Just Eat Takeaway.com NV

AEX:TKWY

Earnings Call Transcript 2022-Q4

[Operator]

Good day and welcome to the Just Eat Takeaway.com Full Year 2022 Results Call. Please note this call is being recorded. And for the duration of the call, your lines will be on listen-only. [Operator Instructions]

I will now hand you over to Jitse Groen, CEO. Please go ahead.

[Jitse Groen, Chief Executive Officer]

Thank you, operator. Good morning, and welcome to this analyst and investor conference call to discuss the full year 2022 results for Just Eat Takeaway.com. On our corporate website, you can download our press release and the slides for this analyst and investor conference call.

I will start today's presentation by taking you through the highlights of 2022, and I will share some additional background on the results of our investment in sustainable growth during the pandemic and how this ties into our ambition to create a highly profitable global food delivery business. Jörg Gerbig, our COO; and Andrew Kenny, our Chief Commercial Officer, have prepared a couple of slides regarding our enhanced offering and consumer proposition and we'll zoom in on our operational efficiency improvements.

Brent Wissink, our CFO, will then talk you through the financial details of the results at group level and for each of our operating segments individually as well as providing additional explanation on our cash position and free cash flow generation.

I will end the presentation with some concluding remarks, after which we will open up the call for your questions. Regarding the question-and-answer session. As a reminder, we will only allow one question at a time from each of the analysts. Please follow me to Slide 4.

Before we dive into the details, I'd like to quickly remind you of our objective, which has been consistent since our final takeaway to come back in the year 2000. We aim to build and extend large-scale and sustainably profitable positions in our markets. And in the following slides, I will provide more details to support this objective.

Flipping to Slide 5. Following the merger of Just Eat and Takeaway.com and the pandemic, we made significant investments, most obviously in the United Kingdom, but also in the other countries in our portfolio. Most of these investments were around partner supply and the rollout of a larger delivery network. And as you can see in the graph, these investments resulted in high growth of our business and in terms of gross transaction value, the combined company is now nearly twice as large as before the pandemic and over 8x larger than the stand-alone takeaway.com.

Our focus on profitability resulted in a material improvement of our adjusted EBITDA from minus €134 million in the first six months of 2022 to €154 million positive in the second half of 2022. We are back to the same profitability as before the pandemic, although, of course, with the company now being much larger, our future earnings capacity has also increased. Our adjusted EBITDA margin as a percentage of GTV is moving towards our current German and Dutch levels of more than 5%.

We are on our way to become free cash flow positive and have sufficient cash to invest in food and non-food adjacencies. To conclude, our business has become much healthier in 2022 and our ambition to create a highly profitable food delivery business is firmly on track.

Now on Slide 6. In 2022, our GTV was stable at €28.2 billion compared with 2021, driven by a higher average transaction value and FX movements, which offset lower order volumes. Revenue increased to €5 billion to €6 billion in 2022, representing a growth rate of 4% compared with 2021. Driven by a wide range of initiatives, we continue to improve our operational efficiency while simultaneously enhancing the user experience and consumer proposition.

Adjusted EBITDA improved significantly to €19 million positive in 2022 from minus €350 million in 2021. And as you can see, the improved adjusted EBITDA was fully attributable to the second half of the year.

Moving to Slide 7. This slide provides the adjusted EBITDA per segment on a half year basis, which clearly indicates that all operating segments materially contributed to our adjusted EBITDA improvement with the largest gains in the UK and Ireland, Southern Europe, and Australia and New Zealand, and North America.

North America, we turned to positive adjusted EBITDA of €65 million in 2022 despite more than €130 million negative impact from remaining fee caps. Excluding these fee caps, the adjusted EBITDA margin in the second half of 2022 and would have been 2.2% of GTV.

Northern Europe continued to demonstrate strong profit generation with an adjusted EBITDA of €313 million in 2022. The adjusted EBITDA margin in the second half of 2022 further improved to 5.1% of GTV. In the UK and Ireland, adjusted EBITDA improved significantly, mostly driven by a notable step-up in the second half of 2022, in which it generated €41 million of adjusted EBITDA resulting in a GTV margin of 1.2%.

In the Southern Europe and ANZ segment, improved unit economics resulted in an adjusted EBITDA of minus €161 million in 2022 from minus €262 million in 2021. This €100 million adjusted EBITDA improvement compared with prior year was driven by higher ATV, optimized pricing strategy, reduced delivery expenses, and improved operating expenses. And in the second half of 2022, the adjusted EBITDA loss halved compared with the first half of 2022. To round off this slide, we were adjusted EBITDA positive in three out of the four operating segments in the second half of 2022.

