Company Reports

Delivery Hero announced the sale of its Taiwan business Foodpanda to Uber Eats on May 14 for $950 million on a cash-free and debt-free basis. The deal is targeted to close in the first half of 2025, subject to the fulfillment of customary closing conditions and regulatory approvals, including merger control approval. Additionally, Uber agreed to acquire a minority stake in Delivery Hero by purchasing newly issued shares at a placement price of EUR 33 per share, which is around a 30% premium to the preannouncement price. This stake represents approximately 3% of Delivery Hero's share capital after the implementation of the capital increase.

Delivery Hero published its first-quarter trading update, with gross merchandise value up 8% in constant currency and revenue up 21% in constant currency (both excluding hyperinflation accounting), ahead of the company's compiled consensus by 2.5% and 5%, respectively. The outperformance was mainly driven by Middle East/North Africa and Europe. Given the solid revenue growth, Delivery Hero upgraded its fiscal 2024 guidance of total revenue growth to 18%-21% from 15%-18% compared with 13% in our model. Guidance on adjusted EBITDA of EUR 725 million-EUR 775 million versus EUR 738 million in our model, GMV growth of 7%-9% versus 8% in our model, and positive free cash flow that does not include interest income and expenses remains unchanged.

Delivery Hero published its fiscal 2023 results, in line with Feb. 5 ad-hoc preliminary results. Its gross merchandise value was up 6.7% and 6.8% in constant currency, respectively, and revenue was up 15.7% in constant currency in both periods, in line with guidance. Adjusted EBITDA exceeded EUR 250 million in fiscal 2023 with an adjusted EBITDA margin of 1.1% in the second half of 2023 and 0.6% in 2023, including a negative hit from hyperinflationary accounting. Delivery Hero reiterated fiscal 2024 guidance of adjusted EBITDA of EUR 725 million-EUR 775 million versus EUR 738 million in our model, GMV growth of 7%-9% versus 8% in our model, revenue growth of 15%-17% versus 13% in our model, and positive free cash flow that does not include interest income and expenses. Free cash flow excludes stock-based compensation, which amounts to about 0.8% of GMV for Delivery Hero and should be perceived as the true cost of running the business (EUR 360 million during 2024 in our model).

Delivery Hero published an ad-hoc release providing preliminary (unaudited) fourth-quarter and fiscal 2023 results with gross merchandise value, or GMV, up 6.7% and 6.8% in constant currency, respectively, and revenue up 15.7% in constant currency in both periods, in line with guidance. Adjusted EBITDA exceeded EUR 250 million in fiscal 2023 with an adjusted EBITDA margin of 1.1% in the second half of 2023 and 0.6% in 2023, including a negative impact from hyperinflationary accounting. The firm also announced it reached free cash flow breakeven during the second half of 2023. Delivery Hero guided fiscal 2024 with adjusted EBITDA of EUR 725 million to EUR 775 million (versus EUR 738 million in our model), GMV growth of 7% to 9% (versus 8% in our model), revenue growth of 15% to 17% (versus 13% in our model), and positive free cash flow (does not include interest income and expense). As a reminder, free cash flow excludes stock-based compensation, which amounts to about 0.8% of GMV for Delivery Hero and should be perceived as a true cost of running the business (EUR 360 million in 2024 in our model).

Delivery Hero is one of the fastest-growing food delivery operators in the world. It’s exposed to regions with attractive long-term structural characteristics and is well positioned to benefit from the secular trend of digitization of food delivery orders, in our opinion. A combination of strong positions in concentrated markets, consistent and sticky cohort behavior, profitable delivery operations in the Middle East and North Africa, South Korea, and a significant addressable market underpins Delivery Hero's investment thesis.

Delivery Hero is one of the fastest-growing food delivery operators in the world. It’s exposed to regions with attractive long-term structural characteristics and is well positioned to benefit from the secular trend of digitization of food delivery orders, in our opinion. A combination of strong positions in concentrated markets, consistent and sticky cohort behavior, profitable delivery operations in the Middle East and North Africa, South Korea, and a significant addressable market underpins Delivery Hero's investment thesis.

