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Edited Transcript of DHER.DE earnings conference call or presentation 31-Oct-19 9:00am GMT

Q3 2019 Delivery Hero SE Earnings Call

Nov 7, 2019 (Thomson StreetEvents) -- Edited Transcript of Delivery Hero SE earnings conference call or presentation Thursday, October 31, 2019 at 9:00:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Emmanuel Thomassin

Delivery Hero SE - CFO & Member of the Management Board

* L. Niklas Östberg

Delivery Hero SE - Co-Founder, MD, CEO & Member of Management Board

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Conference Call Participants

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* Andrew Geoffrey Ross

Barclays Bank PLC, Research Division - Research Analyst

* Andrew Philip Gwynn

Exane BNP Paribas, Research Division - Senior Food Researcher & Analyst of Food Retail

* Giles Thorne

Jefferies LLC, Research Division - Equity Analyst

* Hubert Jeaneau

UBS Investment Bank, Research Division - Director and Research Analyst

* Marcus Diebel

JP Morgan Chase & Co, Research Division - Research Analyst

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Presentation

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Operator [1]

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Ladies and gentlemen, welcome to the Q3 2019 Trading Update of Delivery Hero SE. At our customers' request, this conference will be recorded. (Operator Instructions) May I now hand you over to Niklas Ostberg, Co-founder and CEO, who will lead you through this conference. Please go ahead, sir.

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L. Niklas Östberg, Delivery Hero SE - Co-Founder, MD, CEO & Member of Management Board [2]

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Hey. Good morning, everyone, and welcome to our Q3 '19 trading update. As you have seen this morning, we had another fantastic quarter. In Q3, order and revenue growth further accelerated, reaching the highest level since our IPO. The business outperformed growth expectations for the 10th consecutive quarter. Consequently, we are, once more, raising our revenue guidance this time to between EUR 1.44 billion to EUR 1.48 billion for the full year 2019.

Before going through the numbers, I'd like to recap our vision to always deliver an amazing experience, fast, easy and to your door. And I believe our focus on this is the core reason why we have been outperforming our peers and why we see increased frequency and loyalty to our service but also why I believe we attract and retain the best people. As we look to expand scale and leadership, we remain very focused on implementing this vision. So with this in mind, we are accelerating investments outside of our core food delivery business to increase customer loyalty through our service and leverage our platform of customers, merchants and riders. So now let's move to our Q3 highlights.

In Q3, we managed to achieve 181 million orders, resulting in a record order growth of 92% year-on-year, which tops the 67% record in Q2 '19. Gross merchandise value was up 73% on constant currency basis to EUR 2 billion. And revenue were up 117% on constant currency basis to EUR 391 million. And all numbers in like-for-like pro forma basis.

Moving on to Slide 5. Here, you can clearly see the acceleration of growth since Q3 '18, when we opportunistically decided to significantly increase investments into new customer acquisitions and experience. This quarter alone, we added a record EUR 37 million incremental orders, which is 4x as many incremental orders quarter-on-quarter as only 1 year ago. When we compare our order growth -- or organic order growth of 92% year-on-year with that of our peers, you can clearly see how our investments into customer experience over the last couple of years are now paying off.

Reported pro forma order growth from our listed peers, is between 10% and 35% year-on-year with an average of 21% and slowing trend for the peers with greater exposure to more mature markets. The opportunity that comes from operating in early stage markets will continue to provide us with growth for the next quarters, years and decades to follow.

Now moving into our long-term priorities set out at the IPO. Starting with growth. We continue to deliver on our key IPO promise of delivering long-term sustainable growth. At the IPO, we promised over 40% growth in the short to midterm. And now the fact is that, since the IPO, we achieved order GMV and revenue CAGR of 69%, 57% and 92%, respectively, with strong acceleration in recent quarters.

Thinking beyond 2019, we are encouraged by stronger end cohorts and superior returns on investments that we are seeing, and we expect to reinvest gains from outperformance and achieve growth above our guidance in the short and the midterm for orders, GMV and revenue.

In the long term, growing market size, improving order frequency further should drive sustainable growth above previous guidance level of 30% communicated at the IPO.

On leadership, we continue to successfully invest in leadership and currently winning market shares in every region against every competitor. In Q2, we further added Bulgaria to our leadership countries. Today, we are a leader in 34 countries, representing 83% of all markets. The increase in leadership position is a result of improved service offering as well as efficient data-driven customer acquisitions over the course of the last 12 and 24 months.

In Q3, we processed over 60 million orders per month in now 4,000 cities. In October '19, we already broke through the 70 million orders per month threshold. And the same also applies to our leadership position in own-delivery where we consider ourselves as the pioneer with over 24 million orders per month in Q3 2019. We process multiple times as many orders as all our competitors combined in our leadership countries. We are currently delivering in circa 400 cities, which is up from 300 cities by the end of Q2. This means that we are launching 1 city per day.

On product and tech. Innovation is a key part of our DNA, and we continue to invest in our leadership there. We are making great progress to become a third-generation on-demand platform. We launched additional vertical capabilities to 6 more countries in Q3 and are now live in 18 countries. We also expanded our dark store concept, which is supporting our efforts to push into additional verticals. And until now, our efforts are being concentrated to Turkey, where we see promising customer results with delivery times of 12 minutes and NPS score above 90.

In the light of looking to launch dark stores in 4 additional markets in MENA in Q4 '19, and I will -- we will later speak more about this in more details.