On Slide 8. A clear indicator of our success is the core data across the group. This chart on Slide 8 covers all of our markets outside of the U.S. Most of the orders for any food delivery company are, of course, from existing customers and consumers are highly recurring and order more frequently over time. During the pandemic, we've seen a period of exceptional growth, and while exiting the pandemic has resulted in reduced order volumes, consumers acquired during the pandemic are proving to be very loyal. Our cohorts are, therefore, improving further and our consumers continue to show better order behavior than pre-pandemic.

Now Slide 9. While we already serve a big part of the population in our markets, we still have significant further headroom for growth, both from increasing penetration and frequency. You should remember that we operate in a fairly new industry and that there is still significant scope for growth with penetration growing in all of our markets. Penetration of our brand is still low in most of them, and the highest level of penetration is in the UK and Ireland segment, where 32% of the adult population use our services. We, however, after approximately 80% of the addressable population, and in most countries, we are best placed to achieve that target.

In addition, consumers are ordering takeaway food more often. The monthly order frequency has strongly increased from 2.4x to 2.8x over the past two years despite the effect of getting out of the pandemic and countries reopening in 2022. While our online food delivery business already has a very significant scale, it’s still early days in terms of penetration, and there is significant room for further growth across our markets for many years to come. As an example, at 50% penetration and an average monthly order frequency of five, our business will be over 6x larger.

Now on Slide 10, we reiterate the adjusted EBITDA guidance for the full year 2023. We will maintain focus on profitability and expect to deliver an adjusted EBITDA of approximately €225 million in 2023. This guidance includes additional investments in food and non-food adjacencies and just like any other company in the current environment, wage cost inflation. Of course, it also takes into account an uncertain macroeconomic environment and growth in 2023 is expected to be skewed towards the end of the year, given the lower absolute order level of the second half of 2022 versus the first six months of the same year. The long-term objectives for Just Eat Takeaway.com remain unchanged.

And with that, I hand over to Andrew.

[Andrew Kenny, Chief Commercial Officer]

Thank you, and good morning, everyone. I’m going to cover in a few slides the progress we continue to make on our overall proposition to our customers, particularly around ensuring the best choice of partners as well as the investment we continue to make in our brands.

So on Slide 12, on the partner side, we had another positive year of progress, closing out the year with over 690,000 partners across our 20 markets, reflecting a net growth of just shy of 10% year-over-year. This growth has really been driven by a step-up in all our partner types, including our local hero independents, national and international brands, as well as our grocery and convenience rollout, which I will speak about separately in a moment.

On the right side of the slide, our 2022 additions include many notable brands that we have either launched for the first time on the platform or have scaled meaningfully in further geographies. So just to give a couple of examples. In the UK, we had a successful trial with Domino’s that kicked off in May of last year. That has now scaled nationally and exclusively on Just Eat to nearly 1,200 sites. We also added the likes of Five Guys to our portfolio in a number of markets such as Spain, Australia, the UK and Switzerland. This brand alongside others such as Pizza Express and Joe & The Juice are just a few examples of brands that were formally exclusive with another aggregator but are now scaling with Just. And looking ahead, given our ambition to ensure we provide the best possible choice to our customers, and we will continue to invest in our sales teams around the world in 2023.

Moving to Slide 13. We, of course, placed considerable emphasis on investing in our brands and ultimately drive brand awareness. This is fundamental to the success of our business. Top-of-mind brand awareness, essentially ask consumers for the first brand that comes into their mind when asked which delivery provider they think of first. On the left side shows that right across our European markets, our brand remains far and away the most recognized food delivery player. Encouragingly, this top-of-mind brand leadership position remains very strong in core markets such as the UK, Germany, and the Netherlands. The latter two actually increasing versus 2021, while some of our other established markets, such as Austria, Denmark, Ireland, Australia, remained steady in 2022.

On the right-hand side of the slide, this has all been supported in part by our successful Did Somebody Say brand platform, which kicked off back in 2020 with Snoop Dogg and has enjoyed significant success with the current iteration led by Katy Perry, which we launched last year across 17 markets in 16 different languages. Elsewhere, our extensive partnership across all UEFA competitions includes the Champions League, House and support drive brand visibility while commissions of customers watch European football, obviously, a key ordering moment.

Just lastly, on Slide 14, I’d like to talk just briefly about the encouraging progress of our grocery propositions. We’ve now made key advances in all our markets, adding thousands of new grocery partners to our platform with over 32,000 sites live featuring many of the biggest grocery retailers. In North America, we scale with partners such as Rite Aid, who have a very extensive footprint and Gopuff in the U.S. Whilst in Canada, we’re very pleased with the evolution of our own dark store chain, Skip Express Lane, where we added 15 more express stores in 2022, allowing us to cover just shy of 60% of all SkipTheDishes users.