Delivery Hero published a third-quarter trading update with gross merchandise value, or GMV, up 9% in constant currency (up 2% at current rates) and revenue up 16% in constant currency (up 9% at current rates), implying take rates of 23.2%. On a per-segment basis, Asia's GMV was flat, and revenue was up 3%, versus down 6% and down 4% in current rates, respectively. GMV in the Middle East and North Africa and Europe was up by double digits to 26% and 15%, respectively, and the Americas was mixed, with GMV up 11% but down 1% including hyperinflation accounting. Integrated verticals' GMV and revenue grew 31% and 29%, respectively, with the group reporting that the segment has achieved positive gross profit after store-related expenses in the third quarter (935 stores globally). Delivery Hero maintained guidance for fiscal 2023, with adjusted EBITDA as a percentage of GMV at more than 0.5% and over 1% of GMV in second-half 2023 as well as free cash flow breakeven during second-half 2023 (versus negative free cash flow of about EUR 500 million in the first half). As a reminder, free cash flow excludes stock-based compensation, which amounts to about 0.8% of GMV for Delivery Hero and should be perceived as a true cost of running the business. The company upgraded the GMV growth outlook to the upper end of the 5%-7% range while reiterating revenue growth guidance for fiscal 2023 at 15%. We don't expect to make changes to our EUR 88 fair value estimate for Delivery Hero. Shares trade in 5-star territory despite a 7% uplift in shares as of Nov. 14, which is the time of writing.

Delivery Hero published a second-quarter trading update with gross merchandise value up 8.1% in constant currency (up 2.9% at current rates) and revenue up 16.2% in constant currency (up 11% at current rates), implying a continuous improvement in take rates to 23.3% versus 21.5% in the same quarter last year (including higher commissions from own-delivery, advertising technology revenue, service, and subscription fees). On a per-segment basis, Asia's GMV turned positive to 2% (revenue up 3%), while GMV in the Middle East and North Africa, and Europe was up by double digits to 21% and 17% respectively, and the Americas held up well (GMV up 11% and revenue increased 11%). Integrated verticals' GMV and revenue grew 26% and 32% respectively, with the group now planning to further rationalise 50 low-order stores in third-quarter 2023 to improve utilisation and unit economics. Delivery Hero reiterated guidance for fiscal 2023 with adjusted EBITDA as a percentage of GMV at more than 0.5% and over 1% of GMV in second-half 2023 as well as free cash flow during second-half 2023 (versus negative free cash flow of about EUR 500 million in the first half). Free cash flow excludes stock-based compensation, which amounts to about 0.8% of GMV for Delivery Hero. It confirmed 5%-7% GMV growth, but upgraded revenue growth guidance for fiscal 2023 to 15% from 10% previously, with growth expected to accelerate throughout the year. Apart from the second-quarter update, the presentation contained information on Saudi Arabia (purchased an outstanding minority stake for $297 million, adjusted EBITDA margin higher than 3% in the second quarter) and Dmarts (positive gross profit in June 2023). All in all, a strong print with solid growth in MENA and Europe as well as take rates and revenue guidance driving shares higher. We don't expect to make material changes to our EUR 88 fair value estimate for Delivery Hero. Shares trade deep in 5-star territory despite a 10% uplift in shares on Aug. 9.

Delivery Hero published first-quarter results with gross merchandise value, or GMV, up 2% in constant currency (up 1% at current rates) and revenue up 12% in constant currency (up 12% at current rates), implying continuous improvement in take rates (including higher commissions from own-delivery, AdTech revenues, service and subscription fees). On a per-segment basis, Asia's GMV was down 6% (revenue slightly up 1%, with South Korea orders down 9%), while GMV in MENA and Europe was up double-digits to 16% and 15%, respectively, and Americas holding up well (GMV up 17% and revenue up 15%). Integrated verticals GMV and revenue grew 26% and 31%, respectively, with the group now planning to further rationalise 150 low-order stores in the second and third quarters of 2023 to improve utilisation and unit economics. Delivery Hero reiterated guidance for fiscal 2023, with adjusted EBITDA as a percentage of GMV of more than 0.5% and over 1% of GMV in the second half of 2023 as well as free cash flow breakeven during the second half 2023. Free cash flow excludes stock-based compensation, which in Delivery Hero's case amounts to about 0.8% of GMV. Delivery Hero set out a 5%-7% GMV growth and around 10% revenue growth guidance for fiscal 2023, with growth expected to accelerate throughout the year. Apart from the first-quarter update, the presentation contained information on cohort order frequency evolution (return to prepandemic levels), a deep dive on South Korea (own delivery at 15% of orders, free cash flow positive in 2022, the largest market in the group), and a detailed path to profitability analysis on profitable (65% of GMV, EUR 1 billion EBITDA run-rate in fourth-quarter 2022)/unprofitable platform businesses (leadership but early stage in 75% of these markets' GMV ) as well as the integrated verticals segment (unprofitable but improving). We don't expect to make material changes to our EUR 88 fair value estimate for Delivery Hero. Shares trade in 5-star territory.