And then lastly, the improved logistic efficiency by rolling out the district solution earlier across all markets, and we are replacing delivery time estimates from Google Maps to our own proprietary technology of custom-built machine learning algorithms.

So now to the Q2 (sic) [Q3] business update. As mentioned previously, we have seen a significant acceleration of growth in QT -- Q3 '19 driven by improvements made over the last months. We have increased quantity, quality and choice through expanded restaurant coverage. And here, our hybrid business model allows for the greatest restaurant quantity and pricing and having the ability to add leading global brands as well as local independent restaurants make us the favorite with the customers.

The number of active restaurants on our platform in Q3 grew by 82% year-on-year to now 390,000 with the ability to add more demanded restaurants to our platform.

With the marketplace business being our backbone, we continue to add local favorites in addition to key accounts for the best possible customer experience. And today, only about 4% of orders are coming from any single brand.

Technology and product innovation has been enhancing the customer experience and operational efficiency. During Q3, we reached 1 million daily orders in our Global logistics solution. At the end of Q3, 40% of orders have been delivered through our own-delivery capabilities.

With increased scale and operational efficiency, we also managed to consistently deliver below 30 minutes with much faster delivery in dense areas. All those improvements have led to enhanced customer cohorts and with more customers coming back to the platform, staying with the platform and ordering more frequently on the platform than ever previously before. We have also been investing heavily in marketing and customer acquisition. Promoting these services. The return on our investments has surpassed our expectations. We acquired 100% more customers year-on-year at broadly flat CPS, or actually, it's slightly down. It's down with 8% in Q2. So lower -- slightly lower customer acquisition cost despite significant ramp-up in investments.

Now moving to the next slide. Here, this is a key slide to fully understand. And as you can see, new cohorts are actually of better quality with better retention and higher activity. Once our customers start using the platform, they require little to no marketing efforts. This means our investment spend in new customer is one-off in nature. This creates a highly-predictable reoccurring revenue streams that actually grows over time. It is also very predictable for us as we can see the very predictable nature of our cohorts, and that gives also a very high confidence in future returns.

Today, reorder rates account for more than 95% of orders, which also gives us much confidence in the predictability and reliability of the revenues that we generate from customers once acquired.

Newly acquired customers exhibit higher returns. And this also includes some [barter] incentive acquisitions. So despite any of that, cores are getting stronger.

Then move to the next slide. And here, we can see it even more clearly. As you have here, you see that 2019 cohort shows a 12% higher activity rate versus the 2018 cohort. And what you can see is that every single cohort or year, the cohort has been improving, and this is also true for 2019. And as you can see, the lines are very straight and this is not made up. This is actual data. And this shows the predictability of our model. In some markets, we have noted superior course behavior. And therefore, today, we would like to deep dive into our APAC segment to demonstrate how our concerted efforts in execution and customer proposition have led to superior returns.

So on this graph, you can see 4 of our APAC countries. The first one to scale is Taiwan, where we have strengthened our leadership position to Uber Eats after having overtaken them in Q2 -- or end of Q2. But as you can also see, we now also scale other markets in a similar way with 3 to 6 months delay as we have been taking some of the best learnings from Taiwan and applying them to many of the other APAC countries. So we see this across all APAC countries. And -- but not only in APAC. We also see this in many other regions, we apply the same methodology. We see it in Europe. We see it -- or in some European countries. We see it in some Latin American markets as well as in Middle East. Then if you take Taiwan, and I think this is a good example also to show the success of our investments, although this is not the only one with a very strong return. But as we sold our German business, Taiwan did less than 0.5 million orders per month, and this is less than a year ago.

Today, we are processing more than 7.2 million monthly orders. That is 3x as many orders as we did in Germany when we sold the business for circa EUR 1 billion. Some of the activities can be summarized below. The first one being the increased variety via expanded restaurant coverage by adding more than 53,000 restaurants in APAC. And we have added those to the platform, and that's been giving an improved customer experience through increased choice, quality and quantity of restaurants.

Now we also expanded the city coverage. By expanding geographically to more than 110 cities in this region and offering a wide area coverage with those cities, we made sure to address even a larger customer base than previously. This effort has been supported by close to 800 full-time equivalents being added year-to-date. By expanding geographly -- or geographically, we are all able to boost spending across all marketing channels while keeping CPAs flat. We also improved the delivery experience. And our long focus on own-delivery has allowed us to reduce failure rates, decrease delivery times by 31% to now below 20 minutes in dense areas. And it has helped us to utilize the rider fleet more efficiently by tiered and dynamic pricing algos.

Then we go to the second case study and look at our largest market in the MENA segment, which is Saudi Arabia. And as you know, in Q2, we made some necessary changes to our management team and logistic operations and doing so by applying Delivery Hero logistics solution. Since implementation, you can see a clear improvement in unit economics with higher profit contribution per order than that of the marketplace business. I was surely a costly move, but we now see the fruits of this by the savings on every single order. And right now, it's more savings than EUR 1 per order, which gives us approximately EUR 50 million savings per quarter, which is a clear driver for our profitability in the region.

Then moving to the third case study. And I want to touch upon the fact that we have achieved significant profitability in at-scale markets. Today, delivery or markets constitute 50% of GMV, already reached scale and profitability. Some of these markets have best-in-class EBITDA margins of above 50% of revenue. And some markets with more logistics have reached the previous set target of 5% to 8% EBITDA as a percent of GMV, and that is some more relevant metrics to not distort the numbers from logistics.