In Northern Europe, where the partnership model with aggregators is a little less mature than markets, certainly such as the likes of the UK and North America. We’ve engaged in many pilots to prove value and operational fit to these retailers. And so far, 100% of these pilots have either already led to a successful rollout such as Spar in the Netherlands or Carrefour in Belgium that certainly are on track to materialize into a full rollout this year. In Germany, we also expanded our European dark store experiment by opening our second store in East Berlin, so we now cover 50% of the city’s Lieferando users and these sites are being very well received by consumers. So some encouraging progress there.

On the UK, I think it’s just worth quickly focusing on that market, which saw the most pronounced gains through 2022 and where rollout continues at pace across both partnerships with national grocery brands as well as independent convenience players. As a reminder, these groceries are all store picked by the retailer and then collected by our couriers. Last year, we launched over 2,000 sites and grew our UK population coverage by 3x to 70%. And the grocery convenience offer for those customers has naturally really step change. That’s on the back of partnerships with the likes of Asda, which has grown to 320 sites. We also launched our partnership with Booker Wholesale, part of the Tesco Group and rolled out to their various brands nationwide. And importantly, we are currently rolling out with Sainsbury’s and expect to have a few hundred sites lives in the next few months, while we’re also in an ambitious rollout phase with coop and plan to launch 800 sites across the first half of this year, and that has already kicked off.

Early indications are very encouraging in terms of customer metrics, particularly around frequency and incrementally. Now it’s also worth mentioning, alongside the commercial successes in 2022 across all markets, we have made significant advancements from a product perspective, including a new interface for merchandise, which has transformed the consumer experience. It’s worth remembering that the number of SKUs for groceries can be in the thousands versus perhaps a few dozen for restaurants. So it really does cool for quite a different user experience.

We’ve also invested in improved inventory management features to improve order accuracy and the partner functionality, ultimately to improve their efficiency and accuracy, and that journey will very much continue at pace through 2023. But overall, we’re very pleased with the progress across the category.

So now I’m going to hand it over to Jörg, who will highlight the progress across our operational pillars.

[Jörg Gerbig, Chief Operating Officer]

Thank you, Andrew, and hello, everybody. On the next two slides, I will give you an update on the operational improvements in logistics and customer service. Before we dive into the logistics operations on Slide 15, I’d like to briefly set the scene. As you may recall, it was not that long ago that we actually build out our own logistics proposition, especially in some of the legacy Just

Eat markets such as the UK. During the pandemic, we truly scaled our own delivery business with growth rates of over 500% year-over-year in some markets. So the focus was on quick scaling and ensuring we can address significant demand.

Starting in 2021, we increased our focus on cost effectiveness. In 2022 then, we really doubled down on it, allowing us to significantly improve our unit economics in all our markets and for all our delivery models. We did this whilst improving consumer experience, especially for on-time arrival at both customers and partners.

Now going into the charts shown here on the left-hand side chart, you see how our revenue less fulfillment cost per order, i.e., our gross profit increased substantially for the group between the first and the fourth quarter of last year. This is down to various improvements across our revenue and cost levers. On the revenue side, we optimized pricing and also widen the delivery radius in some of our key markets to be able to offer our consumers an even wider choice, leading to an increase in delivery fee revenues. We also adopted our commission framework for some of our partners.

As far as cost drivers are concerned, please look at the middle chart here. The chart provides a cost per order on a constant currency basis to exclude any FX effects. The cost per order in the group decreased by 5%, whilst the improvements across our less mature UK and Continental European logistics operations were even more significant. We made notable progress improving our courier productivity. This was delivered despite high inflation in 2022, which negatively impacted cost of delivery.

Further, various tech enablement also played a key role. These tech advances include improved order flows and algorithm optimization, allowing us to optimize when a restaurant receives the order, when a courier has dispatched and when we expect the courier to be back on the street open for a new delivery.

Moving on to the right-hand side chart, pooling too has been immensely powerful lever for us. The pooling percentage within 2022 increased from single digits up to more than 30% in some markets. Once pushed through, the ability for couriers to carry more than just one order at any given time provides us with ample opportunity to fully leverage our fleet across all delivery models, whilst also improving delivery times for consumers during peak hours.

Finally, looking ahead, we have much potential to improve our unit economics further. Tech enablements remain the biggest carrier with improved productivity mechanisms, further pooling rollout, router algorithm optimization, and many others that will contribute to further efficiencies and improvement in consumer experience. We are also driving further density improvements through further supply scaling in our core business as well as in groceries and other adjacencies.