Delivery Hero published fourth-quarter results with gross merchandise value, or GMV, up 7.9% in constant currency (up 8.8% at current rates) and revenue up 17.6% in constant currency (up 20.7% at current rates), implying continuous improvement in take rates on a year-on-year basis. On a per-segment basis, Asia grew GMV by 2% (revenue up 10.4%) while GMV in MENA and Europe was up double-digits to 27% and 17.7%, respectively, with Americas slowing down (GMV up 3.5% and revenue up 1.1%). Integrated verticals GMV grew 47% in the fourth quarter. On profitability, at the group level (including Glovo), adjusted EBITDA was negative 1.4% of GMV, at the upper end of previously given guidance. In the fourth quarter, the company's platform business including Glovo reached positive adjusted EBITDA and achieved a positive adjusted EBITDA for the entire fiscal 2022 excluding Glovo. In fiscal 2022, the Integrated Verticals segment recorded lower-than-expected losses at the adjusted EBITDA level of negative EUR 345 million versus the guided to negative EUR 380 million-EUR 400 million. Both GMV and revenue for the year came in slightly below guidance ranges. Delivery Hero reiterated guidance for fiscal 2023, with a positive adjusted EBITDA as a percentage of GMV of more than 0.5% (versus 0.3% in our model) and over 1% of GMV in the second half of 2023 as well as free cash flow breakeven during the second half 2023 (free cash flow excludes stock-based compensation, which in Delivery Hero's case amounts to about 0.8% of GMV). Despite progress in profitability and a better cash balance at the end of the year than consensus, share price was down about 10% during the day, due to the top-line miss and as the market was looking for more concrete evidence on growth trends in 2023 (top-line guidance will be provided with the publication of the annual report). We don't expect to make material changes to our EUR 88 fair value estimate for Delivery Hero. Shares trade in 4-star territory.

Delivery Hero published third-quarter results with gross merchandise value, or GMV, up 7.6% in constant currency (up 12.3% at current rates) and revenue up 20.3% in constant currency (up 28% at current rates), implying around 250 basis points improvement in rates on a year-on-year basis. On a per-segment basis, Asia grew GMV by 2% (revenue up 14%) while GMV in MENA, Europe, and Americas were up double-digits 28%, 27% (up 13% excluding Glovo, which grew 40% in the quarter), and 52%, respectively. Integrated Verticals GMV grew 55% in the third quarter, driven by higher basket values. More importantly, previously given profit guidance was upgraded. The firm continues to see a lower adjusted EBITDA loss for the integrated verticals segment in 2022 at EUR 380 to 400 million (from EUR 475 million previously), while the platform business including Glovo (food delivery business) reached breakeven in line with previous guidance. At the group level, adjusted EBITDA as a percentage of GMV in fiscal 2022 is now expected to be negative 1.4% to 1.5% from negative 1.5% to 1.6% previously, while GMV growth closer to the low end of former forecast (EUR 44.7 billion to EUR 46.9 billion). Delivery Hero also provided guidance for fiscal 2023, with a positive adjusted EBITDA as a percentage of GMV of more than 0.5% (versus 0.3% in our model). Notably, management committed to reach free cash flow breakeven during the second half 2023. We don't expect to make material changes to our EUR 88 fair value estimate for Delivery Hero. Shares trade in 5-star territory.