So -- but the remarks have reached this target of between 5% to 8% EBITDA as a percent of GMV, which we target for the long term.

Close-to-breakeven markets with moderate scale are expected to break even in the midterm. And investment markets featuring accelerated growth with healthy order frequency, unit economics and acquisition costs, indicating a clear path to long-term profitability.

In the short and midterm, we expect to continue to invest given the attractive returns, early stage and population size north of 800 million people in these markets.

With that, I'd like to hand over to Emmanuel for a financial deep dive of the quarter.

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Emmanuel Thomassin, Delivery Hero SE - CFO & Member of the Management Board [3]

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Thank you, Niklas. Good morning, ladies and gentlemen. I welcome you to our trading update for Q3 2019. Delivery Hero is continuing its strong growth path following another exciting performance in this third quarter. Our performance in this third quarter is clearly exceeding even our own ambitious expectations.

Once more, we accelerated group order growth by 92% year-on-year, and group revenue growth by 117% year-on-year on a constant currency basis.

At this point, I would like to put out our growth pro forma into perspective with the pro forma growth that we are currently seeing across all listed peers. Recently reported [series] of the peers are averaging pro forma orders growth of 21% year-on-year, while slowing down tendency. The growth rates that we see today at delivery are the result of the unparalleled for to invest into what we see as a big rock for our success. That is our vision to provide an amazing on-demand experience. We decided really early to invest at early stage in customer experience, for example, into our own-delivery, restaurant coverage, the technology and most recently, the additional vertical. And we are now exceeding our peers growth level by multiple times, and we will continue to do so.

And now let's start with our group financials. Orders increased by 92% year-on-year in Q3 to 181 million orders. If we adjust for all the investments and acquisitions, the group will have grown orders by 87% year-on-year on a like-for-like basis.

In the third quarter alone, we add 37 million orders versus the previous one due to your operational improvements implemented in the past months. We improved our restaurant selection as well as the extended delivery services and also the rapid expansions in new areas in early stage markets have driven growth beyond expectations.

Our GMV amounted to EUR 2 billion in Q3. This is presenting a growth of 73% year-on-year on constant currency and significantly beating our previous record of 64% year-on-year growth in Q2 '19.

The revenues are growing at a record pace with a year-on-year growth of over 117% on currency basis to reach EUR 391 million.

And with that in mind, we have increased our previously announced revenue guidance to a range of between EUR 144 million and EUR 143 billion for this year. During the previous quarter, our revenues on the group level have been impacted by the application of IAS 29. This is the inflation accounting for our Argentina operation, and this came into action first time in Q3 2018. I will come back to this during our Americas segment.

Moreover, on delivery orders are now at 40% of total orders for the group and driven by the accelerated rollout of our delivery, mainly through city extensions and also increased customer demand. The group that creates [X] on delivery increased to 12%, up from 11.2% in Q3 '18. And the commission rate for the marketplace orders is still relatively low with now being at 9%. So that the business with matures, we will -- we have natural potential to increase the commission rate from here. And finally, the net revenues, which could be defined as our gross revenue before subscription of vouchers or the so-called [EFS 15], minus the delivery costs and cost for food processing, grew by 48% year-on-year to EUR 159 million. And we expect to see further upside for net revenue in Q4 and logistics efficiencies improve.

So now let's look at the performance from our 4 operating segments, and I'd like to start with our bigger segment, MENA.

The strong order growth in MENA is continuing. MENA is generating now 77 million orders in Q3, and this is representing a growth of 58% year-on-year, while we are now also operating at high profitability. The GMV grew by 62% year-on-year in Q3 to EUR 928 million on constant currency basis, and the growth is even higher if -- at 69% on a reported currency basis.

own-delivery is now at 32% of the total orders of the segment. And as a consequence, the take rate increased to 20.8%, up from 15.5% in Q3 2018. And moreover, we have further increased the delivery efficiency across the -- MENA segment and increased speed sizably by 6 minutes against the quarter -- the third quarter 2018.

As a result of our own-delivery rollout, we are seeing an improved delivery efficiency with lower cost per order. And as Nick has already mentioned, for example, in KSA, we made necessary modifications and changed our logistic operations to our property solutions in Q2 '19.

And therefore, as a consequence, we managed to lower the cost per order by more than EUR 1 in Q3, which is a huge lever for delivery economics in the region with more than $15 million in savings per quarter.

Over the course of the last month, MENA segment moved significantly to profitability, while we continue to aggressively invest into growth. The MENA food delivery business is expected to generate EUR 65 million full year 2019 adjusted EBITDA which -- with $75 million expected in H2 2019. And this is really a great achievement from the team on the ground.

H2 '19 is nearly compensating the loss associated with the third-party logistic change at Hungerstation and also the (inaudible) integration of the so-called one-off that we had in H1 2019. Outside of the food delivery business, the MENA segment aims to boost the investments into dark stores and virtual restaurants with a net adjusted EBITDA impact of a negative EUR 20 million for this year circa.

And with that, we are expanding our dark store footprint from 1 to 5 markets and the virtual restaurants from 20 to 100 in Q4 2019.

We deploy these investments to further strengthen our product offering and also because we believe that we can build a high profitable business by leveraging our user base, our platform and obviously our logistic network.

And now I'd like to move to the next one, Europe. Our Europe segment demonstrates strong growth potential given operational excellence and investments in services offerings over the course of the last years. Now Europe generated 21 million orders in Q3 2019, and this is a growth of 45% year-on-year compared to Q3 2018.