I will now move on to customer service operations on the next slide. I’d again like to set the scene first. It’s worth remembering that we’ve had two legacy organizations merging – Just Eat and Takeaway. So 2021 was all about the harmonization of the two, making sure we bring them closer together to allow for a smoother customer experience that we can manage across both legacy setups. In 2022 then, we moved on to driving operational effectiveness, bringing down our staff and OpEx cost per order as shown on the left-hand side and the FTEs per million orders as shown on the right-hand side. This came through, amongst others, by aligning policies and introducing further automation as well as powering self-service flows. Again, we are executing all this having the consumer and partner experience at the center of everything we do. Looking ahead, I’m excited about the potential for further improvements across JET’s customer service operations.

With that, I would like to hand over to Brent for the group results.

[Brent Wissink, Chief Financial Officer]

Thank you, Jörg, and good morning, everyone. As a reminder, unless mentioned, all figures in the financial section include wrap-up from the 1st of January 2021 and exclude to cease operations in Norway, Portugal and Romania from the 1st of January 2022. After a period of investments, we returned to positive adjusted EBITDA in 2022. The investments we made in our technology partner [ph] supply and delivery network drove improvements in revenue and most significantly in our unit economics.

I will provide more color on this improvement in the next slide. Our focus on optimizing spend below fulfillment cost also assisted in significant and sustainable gains in adjusted EBITDA with that metric improving by €370 million year-on-year.

Please move to the next slide. Unit economics are key to the long-term financial success of the business, but you cannot be profitable for a cash generation without a strong unit economic base. The improvements in the revenue less fulfillment cost came from both marketplace and delivery and in each of our operating segments. The segments where we had invested the most in our delivery offering provided the greatest improvements with our investments matured and began to deliver.

The UK and Ireland and Southern Europe and ANZ segments each increased revenue less fulfillment cost by more than 50%. Of course, we are not finished here and our unit economics remains a focus for further optimization and improvements for 2023 and beyond.

On the next slide, we see the contribution of each segment to the positive development of adjusted EBITDA. I’m pleased that each segment contributed materially to overall improvement in adjusted EBITDA. The UK and Ireland segment contribute the largest absolute improvement of adjusted EBITDA and Southern Europe and ANZ provided the greatest improvement of adjusted EBITDA relative to its GTV.

Please follow me to the next slide where we summarize the overall cash flows from 2022 and how they expect to develop in 2023, before we cover each year in more detail on the following two slides. In 2022, we see the cash flows from operating the business, including CapEx, leases, taxes and interest amounted to approximately negative €500 million.

In addition, we see the net cash inflow of more than €1.2 billion from financing and investment activities. This was mainly from the sale of iFood and repayment of the term loan of €300 million. This leads us with just over €2 billion cash at the year end.

Moving to 23 with adjusted EBITDA increasing as we guided. We expect cash flow to improve.

Moving to the next slide where we bridge 2022 adjusted EBITDA and free cash flow. Our definition of free cash flow is fully loaded and contains all cash flow items other than principal finance flows. So for example, free cash flow includes interest costs and exceptional costs.

Given the nature of our working capital cycle where we receive the growth transaction value ahead of paying our partners working capital, cash flows are posted over time, which are subject to volatility based on [indiscernible]. This volatility is just a technical movement based on which day of the week the period ends and does not impact our operation.

We therefore consider free cash flows, excluding working capital to get a better view of underlying performance. The fully loaded net cash flow shown here before refactoring financing and M&A activity was approximately €500 million negative. This was better than communicated due to amongst others, a one-off tax receipts related to the settlement of a tax procedure between two tax jurisdictions. The settlement that we received of €23 million in late 2022 from the UK. However, this will be offset by payment to the damage tax authorities of €36 million in 2023.

On the next slide, I will provide some further explanation on how cash flows are expected to develop in 2023. Adjusted EBITDA will be the largest contributor to the improved cash generation in 2023. Operating cash costs such as CapEx, leases will remain roughly stable and will reduce as a percentage of GDP over time. Taxes will of course increase on an absolute base as the company becomes more profitable. However, as just noted, 2022 cash taxes should be normalized through adding back the €23 million refund from the UK and for 2023 to €36 million payment to the Danish tax authority should be factored in.

We expect to see a reduced net interest cost in 2023. It is because the fixed interest costs of our bonds is increasingly offset by larger amounts on deposits following receipt of the iFood proceeds and higher deposit rates. Although exceptional item cash flows are event driven, we currently expect reduction in 2023. I would note that we still have some residual costs from iFood and the withdraw of the 2022 market exits to be paid in 2023.