Following a release of its second-quarter results, Delivery Hero published second-quarter revenue on a per-segment basis, up 31% in constant currency, implying continuing strength in take rates (up 280 basis points and 310 basis points in the first and second quarters, respectively. Average order values, or AOVs, were up almost 15%. According to the company this was due to strong execution on basket-size initiatives (new audience targeting tool in Asia) and inflation (Americas AOV increased by 26%), among others. Per-segment gross transaction value growth also revealed that Asia was the primary driver of a sequential GTV growth slowdown with the segment being down about 7%. In comparison, MENA and Americas were both up 4% and 20%, respectively. However, Delivery Hero said that quarter-on-quarter trends are reversing in the third quarter (7% growth for the group) based on the first six weeks of trading (which we believe constitutes a positive read-across for food delivery peers in our coverage), with GTV in Asia expected to grow 8% sequentially. The group also noted that Asia recorded its first full second-quarter positive adjusted EBITDA. Previously given guidance was confirmed. The firm continues to see a lower adjusted EBITDA loss for the integrated verticals segment in 2022 at EUR 475 million, in line with our estimates. Glovo guidance at GMV of EUR 3.7 billion-EUR 3.9 billion for 2022 and EUR 300 million EBITDA loss (we don't include Glovo in our model) was reiterated. Notably, in the presentation the firm noted that profitable platform countries representing 70% of the group's GMV are expected to generate over EUR 600 million in adjusted EBITDA (EUR 200 million in the first half and EUR 400 million in the second half), offering further reassurance on the clear profitability path ahead. We don't expect to make material changes to our EUR 88 fair value estimate for Delivery Hero. Shares trade in 5-star territory.

On July 22, Delivery Hero published an ad hoc report, giving updated guidance for fiscal 2022 based on preliminary second-quarter numbers and announcement of a partial repurchase of 2024 convertible bonds. More specifically, the firm now expects gross merchandise value excluding Glovo of EUR 41 billion-EUR 43 billion versus EUR 44 billion-EUR 45 billion previously and EUR 44.3 billion in our model. On profitability guidance, Delivery Hero guides EBITDA over GMV margin of minus 0.9% to minus 1% versus minus 1% to minus 1.2% or about EUR 400 million EBITDA loss at the midpoint versus EUR 498 million EBITDA loss in our model. Within this, the firm sees a lower adjusted EBITDA loss for the integrated verticals segment in 2022 at EUR 475 million versus EUR 525 million previously and EUR 475 million loss in our model, while upgrading its previous guidance of break-even to positive adjusted EBITDA for the platform business versus a EUR 23 million loss in our model. Delivery Hero also updated Glovo guidance at GMV of EUR 3.7 billion-EUR 3.9 billion for 2022 (from EUR 4 billion-EUR 4.3 billion before) and EUR 300 million EBITDA loss (versus EUR 330 million loss before, we don't include Glovo in our model). As a result, the group expects to generate EUR 40 million-EUR 120 million (break-even to EUR 100 million profit previously) in adjusted EBITDA profit in fourth-quarter 2022 including Glovo. Last, management decided to repurchase a nominal amount of up to EUR 85 million (about 10% of the outstanding amount) of its convertible bonds due in January 2024, signaling confidence in cash flow generation and guided profitability path. Importantly, the firm said the platform business was at break-even in terms of adjusted EBITDA in May and June 2022 (excluding one-off impact from Turkey), offering further reassurance on the clear profitability path ahead. We don't expect to make material changes to our EUR 88 fair value estimate for Delivery Hero. Shares trade in 5-star territory.

As a result of recent macroeconomic developments, such as geopolitical uncertainty and pandemic-related supply constraints causing inflationary pressures, which tend to dampen consumer confidence and discretionary spending, we reduce our top-line growth estimates for European food delivery companies. In addition, we revise our cost of capital forecasts upwards, as a result of increased share price volatility over the last year, which reflects industry-wide headwinds and a tightening interest rate and valuation environment, as well as a high cost of debt. Significantly reduced values but unchanged star ratings arise from the preceding factors (all three names are in the 5-star territory). We continue to expect material secular growth opportunities in food delivery and its adjacent markets (such as supermarket convenience delivery), principally driven by the steady shift from phone-based to online meal ordering. As a result of pandemic-driven lockdowns, a much greater number of new clients have chosen to utilize meal delivery services. We anticipate that cohorts acquired during the pandemic will display weaker spending habits than historical generations, which, combined with a lack of strength in discretionary spending, will result in a noticeable slowing of order growth in the medium term (2022-2024, we observe early signs of this slowdown in google search trends data, mobile app downloads, website traffic numbers and restaurant dining activity trends). In our coverage of European food delivery companies (Just Eat Takeaway, Delivery Hero, and Deliveroo), we expect Gross Transaction Value or GTV growth to underperform management forecasts in fiscal 2022, although we feel this is already reflected in current prices. Our fair value estimates for Just Eat Takeaway, Delivery Hero, and Deliveroo decrease to EUR 81, EUR 88, and GBp 215 per share, from EUR 126, EUR 97 and GBp 350 per share, respectively. Just Eat Takeaway remains our top pick.