With that, we are, by far, the fast-growing food delivery company compared to our European public listed companies or peers. We just see growing orders by just 16% year-on-year in Q3 and takeaway pro forma growth being by 21% also in Q3.

We achieved this growth while, at the same time, we have broke even -- breakeven on adjusted EBITDA basis, excluding group costs during Q3. And we will break even on adjusted EBITDA basis during Q4 2019 after group costs. We have also seen us taking market share. And we are now clear leaders in 13 from 14 markets. We've recently having reached leadership in Bulgaria, as Niklas just mentioned.

Europe. Revenue grew by 56% year-on-year on a constant currency basis to EUR 43 million, while our GMV grew by 49% to EUR 258 million. The own-delivery orders are now at 15% of total orders. And as a result, the take rate increased to 16.5%.

We -- I must say, we have been pleased with the development of Europe, especially the strong order growth of 45% year-on-year. And now let's move to Asia.

Asia has continued to be a focus area for growth for us in Q3. We can clearly see the impact of previous investments due to targeted customer acquisitions, the city coverage expansion and improved customer experience through faster and more reliable delivery and also our greater restaurant selection. And the result of these investments, and therefore, we have seen a record order acceleration to 212% in Q3 2019 compared to the same period last year. And we still see enormous potential and our exceptional growth to continue to accelerate further in Q4 this year.

Asia's GMV increased substantially by 107% in constant currency to EUR 654 million. The GMV grew slightly slower than orders as a result of our affordability campaign in our own-delivery market. And also in some markets with the decrease of so-called MOV or minimum order value as well as the reduction of our delivery fees.

The revenues reached EUR 126 million for Q3 2019, growing at 146% compared to Q3 '18 on an adjusted constant currency basis and this, again, despite the affordability efforts mentioned previously and also the lower price for -- lower prices for our customers. The strong revenue growth is also due to the increase of own-delivery orders, which now stands for a 55% of the total orders of the segment. And as a result, again, the take rate increased to 19.3%, up from 16% in Q3 2018.

And here, again, very strong results from Asia.

So now let's move to Americas. Our last segment.

Americas generated 16 million orders in Q3 '19, which represents a year-on-year growth of 62% compared to the same period 2018. However, this growth increased to 76% pro forma growth if we account the [early] investments of Brazil, Ecuador and Peru. And this is a significant acceleration from previous quarters. We continue to operate in early stage markets and expect this growth acceleration to continue there.

The GMV for Americas grew by 68% in our reporting currency. And on constant currency, GMV grew -- growth would have been 71%, amounting to around EUR 131 million. But the FX headwinds among the region are impacting our report results in euros significantly in Americas for the last quarters.

The revenue grew significantly by 127% on constant currency basis and amounts now to 28% -- EUR 28 million boosted by the investments in our own-delivery capacity as well as the continued rollout of our multi-vertical offering, including groceries and other on-demand items. The revenues as well as the GMV for Americas have been impacted by the application of IAS 29, I mentioned this before. And this came into play for the first time in Q3 2018. Considering the impact of this hyperinflationary country, which was negative by EUR 3.3 million in Q3 '18 -- '19 on our revenues and negative by EUR 19.7 million in terms of GMV for the same quarter.

Own-delivery orders in North America are at 49% of total orders. And here, the take rate increased to 21.5%, up from 16% in Q3 2018.

So finally, I'd like to move to our guidance before wrapping up.

As I already commented earlier, we are increasing our full year 2019 revenue guidance to a range of between EUR 1.44 billion and EUR 1.48 billion from the previously communicated guidance of the top of the range of between EUR 1.3 billion and EUR 1.4 billion. That increase in guidance is driven by outperformance in Q3 as well as a higher performance for growth during the last quarter, Q4 2019. In terms of adjusted EBITDA guidance for the group, we expect to be close to the lower end of the previously announced guidance range of between minus EUR 370 million and 400 -- minus $420 million given accelerated investments and through additional verticals in the MENA segment that I commented just before.

And now I hand over to Niklas to wrap up.

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L. Niklas Östberg, Delivery Hero SE - Co-Founder, MD, CEO & Member of Management Board [4]

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Thanks, Emmanuel. To wrap up, I would like to highlight the most important points. Again, we continue to grow in scale with 70 million orders in October. We have increased our leadership position. We're now leading in 34 out of 41 markets. Our technology remains the best-in-class, and we will continue to roll out our third generation platform, including groceries, dark stores and virtual restaurants. Our core strength and investment returns are demonstrated by our 117% revenue growth for Q3. And with increased number of customers we added in 2019 and improved customer behavior, we are very optimistic about 2020 and beyond. With scale and improved operations comes better utilization and improved unit economics, and this was clearly evidenced by KSA, where we have improved cost per order with EUR 1.

We have also laid out a clear path to profitability. And already today, we are generating about 50% of [RD] from profitable markets, and profits in these markets are increasing quickly.

So with that, I would like to thank you for your amazing support. And Emmanuel and I will now be open for questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) The first question received is from Andrew Ross from Barclays.

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Andrew Geoffrey Ross, Barclays Bank PLC, Research Division - Research Analyst [2]

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I have got 3. The first one is the inevitable question about if there's any pointers you can give us on how you might be thinking on investment levels for next year? I appreciate it's still early, but if there's any pointers you can give on how you're thinking about EBITDA for 2020, that would be very helpful? Second question is a high-level one around there's been a lot of noise recently around funding trends in private markets. I'm wondering if you've seen any change in any of the markets where you're up against kind of venture capital-backed competition, whether you think competitors are a bit more focused on profitability at the margin? Or it's too early to say anything? And then third question, back to your kind of long-term 5% to 8% margin on GMV. Could you help us understand how you think about the steady-state level of CapEx and also the working capital as part of that long-term model? Because clearly the investment into cloud kitchens and dark stores is stepping up.