Please follow me to the next slide where I will summarize our capital structure. Showing the sale of our output stake in 2022, we are well capitalized to cover our debt obligation, with cash almost equal to the borrowings and our positive adjusted EBITDA trajectory. We also renegotiated terms of our €400 million RCF made last year, mainly to relax the leverage covenants as we progress towards greater profitability.

The full RCF is now available and is expected to remain available until 2026 with an option to extend it to 2027. The company is, therefore, well fined to execute its fast profitability with a manageable debt security profile. These strengths allow us to make optimal long-term decisions, both operationally and with our capital structure.

In terms of our capital structure, we continue to consider our capital allocation options we will take action to capture value, should compelling opportunity arise after considering all factors. Relevant factors include the return from the current cash holdings purchased a very low coupon for the shorter-dated bonds and managing the maturity profile to maintain strong liquidity.

Moving to the next slide, where we show the bridge between the adjusted EBITDA and the loss for the period. The loss for the period was mainly due to noncash items such as amortization of acquisition intangibles and goodwill impairments. The goodwill impairments related to the Grubhub and Just Eat equity funded acquisitions. These impairments were mainly driven by macroeconomic factors, such as increasing interest rates and technical valuation metrics. In addition, the loss for the period includes a noncash book loss of €275 million on the sale of iFood.

Excluding the impact of impairments and the book loss on the iFood stake, the loss for the period 2022 amounted to €792 million compared to a loss of €990 million in 2021. Please turn to the next slide, where we look at each segment more in detail.

In North America, we saw a decline in orders after the peak of the pandemic ordering last year. Nonetheless, GTV and revenue grew year-on-year, and we delivered substantial improvement in segment profitability despite the €132 million negative impact of the remaining fee caps. The Amazon partnership we entered into during the year has strengthened Grubhub’s competitiveness and represents a significantly opportunity for further growth.

Turning to the next slide. In Northern Europe, we increased and segment GTV by 3% and revenue by 9% on a year-on-year basis. This was achieved mainly through larger basket – sizes and optimized partner and consumer pricing. Adjusted EBITDA improved year-on-year by 23%, reaching €313 million. The adjusted EBITDA margin in the second half of 2022 was just over 5%, which means the segment has reached our long-term EBITDA margin target, and we believe there is more improvement to come.

On the next slide, we outline the performance of the UK and Ireland, following a period of investment in 2022, the segment returned to positive adjusted EBITDA with particularly strong improvement in the second half. This was achieved largely through delivery efficiency as we moved from the rapid scaling we saw last year to a period of optimizing performance.

Move to the next slide. Southern Europe and ANZ. This segment contains many of our less mature markets, where we are making confident steps on our path to profitability. There is a particular focus on improving unit economics. I’m therefore pleased that the segment’s revenue less order fulfillment costs increased by more than 50% year-on-year. I would also specifically go out Australia, which now delivers strong positive unit economics, which have been a focus of investment for the last few years.

The next slide covers head office costs, such as staff and project expenses for global support teams. The head office cost base increased year-on-year mainly due to investments made in 2021 to support the growth. In 2022, the cost of stock recruited over the course of 2021 had a full year impact, which is the primary reason for the year-on-year increase. However, within 2022, we launched various cost initiatives, for example, ad countries and other restructurings we led to lower cost in the second half of the year. We remain focused on disciplined head office spend in 2023.

And with that, I hand over to Jitse for the conclusions of the presentation.

[Jitse Groen, Chief Executive Officer]

Thank you very much, Brent. I will continue with the wrap-up of this presentation on Slide 33. Just Eat Takeaway.com delivered a material improvement in profitability as we generated adjusted EBITDA of €19 [ph] million in 2022 compared with minus €350 million in 2021. Our GTV was stable in 2022 compared with the prior year, despite challenging post pandemic circumstances. Management expects to deliver a positive adjusted EBITDA for approximately €225 million in 2023.

The company is well capitalized to meet all its future debt obligations with over €2 billion of cash and cash equivalents at year-end and limited expected cash outflow in 2023. And to conclude in 2022, our priority was to enhance profitability and strengthen the business, and we expect a further improvement to adjusted EBITDA in 2023 and our ambition to create a highly profitable food delivery business is firmly on track.

And with that, operator, I would like to open up the call for questions.

[Operator]

Thank you. [Operator instructions] The first question comes from Miriam Josiah from Morgan Stanley.