Delivery Hero is one of the fastest-growing food delivery operators in the world. It’s exposed to regions with attractive long-term structural characteristics and is well positioned to benefit from the secular trend of digitization of food delivery orders, in our opinion. A combination of strong positions in concentrated markets, consistent and sticky cohort behavior, profitable delivery operations in the Middle East and North Africa, the Woowa acquisition in South Korea, and a significant and untapped addressable market underpins our investment thesis.

Delivery Hero is one of the fastest-growing food delivery operators in the world. It’s exposed to regions with attractive long-term structural characteristics and is well positioned to benefit from the secular trend of digitization of food delivery orders, in our opinion. A combination of strong positions in concentrated markets, consistent and sticky cohort behavior, profitable delivery operations in the Middle East and North Africa, the Woowa acquisition in South Korea, and a significant and untapped addressable market underpins our investment thesis.

Delivery Hero reported first-quarter results with growth in line with company-compiled consensus (gross merchandise value of EUR 10.1 billion and segment revenue up 52% to EUR 2.1 billion). It reiterated guidance for GMV of EUR 44 billion-EUR 45 billion, revenue of EUR 9.5 billion-EUR 10.5 billion, and adjusted EBITDA margin of negative 1.0%-1.2%, including negative EBITDA of up to EUR 525 million for integrated verticals and breakeven for the platform business. We maintain our narrow moat rating as we still perceive the South Korean business to be a high-quality asset along with resilient marketplace businesses across the group's regions. However, we expect to reduce our fair value estimate after incorporating guidance and 2021 actuals into our model, now that the annual report has been published, and applying a higher discount rate for the group. The higher cost of capital is a function of a higher beta, itself the result of higher share price volatility in the last 12 months reflecting industrywide headwinds and a tightening market environment, and an elevated cost of debt in recent weeks (yield to maturity for convertible bonds trade at the 9% level).

Delivery Hero reported fourth-quarter 2021 results, with growth below company-compiled consensus (gross merchandize value, or GMV, at EUR 9.6 billion versus EUR 9.8 billion for consensus and orders at 776 million versus about 850 million for consensus) and adjusted EBITDA of negative EUR 781million, implying a 2.2% margin versus negative EUR 710 million or negative 2% for company compiled consensus (percentage of GMV). On guidance, the group expects GMV of EUR 44 billion-EUR 45 billion, revenue of EUR 9.5 billion-EUR 10.5 billion, and adjusted EBITDA margin of negative 1.0%-1.2%, including negative EBITDA of EUR 525 million-EUR 550 million for the integrated verticals segment and breakeven for the platform business (food delivery). While we maintain our narrow moat rating as we still perceive the S. Korean business to be a high quality asset along with resilient marketplace businesses across the group's regions (especially MENA and Europe), we expect to reduce our fair value estimate by a low-double-digit percentage after incorporating lower guidance and fiscal-year 2021 actuals in our model and applying a higher discount rate for the Integrated Verticals segment. We increase our uncertainty rating to very high from high, the result of lower visibility on: 1) profitability path with regard to Glovo and Integrated Verticals, 2) funding constraints given still loss-making operations during a period with tightening market conditions, which could result in new rounds of equity issuance and/or suboptimal (in terms of timing and price) divestments of minority stakes when valuations are at their lowest. With the stock tanking by as much as 30% on Feb. 10, we expect shares to trade in 4-star territory after incorporating the above changes. Although the firm still provides strong upside given leading market positions in profitable markets such as South Korea and MENA, our preferred pick in the space is Just 5-star Eat Takeaway, which offers a better risk/return profile.

In an ad hoc release published Jan. 10, Delivery Hero announced that it expects its food delivery business to break even in the second half of fiscal 2022 and generate EUR 0-100 million in adjusted EBITDA in the fourth quarter of 2022. On quick commerce, the company expects investments to peak in the first quarter and gradually decline thereafter.

In the food delivery space, two announcements caught our attention on Dec. 22.