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L. Niklas Östberg, Delivery Hero SE - Co-Founder, MD, CEO & Member of Management Board [3]

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Thanks, Andrew. In terms of the investment levels, we are currently budgeting in work in process for 2020, which will conclude closer to the year-end. So at this stage, it would not be prudent for us to give guidance for 2020 or to comment on further investment opportunities. But right now, we are very happy with the returns of our investments and hope to see continued opportunity to invest at these levels of returns and by that, also driving a lot of shareholder value. And if we continue to see these high returns on investments, it absolutely makes sense to continue to invest also beyond 2019. In terms of private markets, well, we are prepared for any market. But you're right, the last few months have been tough. We have seen more rationality in these markets. We have also seen that it has been much harder for private companies to get funding, and there has been a stronger focus on unit economics in all insights that we have. But again, we prepare and we plan for any market. And that also means that we prepare for high competition also next year. But of course, if this changes, that would be very positive for Delivery Hero. In terms of fattest margin per GMV. We do not yet want to give any clear guidance on working capital. It's too early. As we expand these dark stores and virtual kitchens we will have to see how this is playing out, to what extent we invest at what level. It's still very early, and we have very encouraging results in most places and most type of investments we have there. But not in all, but we also have to see how this scales in other markets and other regions before giving any clear guidance on where we will stand on working capital.

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Andrew Geoffrey Ross, Barclays Bank PLC, Research Division - Research Analyst [4]

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And if you can say on CapEx or...

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L. Niklas Östberg, Delivery Hero SE - Co-Founder, MD, CEO & Member of Management Board [5]

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That's the thing, that we don't know how this will play out. And as you correctly said, these are ones that drive CapEx significantly. So investments into virtual kitchens or at least the ones where we have operations and also dark stores. There is a clearly different CapEx versus our original business or our core business. And at the time, we cannot say how large a portion that business will be and how aggressively we invest in this area.

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Operator [6]

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The next question received is from Andrew Gwynn from Exane.

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Andrew Philip Gwynn, Exane BNP Paribas, Research Division - Senior Food Researcher & Analyst of Food Retail [7]

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Obviously some good disclosure today. I'm just wondering if you could run through, again, some of the sort of economics on the delivery side of the equation? And obviously, we've seen an improvement, I think, in Saudi Arabia, but obviously perhaps a market with fairly large income disparity. So how does the trend look in some of the other markets where perhaps that income disparity isn't quite as big, I suppose the cynic in me sort of says it's a unique example. The other one, I mean, again, unfortunately, just coming back to the guidance for the next year. And obviously, clear -- a very, very clear ambition to deliver top line growth. But to what extent do you think that the sort of EUR 370 million, EUR 420 million loss, how much of that do you think is sort of discretionary, if you will, that you could decide you could turn it off completely? And how much it really is just a function of trying to build scale in those individual markets? I know it's a slightly tough question to answer, but any kind of help to help us on that profit expectation for next year we'd be really grateful for.

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L. Niklas Östberg, Delivery Hero SE - Co-Founder, MD, CEO & Member of Management Board [8]

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Yes. Perfect. Thanks, Andrew. Maybe Emmanuel can start with the first one, and I give the second.

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Emmanuel Thomassin, Delivery Hero SE - CFO & Member of the Management Board [9]

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So the unique economics in own-delivery, the improvement that you've seen in MENA is clearly due to our property solutions that we develop or we implement in the first half of the year in KSA. Once we -- the economics come into play, with our solutions, we are capable to improve our gross profit per order significantly. That's what we've seen in MENA this year. Huge efforts are paying off in H2, and we continue to do so in the coming years. The situation is a bit different in terms of situations in APAC as we invest or we are pushing our (inaudible) campaign in the region means decreasing or reducing the MOV, so-called MOV, I mean, the value and also the delivery fees and as giving the chance to more and more customers or to unlock the market actually and to have pushing the growth through our services and technology, but also to make our service more affordable. So the situation is slightly different. In terms of know-how to logistics, I can clearly see that we are best-in-class in this segment. So it means like we are extremely efficient. We are extremely predictable for our customers. And this is also driving the results and the reorder rate. So that's -- let's say, the unique economics evolution that you can see in these 2 segments in particular.

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L. Niklas Östberg, Delivery Hero SE - Co-Founder, MD, CEO & Member of Management Board [10]

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Maybe add on that. We -- as Emmanuel said, we did take a big step in trying to reduce delivery fee minimum order value. And that, of course, taking a big hit on short-term gross profit. But we've also seen how we significantly improved efficiencies, and we believe -- or we see that we still have a lot of room to improve that. That's why we actually see now economics in Q3 again growing. So we see our gross profit pre-voucher is growing faster or accelerating now in Q3 and has the effect of now increased efficiency in this on a global level. Having said that, there's a lot of mix effects here. We have mix effects that have increased logistics. It's a number of proportion of business being more in the logistics side. And then you have a mix effect between countries. So when you look on a group basis, it's very hard to see where efficiencies are coming from and where gross profit as a margin of revenue is, of course, changing. But if you look at logistic unit economics, it's improving -- or the gross profit is actually now growing on an accelerated basis in Q3.