[Miriam Josiah, Morgan Stanley]

Great. Good morning everyone. Thanks for taking my question. I’m just wondering if you could give us a bit more color on the current trading. I understand you’re not giving top line guidance today, but just want to get a sense of what you’ve seen so far in the first couple of months of the year and also sort of how we should think about sort of Q1. I think previously on the last call, you spoke about sort of similar trends in Q1 because of the comp, but then potentially getting to sort of flat sort of positive growth in Q2. Is that still your expectation? Or are you seeing anything that has changed since the last call? Thanks.

[Jitse Groen, Chief Executive Officer]

Hi, Miriam. Thank you. I hope you’re well – to that question, I can’t comment on current trading. We have said, however, that growth will be skewed to the end of the year, and we are also comfortable with where consensus sits for the full year growth on GTV, which is also why we didn’t give additional GTV guidance.

[Miriam Josiah, Morgan Stanley]

Okay, great. Thank you.

[Jitse Groen, Chief Executive Officer]

Thanks.

[Operator]

Your next question comes from Jo Barnet-Lamb from Credit Suisse.

[Jo Barnet-Lamb, Credit Suisse]

Excellent. Thanks for taking my question. So it looks like a date has now been set for a committee meeting with regards to New York City fee caps. In addition, it looks like the bill has 26 co-signatory but only four out of the nine members of the subcommittee. I was wondering if you could give us a little bit of color around the process through the committee and your thoughts going forward. And I guess as a related bolt-on question, I think it’s been an article implying that the opposition party in Quebec want to reintroduce fee caps on a permanent basis. Any views on the likelihood there or any views on that would be great. Thank you.

[Jitse Groen, Chief Executive Officer]

Yes. Thanks for the question. I think overall, the development that we’ve seen in the U.S. market is for the fee caps to turn into something like a minimum fee to deliver food and then separately, marketing fees. And that’s a development that we have seen, for instance, in San Francisco, but also in Seattle and a couple of other cities.

And that’s also similar in Canada. We can work with that construct because we’re perfectly fine with providing a logistical service against a fixed cost, that’s obviously fine. But we are a marketplace. And in the description of the word, marketplace, you already see that we are providing a service to market a restaurant. And therefore, it’s very important to us, but also to restaurants that they are able to market themselves on our business because if not, you basically create a situation in which there is no more competition between restaurants.

So we’ve been very much opposed to any sort of fee caps that just bluntly limits the ability for restaurants to promote themselves. We’re very happy that those fee caps have disappeared in most of the U.S. and Canada.

We’re perfectly fine with some sort of constructs that regulates, for instance the delivery, but not the marketplace part of the business, which is what we have seen. To that specific process in New York, it looks like also the New York City Council is moving in the same direction as what we’ve seen elsewhere, which is of course, a positive for us. But I think more importantly, it’s a positive for consumers in New York because it will create lower delivery fees for consumers in the city. It’s good for restaurants because they are able to advertise themselves and therefore, they can grow. And in the end, is also good for periods in New York.

So – these are good developments. Now it has to pass through the New York City Council. As far as I’m aware, I don’t run the New York City Council, but we’re very hopeful that the New York City Council takes the right decision for the city of New York. And the only thing that we can do from our position is to wait the outcome of that process.

[Jo Barnet-Lamb, Credit Suisse]

Thanks, Jitse. Any comment on Quebec?

[Jitse Groen, Chief Executive Officer]

Quebec, it’s a similar story. Look, in the end, I think what politicians are trying to do is to make sure that there are reasonable prices to provide the delivery. I don’t think that any government that says, okay, you can’t promote your business because obviously, there’s many ways of promoting your business for restaurants. Food delivery businesses like ourselves, but also our competitors provide a very economical way to promote restaurants and therefore, it’s a sensible thing for governments to stay out of. But yes, realistically, obviously, if you’re dependent on a delivery service, then I can understand that governments want to put some restrictions on that part of the business.

[Jo Barnet-Lamb, Credit Suisse]

Excellent. Thank you for the color.

[Jitse Groen, Chief Executive Officer]

Thank you.

[Operator]

The next question comes from Andrew Gwynn from BNP Paribas Exane.

[Andrew Gwynn, BNP Paribas Exane]

Hi there. Good morning. A very quick question, but maybe a long answer. But where in the financial statements do you want us to judge you? So thinking longer term here rather than just 2023 discussion about being profitable, but obviously, if we put in depreciation or CapEx or whatever you want to put in, clearly still negative numbers. So if you're thinking take five years out, what number or what metric should we be focusing on? Thank you.

[Jitse Groen, Chief Executive Officer]

It's a very good question. Well, obviously, first, the profitability of the business. As we've shown we are at the long-term target now for Northern Europe. This is a long-term target that we set for the entire business. We're already there for Northern Europe. We've never said that it would stop at 5%. So we're actually assuming that, that goes up.

