Delivery Hero Earnings: Strong Growth With Asia Turning Positive and Upgraded Revenue Guidance

Delivery Hero DHER 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.