In terms of the guidance investment. And as I said, we cannot really comment on it. But the way we see it is that this is very much at our discretion, and we see more mature markets where we go a little bit less often and marketing for us more like below 10% of revenue. And -- but we're still very early in many of those markets and as a group. So clearly not there yet in all markets by any means. But I'm sure you can cut 90% of the marketing investments, you can cut 90% of the sales team. You can cut, and you will still generate more or less the same revenue over the next 6, maybe 12 months. But of course, you would then start to cut down on growth when it come in 2, 3, 4 years from now as you are not building the customer base as fast as you would have done otherwise. And the investments we do, we don't really trade between how much we grow on the top line and how much do we invest because that's irrelevant. The relevant part is that do we get a return on every single customer that we acquire. And that's very clear that we do, and that's why we acquired so many customers because we see a very clear return. But keep in mind, the cohort is very stable. So we get these returns and we have seen over the course of 18 years that it has not dropped. We see actually more orders per customers despite any churn. The absolute order per acquired customer is flat to upwards. So that means we can calculate very long on these returns. And that is the relevant metric for us to judge our investments on. And the consequence is, of course, the growth in the top line growth but as a consequence, not a target.

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Andrew Philip Gwynn, Exane BNP Paribas, Research Division - Senior Food Researcher & Analyst of Food Retail [11]

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Okay. That's clear. Just a very quick follow-up. Obviously, there's a bit of a gap between segmental revenue and group revenue. I think it was about 12% in H1. Is that loosely the kind of gap we should expect in H2?

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L. Niklas Östberg, Delivery Hero SE - Co-Founder, MD, CEO & Member of Management Board [12]

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Say again, growth of?

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Andrew Philip Gwynn, Exane BNP Paribas, Research Division - Senior Food Researcher & Analyst of Food Retail [13]

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Well, that would be the discounting. So the gap between what you call segmental revenue and, I guess, IFRS revenue? It was about 12% lower. Is that loosely similar in H2?

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L. Niklas Östberg, Delivery Hero SE - Co-Founder, MD, CEO & Member of Management Board [14]

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Yes. So the discount is an interesting topic. So the way I see it, and I'd like to clarify this, is that you have a discount for general customer acquisition. You have a discount in terms of promotion for new services or verticals, and you now also have certain marginal discounts for subscriptions. As of H1, the significant majority being in customer acquisition with a retargeting fee underwriting 2 to 3 orders. After that, we know that, that they're loyal, it makes no sense to give them more vouchers. They stick to our platform at very predictable rates. So when we do this in a very data-driven approach, we have a better relation between lifetime value and customer acquisition cost.

However, for -- that means, for me, that this is more pure marketing acquisition cost. It's just another way of acquiring a customer, either you pay more and you have a slightly better lifetime value or you pay less and have a slightly less lifetime value. But the relationship between acquisition cost and lifetime value is what matters here. And here, we have a very good return when we work on this data-driven approach around this. However, according to IFRS, we need to put this as revenue reduction. I think that's fair but very misleading in terms of the action. So we also do promotion for having people testing our offerings. And we do this to get the snowball effect rolling. So you also see here that this is a way of -- even if it's not a customer acquisition, we still see this as a clear way of getting the snowball rolling on the new vertical and getting them used and try out this service. And that's why I was -- do some marketing there. And the third, as I said, significant use case of discounts is related to our subscription service in Korea. However, the positive unit economics plus the, now, subscription fee is now already covering the cost of these vouchers and discounts. But in magnitude, it's still significant. So if you then look at the numbers for H1 '19, discounts amounted to EUR 71 million or 12% of revenues that half year. Significant portion of this being in Korea, as we promoted that we have signed up all key accounts. These were very successful campaigns and have had a very positive effect on our nonvoucher-driven growth. That means, even if you take out all vouchers, assuming that none of these customers would have come and ordered without the voucher, we still grow in very high double-digit growth in Korea. And then, of course, with this, we grow even faster. But it's important to keep in mind, like, even without any vouchers usage, we grow in a very high double-digit growth. We expect now, for the next half year, that as a percentage of revenue, vouchers in H2 will be slightly higher. It will be between 13 and 14 on a full year basis. So we slightly move it up to that level. And this is mainly driven by the incorporation of subscription service in Korea. It is also the push of new verticals that we are pushing now and then still using vouchers for customer acquisition. But here, we clearly keep a very close eye on returns at all time. Majority of discount goes into Asia, followed by Americas, as you know. And those are also the highest markets where we try to drive growth and awareness of our service. So that should hopefully give you a little bit guidance around the use of vouchers. When we look at going forward, we expect the proportion to decline from these levels, not because we don't think it's a good way of getting new customers with a good return on lifetime value. But we expect it to decline as we are getting more customers from returning customers than new customers.

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Operator [15]

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The next question received is from Marcus Diebel from JPMorgan.

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Marcus Diebel, JP Morgan Chase & Co, Research Division - Research Analyst [16]

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Three questions, if I may. I mean, one quickly going back to your to slide on Saudi Arabia and the unit economics, higher contribution per order for own-delivery versus marketplace. I didn't get fully how to read this from your previous comments. I mean does -- is that still, for you, kind of a great case for this specific country? Or should we actually think that this development increasingly might also happen in other markets? Then the second question. There was a lot of, yes, news flow around some shareholders saying you might or you should abstain from your vote in the upcoming bid around the Takeaway/Just Eat merger. If you could just comment on this? Is it just noise for you? Or how do you actually see this development? Then thirdly, I assume you all read the Grubhub letter when that was announced. They talk about very different trends in their markets. They claim that the cores are not that strong. Customers are less sticky, which is obviously very different what we've seen today. Could you maybe elaborate a little bit more where you see what the key differences really are and why we should think that your trends should remain in the next couple of years as strong as you explained today.