We're not there yet in all the other segments, but we're moving in the right direction there. We have a high quality business, and we've spoken about this before, not every food delivery business is going to yield such significant profit, but we believe that we own a lot of this sort of business because also within the Northern European segments, obviously, there are plenty of countries that are profitable, not talking about EBITDA positive, I'm talking to pure profit. So that's obviously a good thing to look at. But it's also GTV.

Now I recognize, of course, that last year, but also this year are difficult from a GTV growth perspective. At the same time, this is caused by getting out of a pandemic. So if you also look at the cohort slide, I believe it's Page 8, you will see that, indeed, there are people no longer ordering that were ordering only during the pandemic, which is logical. You lock people up. They need to do something for their food. So obviously, they're ordering with us. So actually, our total order volume came down a bit.

I think the most important thing here is that the cohort model looks exactly the same as before the pandemic but also during the pandemic. And therefore, you should expect growth from food delivery business in general, but also from ourselves. Now that growth, of course, is going to be very valuable in countries such as Germany and Holland because this is very profitable growth, but it's also going to be quite valuable in other parts of our businesses in which we're becoming far more profitable. And therefore, our growth should be profitable growth going forward. So that's I think, good news.

So if you ask me, what do you need to judge us on, well, it's GTV growth and it is profitability growth, and I think we're delivering both at this point in time, and we'll deliver more in the future.

[Andrew Gwynn, BNP Paribas Exane]

But I suppose just to push a point a bit more. I mean one of the concerns from the trading statement was really around the cash flow. So that bridge between EBITDA and free cash flow. So it's interesting that sort of free cash flow isn't one of the metrics. It's as important to you. I'm not saying it's unimportant, but it doesn't seem as important. Just help us understand that a bit more, sorry.

[Jitse Groen, Chief Executive Officer]

Well, I'm talking about profitability. So that's essentially the same thing.

[Brent Wissink, Chief Financial Officer]

Well, maybe I can – of course, we – profitability is the first thing, and that's what we focus on. And indeed, when profitability increase, we ultimately will also become cash flow positive. And once we reach that point, we ultimately also should become net income positive. So I think that will be the sequence of events when you talk about where to look at.

[Andrew Gwynn, BNP Paribas Exane]

Okay, great. Thank you.

[Operator]

The next question comes from William Woods from Bernstein.

[William Woods, Bernstein]

Hi, good morning. I wonder if you could comment on the – how marketplace and delivery has trended over 2022 and where you kind of ended up with the mix across the business. Thanks.

[Jitse Groen, Chief Executive Officer]

Yes. I realize we haven't disclosed this. It is stable and marketplace is taking a bit of share from delivery, but not much. So just think of it as being stable.

[William Woods, Bernstein]

Got you. That's stable versus 2021?

[Jitse Groen, Chief Executive Officer]

Stable as opposed to what we last showed you. So if you look at that line, I think it flattened out at some point, that's still where it is at. Obviously, a couple of the things that we will be doing this year, you should expect us to expand the delivery network most predominantly in Northern Europe because we are in a – as you can see, we're in a very profitable position, we think that we can go for further growth there, while also, of course, improving the KPIs of the logistical network itself. So you should expect us to invest a bit in that, especially also to cater for the food and nonfood adjacencies in which we are investing. So you should expect that to go up a bit but currently it's stable.

[William Woods, Bernstein]

Excellent. Thank you.

[Operator]

The next question comes from Georgios Pilakoutas from Numis. Please go ahead.

[Georgios Pilakoutas, Numis]

Hi, good morning. The question is around – you grew total group partners by around 10%, but that looks to largely have come from North America and the UK as well. So just interested in Northern Europe, in particular, where partner numbers were a bit more flat. Why do you think that was the case? How much of that maturity versus you waiting to invest more as you kind of roll out the delivery capabilities?

[Jitse Groen, Chief Executive Officer]

Yes, I think to be quite clear on the delivery capabilities. I do want to stress that we have the largest delivery network in Europe. So it's not that we don't have a network that will be – will be a bit outrageous to assume that. We have added restaurants across the board. So I'm not sure why you have the impression that most of that is in certain parts of the world, and we'll continue to do that. We are the most advanced currently in the UK and Canada, if you look at the grocery expansion. So that's going pretty well. That's something that you will likely also see in countries like Holland and Germany, et cetera.

But these pipelines are up pretty long, so it sometimes takes a bit of time. And obviously, if you add a grocery chain, you add 1,000 stores or if you add Domino’s, you had 1,000 stores. And that is to a certain extent easier than to add 1,000 single restaurants. So maybe that’s what you’re looking at. But I think it’s actually quite a good development that we’re having so many restaurants.

