberg: Sure. So the two parts of this. One part is -- there's some background music, if you can take that off, please. So we had the original plan to spend EUR100 million to EUR150 million just to drive certain product initiatives and driving own delivery even faster than we have done in the past outside of fuel and so on. That should help our profitability for next year. So all these investments should have a very high good return as we get into next year. Then now there is an incremental investment cost, also a careful category, precision and respond to the market dynamics exactly how much and when -- how much is needed or required there is still too early to say. As I said, they started to change for a free delivery run mid of March. As I said, we took a hit over the first couple of weeks responded to that very fast, and we have seen better momentum since then. But how long we will have to keep spending up still too early for me to say. And we also something that we prefer not to guide to.

Annick Maas: Thank you.

Niklas Ostberg: But again, overall, as a group, we will still deliver on our guidance, both 725, 775 as well as Q4 EUR1.2 billion annualized. We have a lot of room as we have been driving cost efficiencies and we have driving monetization in a lot of places. And that puts us in a very strong position to respond and still hitting our guidance. Thanks, Annick.

Operator: The next question is from Andrew Gwynn, BNP Paribas.

Andrew Gwynn: Hey, sort of assess credit, there was so integrated verticals? Obviously, you've highlighted the best performing markets. What separates it from the worst-performing markets? Anything to take away from that procurement?

Niklas Ostberg: So yeah, the best performing markets are usually under them many aspects of it, but usually is to get into writing the density or order density, but even more so in the GMV density in a market. In order to have good density of orders in GMV, we need a lot of customers in that area. So the more customers have in an area, the more we can do on orders and GMV per store. And of course, there are a few other aspects is a little bit how supply chains are working to get this and also that did the enough size of cities such that we can have good distribution center to further drive down cost of distributing orders and buying per acumen but also distributing these orders to our Dmarts. And so that's an important aspect. Then, yes, there are a few aspects there in order to drive it profitably. But the most important one is to get the right order and GMV density per store. If you look at Korea, because I think you hinted us their economics, there are good. The team is executing really well. Emmanuel and we sit on over 1,000 SKUs there per store, which was due in the best markets for over 1000, 10,000 sorry 10,000 SKUs that was the case for the best practice market. That means a good hypermarket type of store. Is not it’s a small store. It's maybe in size, but not in terms of SKUs. I think what still needs to be done in Korea is to drive more orders there. And I think we have a unapproven that many other places. So it's just a matter of time. The proportion of quick commerce in Korea is still very, very low in comparison to our best in class markets. On a best in class market are as high as 30% of orders coming from quick commerce and mostly groceries while Korea is far behind in this aspect, but it's catching up very fast. It's one of our fastest part, fastest growing country in terms of customers.

Andrew Gwynn: Okay, let's play. I just want to What gives us the adjustments to summarize around sort of country-specific factors a lot of it is just execution on the ground. It's not like Middle East works and nowhere else will. It's a --

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

Andrew Gwynn: Very clear. And it feels like by the end of the year, you could be the last company standing around the grocery. So best of luck. Thank you.

Niklas Ostberg: Maybe Thank you.

Operator: The next question is from Joe Barnet-Lamb, UBS.

Joe Barnet-Lamb: Back to the front of the queue. And so we continue to close and walk back launches in a few territories recently, but no sweeping closures. Can you talk a bit about your thought process behind the decisions that you've taken to date and what would encourage you to close more territories. And I guess related Just a clarification. Your 90% reduction in adjusted EBITDA losses, the unprofitable platform 4Q '22 to '24, does that assume any further market exits? Thank you.

Niklas Ostberg: And so them many aspects of this, I'll tried to simplify Arno. So one is that the country needs to store needs to have enough orders per stores needs to be enough density, but it also makes no sense to have just one or two or three stores in the countries who needs to also the country needs to be large enough. There are also aspect about distribution. There are areas in the world where it's just very hard to get the items procured in a good consistent low cost way. So it could be part of Sweden is not suitable or part of Turkey is not suitable. The part of some other countries are suitable. So you have to also look at the city level, can we procure these items well, and do you have enough size in that country? And do you have enough size in that store and it also is part of it was to see how relevant is it for our business and for our consumer, how much does it drive our loyalty among consumers? Is it just an additional way of making money or is it also a value add as a loyalty aspect to our customers to subscription programs to better satisfy the other benefits of the too. And thirdly, what other strong retailers do have in our platform. There are cases where we feel like, oh, we have a are very close to breakeven and maybe a certain market or maybe even breakeven in a certain market. But we don't see that there is the value that we can create in addition to have the best retail on our platform might just be a distraction because we're not building this to make money, of course, ability to make money. But the ultimate goal is to make money and building loyalty to our customers and in some cases, we have an amazing third party, a local store concept as well. And there's just a matter of priority and focus. And in some cases, unless you double down on that and make it an amazing experience from those retailers and hyper markets this one. So as part of this process, and this is an evolving thing. And if you look two years back, we had no good retailers in our store or two, three years back or very few of them. Now we have the best retailers. We have an amazing excuse that and I build a product that is really good, when it comes to matching local shops and the stores, and the complexity of their that is a lot. Like how to deal with out of stock, how to do replacement items, how to do it. So there is an enormous focus here by me and Dublin team to build the world's greatest local shop experience. And when we do that, we can also subscribe without the Dmart in that country.

Joe Barnet-Lamb: Thanks with that [Technical Difficulty]. So everybody thanks that's useful color on the -- and I apologize, maybe I should have been a little bit clearer. I meant specifically with regard countries for platform where you've obviously closed a couple of countries within platform and roll back a launch as well as it was more could we see further country closures within our platform? And then --

Niklas Ostberg: Yeah, sorry.

Joe Barnet-Lamb: I should have been clear.

Niklas Ostberg: So, yes for the market it could be further countries. For the overall platform markets? Well, first, we look at our nor do we have a market position that where we can build a clear leader and or at least a strong number two, is the market large enough to have to make sense. And yeah, that is it also progress on the plans that we're setting out. And there's always an assessment there and we are continuing to asses. Yes, so I don't pre-announce anything, but we continue to evolve and analyze always in the position that we need to be in order to justify operating it. I hope that was helpfull.

Joe Barnet-Lamb: And that's great again, but do you need any market closures to get to your 90% reduction in unprofitable?

Niklas Ostberg: If you will be in the market closer those very relevant in amount, because usually that would be either very small markets. And if it's a small market and we buy and we don't spend a lot of money on small markets, if it's say something larger market well, then usually it's say on a close to breakeven anyway. And but I still not justify a lot of focus if you are number three or if we are not in a position where we can be a strong number two. So I'm sorry, we're not it will not be required in order to hit our goals. Unprofitable markets breakeven, does not require it would rather be a question of focus.

Operator: That was the last question. I would like now to turn the conference back over to Mr. Ostberg for any final remarks. Thank you.

Niklas Ostberg: Okay, not much for me. Thank everyone for listening in and thanks to all heroes for your very hard work is truly appreciated. So thank everyone.

Emmanuel Thomassin: Thank you, everyone, have a good day.

Operator: Ladies and gentlemen, the conference is now over. Thank you for choosing chorus call and thank you for participating in the conference. You may now disconnect your lines, goodbye.