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L. Niklas Östberg, Delivery Hero SE - Co-Founder, MD, CEO & Member of Management Board [17]

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Perfect. I may cover the first one because it's a quick reiteration of the answers that Emmanuel gave. So this is a very positive development we have that imply our own logistic tools. And of course, it was very costly for us to make this change. And that hit our EBITDA quite significantly in the first half of the year. But as you see now, it was a very good decision to make these changes because now we drive significantly higher profit contribution broader, even higher than that of the marketplace. And it was a strong contribution to the fact that we're now going from minus EUR 10 million in EBITDA in MENA to plus EUR 75 million in the second half of the year for the food business. So this is a very clear case. We can see that -- how efficiency and good tools actually make a huge difference. In terms of the news flow on Takeaway, yes, if it's noise. Yes, it's noise, but it's still pretty frustrating. It distracts us from executing on our strategy, which is the only thing that we care for. And maybe to iterate on the facts here. Because I think there's a very confusing message that's being sent, we received 9.5 million Takeaway shares in April as part of the consolidated sale of Germany operation Takeaway. As we outlined, this was a pure financial stake, and we outlined that since the very start. Our divestment strategy for this stake has been focused on derisking our position and locking in significant gains in the stock. As we saw significant synergies in this operation, we also expected this to happen. But the strategy was to de-risk our position and gain -- or take off some significant gains in the stock. And a part of this strategy, we ordered to monetize 1/3 of our Takeaway stocks, so 3.2 million shares, in April, so way before any news flow. And by September, the stock had went up another 20% from the point where we felt we were very happy with the price. And then we took a decision, obviously, to monetize another 1/3 of the stake, which obviously makes sense and also at the top of -- at an all-time high. I'd also like to add that when we did collar, we received a significant discount of 7.2% to the previous day's close. And so at EUR 68.5 was what we -- when we monetized some of that stake. And that was clearly not an ideal outcome for us. So in September, we decided to sell down (inaudible), limiting our trade to a very cautious 20% of average daily trading volume to minimize any impact on share price and make sure sales are happen in a very orderly fashion. And in reality, since initiation in September, our sale accounted for only 9% of average trading volume. And it's unreasonable, in our view, to believe that this has any impact on the market. And I should also add that 1/3 of our sale has been off-market through different blocks. Overall, I think we deem the results of this sell-down as very successful, much more so than our April trade we took at -- or we look -- if you look at the online food delivery industry, that's seen an average decline of 15% since 9th of September, while Takeaway share price has fallen only 10%. So it has outperformed the market in this case. And I think this is all but excellent outcome of monetizing our stakes.

So we are very happy with the results. And with that, I'm also very happy to leave this topic because we really want to focus on our business and not their business. Then -- but thanks for bringing it up, Marcus. In terms of Grubhub and the different trends. Yes, it's -- I think the difference here is that we have probably been a little bit earlier in some of the initiatives that they currently push forward, which I think makes a lot of sense. But of course, we were a little bit earlier on that, and therefore, we also have a superior product to our competitors. We have more restaurants, we have faster delivery, we have better offerings. We have -- so therefore, the effect of competition is we haven't really seen it. We have only seen the impact of our improved service. And that's why I think it's very important for us to highlight and iterate the fact that we do not see any of deterioration because of competition, we actually see improvements in any place, and that is probably why we also take market shares in every place. And we expect that we'll continue to do so. So yes, we don't see that.

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Operator [18]

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The next question received is from Hubert Jeaneau of UBS.

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Hubert Jeaneau, UBS Investment Bank, Research Division - Director and Research Analyst [19]

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I have 3. The first one is on the -- so the EUR 20 million impact from dark stores and dark kitchens. Just getting a sense of -- are we -- are the early innings of a cycle of investments here? Or are those kind of more tactical investments? Or translating in a different way, do you see a meaningful impact on MENA margins going forward from those investments? Second one is on the discounts. Just wondering, you referred to subscription model in Korea. Can you please explain to us how this works in practice and whether the vouchering is actually through kind of loyalty and rewards or -- yes, it'd be great to have some clarity on that. Finally, last question, maybe for Emmanuel, on the net cash position in Q3 and whether you participated in the rapid funding. Any color there would be helpful.

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L. Niklas Östberg, Delivery Hero SE - Co-Founder, MD, CEO & Member of Management Board [20]

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So in terms of the dark stores. So we are seeing very good initial traction with interaction of this multi vertical. As I said before, we operate now in 18 countries. When it comes to dark stores, it's less but we are rolling it out now and in particular, MENA there. It's still early stage but very encouraging. I think that, even if you see this as a very strong investment case, good return, the positive thing is that we already have the customers, we already have the platform and in most part of the technology. And we also already have the logistic capabilities. So therefore -- and I should add, those are the largest costs for building a business, especially a consumer-driven business. So therefore, even if we go very aggressive into this, we already covered the largest item. And we only have to making sure that we drive our gross profit economics on these incremental orders that we can cross-sell to. And as you always know, in the beginning, and that was the same with logistic, in the beginning, in the first orders when you scale up new stores, before you have building a certain scale, you will always have some negative unit economics there. And that's why there are some investments. But we see as soon as the -- like, if you take the stores as an example, as soon as they've been around for a certain time, you start making good economics here. But of course, we're ramping up more stores than -- or as we ramp up more stores with our stores, this then having an impact on EBITDA. But luckily, we are already covering mostly. Maybe you want to explain the Korea?

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Emmanuel Thomassin, Delivery Hero SE - CFO & Member of the Management Board [21]

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Yes, absolutely. I mean the -- you were asking like about the vouchers and the subscription model in Korea. So this subscription model is giving the possibilities to our customers in Korea to pay a monthly fee. And this monthly fee will give them the access to a limited number of orders they can execute during the month with discounts. So it's not unlimited discounts on unlimited numbers of orders, but this is giving the chance for the users, and almost they're also like your loyal users, to have access to these numbers of orders -- limited numbers of orders with discounts. So this is how it works. And maybe also maybe continue on the net cash position. So looking at the cash and cash equivalents on the balance sheet by the end of September, the total amount was around EUR 700 million, of which EUR 550 million are, what we call, operative cash, I mean, excluding restaurant money. As you remember, surely, we are collecting the cash from the restaurants, so that we deduct from the cash and the cash equivalents. The total cash, net cash, operative cash for the company is amounting EUR 550 million at the end of September. And in terms of cash movements, the decrease of the cash position since the end of H1 is mainly driven by our EBITDA movements and also Takeaway.

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L. Niklas Östberg, Delivery Hero SE - Co-Founder, MD, CEO & Member of Management Board [22]

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And I think I didn't tell specifically if we are going to disclose more around the new verticals and investments there. We will disclose some more cost and revenue associated (inaudible) and give more clearance around it. But for now, it's not as a new segment, but there will be some additional disclosures such that you can get some comfort there. And now maybe, because of time, maybe we can take one more question.

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Operator [23]

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And the last question for today is from Giles Thorne from Jefferies.

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Giles Thorne, Jefferies LLC, Research Division - Equity Analyst [24]

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I'm sorry, I've got 3 questions. First one was on multi-vertical, it'd be interesting to get a sense of how customer lifetime value compares to hot food? And then any implications from that for your future participation in Glovo and Rappi? Second question was just coming back to the question of the Grubhub letter, really, it's an account of why you want to be a hybrid incumbent marketplace in a normalized growth environment. Well, that's how I read it. I'd be interested to see if you share that same characterization? And just generally, what your view is about what type of business model to have in a maturing environment? And then lastly, in Korea, do you think your actions this year in pursuing growth and closing the gap on the #1 player in that market are creating conditions for consolidation?

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L. Niklas Östberg, Delivery Hero SE - Co-Founder, MD, CEO & Member of Management Board [25]

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Yes. So multi-vertical, we do not disclose yet how we see the value of customers. And I think it's a little bit too early as well. We are very encouraged by the results. We -- if you do it right, I do think that we will be able to generate at least similar economics in some of the initiatives we do. There are also some initiatives where we do not see that. And here, we also then invest significantly less or not at all. So we have to be very careful analyzing what are the returns and how do we get the economics to work before we start spending big money around it. But in some ways, we do see a very good case. We do not comment in participation in Glovo and Rappi. And -- but I'm happy to comment on the point with Grubhub and the question whether that should be in hybrid. And I would absolutely agree it is. I think some of the nonsustainable private market investments will be very tough if markets are changing. I would be very curious to see the economics of some of those players who have a significant portion of our business locked into key accounts with very aggressive terms and having logistics in places with -- without commission contracts and a significant vouchering promotion to repeat customers. That's completely different from what we are doing here. It's not acquisition tool but using it as a reordering tool, which, of course, turns the whole lifetime value completely upside down. And -- but I understand the hope is that they will gain size and maybe change their business model over time. But I think the hybrid model is, of course, very strong in this case that you rely on that. And also in case of any changes in labor legislation. In terms of Korea, I cannot say much here. But despite us being the clear #2 in the market or clearly behind the leader, it still remains a very attractive market for us. We are very happy with the current development in order growth, both including and excluding any vouchers, and we see a very positive market share and improvements in brand perception. But we can obviously not comment on any potential consolidation in any markets. Thanks for trying, though.

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Giles Thorne, Jefferies LLC, Research Division - Equity Analyst [26]

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So it's always worth trying. Let me ask a keener question on South Korea then. Uber is now -- Uber Eats has now exited. Is that something that's going to have a material impact into 2020? Or are they so small that you barely register them?

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L. Niklas Östberg, Delivery Hero SE - Co-Founder, MD, CEO & Member of Management Board [27]

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No. Look, Uber did, at its peak, 200,000 orders per month or 250,000 orders for (inaudible), who invested significantly over the last couple of years. It was, I don't know, decent compared to 140 million or 150 million orders. So this was more -- this wasn't really a significant change.

Then I'd like to thank everyone, again. I thank you for the tremendous support. Our momentum is great, and I'm extremely excited to be part of this amazing company. So I'm very much looking forward helping shaping the future of this industry. And I still believe that we are in the very early days, and thank you for your long term support.

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Emmanuel Thomassin, Delivery Hero SE - CFO & Member of the Management Board [28]

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Thank you very much.

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Operator [29]

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Ladies and gentlemen, thank you for your attendance. This call has been concluded. You may disconnect.