[Georgios Pilakoutas, Numis]

Sorry, just in Northern Europe, there’s any 2,000 new partners in the year, which is kind of a much slower rate than lots of the other geographies when I guess, Northern Europe is on some metrics quite underpenetrated still. So I was just trying to understand why that wasn’t stronger or what might maybe stronger?

[Jitse Groen, Chief Executive Officer]

Really, we need to get rid of that nonsense rhetoric over the last couple of years. There’s no under penetration of Northern Europe. The percentage of orders in Northern Europe that is delivery is just as a function of the market lower. And therefore, it also means that if you add more delivery restaurants, you’re going to add it from a lower base than, for instance, in the UK or in Canada where all the restaurants are logistics.

You can add a lot of additional delivery restaurants in these countries. It doesn’t mean that you’re adding a lot of volume. You’re adding more reference and more partners that might or might not have any volume. And if the volume, of course, if you’re adding a grocery chain, you’re adding a lot of volume because people know those grocery change, but if you add just a single fuel station, you’re not going to generate a lot of orders.

[Georgios Pilakoutas, Numis]

Okay. Thank you.

[Operator]

The next question comes from Chris Johnen from HSBC.

[Chris Johnen, HSBC]

Yes. Thanks for taking my questions. I would like to pick a brand on the minimum wage situation in New York. I understand that nothing is for certain things might still change. This has not been put into law. So I understand that you’re probably going to be a little bit reluctant to give very specific answers. But I think what will be helpful for us is to get a bit of color as to where you currently stand. We know that marketplace is a little, more than something, around 60% probably. But in the study commissioned by the city, they’re talking about 125 million deliveries being made in the city and the quarter McKinsey share for you guys of 35%. If we could have a rough idea as to whether or not this is sensible mathematically or whether you have any objections to that that would at least give us an idea as to how many delivery orders we are talking about in New York? Yes, that would be my question.

[Jitse Groen, Chief Executive Officer]

Thank you. I will give you a bit of a more direct answer because otherwise, you’re still going to not be able to make a sense of all this. Our current understanding of the work of that committee and the outcome of the committee and again, we don’t know what we don’t know, is that the impact on us will be negligible after mitigation because we do need to mitigate. Obviously, as you said, we are predominantly a marketplace business in New York. So that means that part of our business, potentially, we need to increase the delivery fees a bit if the minimum wage goes what actually is introduced.

Which, again, we don’t know whether it’s going to be introduced, but assuming it’s going to be introduced. We don’t think it will have a very large impact on our business as things stand today. And it’s also already included in our EBITDA guidance. So you also should not expect us to change the EBITDA guidance based on this. You should, of course, expect us to change the EBITDA guidance if the fee can fall off.

[Chris Johnen, HSBC]

Okay. That’s very helpful. Thanks a lot.

[Operator]

The next question comes from Adrien de Saint Hilaire from BofA. Please go ahead.

[Adrien de Saint Hilaire, BofA]

Yes. Thank you very much. Hopefully, you can hear me okay. I’ve got one question around seasonality. So you talked about growth being skewed towards the end of the year on GTV. I’m just wondering how you think about seasonality of EBITDA between H1 and H2.

[Jitse Groen, Chief Executive Officer]

Yes, it’s a good question. So first off, it’s not really seasonality that’s causing the growth to be skewed to the end of the year, it’s more of a mathematical thing. We obviously shrank last year. That means that we start the year with less orders than when we started last year. So we need to make up for that before you will see year-over-year growth. So that’s why it’s skewed towards the end of the year. Regarding EBITDA, the most significant change is going to be, and that’s the same for any business. It’s an increase of wages of the staff because of inflation of the last year. And obviously, as a business, you do that at the beginning of the year.

At the same time, and I think this is why we are in an enviable position. We are improving our business quite a bit. You’ve seen a lot of that in H2. We’re not done yet. I think a lot of people sometimes miss with us is that we’re still a merged business. So we might have multiple systems. We might have multiple platforms, et cetera, et cetera. We’re trying to get rid of that duplication in our business, and that should help us, but also the customers because we will be able to offer them better products.

So we do have quite a lot of improvement still in the pipeline against a headwind of the wage cost inflation, they will face basically every business in most of the world. So there’s a lot of things working against each other there, but that is going to be, I think, different from, let’s say, H2 last year.

[Adrien de Saint Hilaire, BofA]

Okay. Thank you.

[Operator]

The next question comes from Silvia Cuneo from Deutsche Bank.

[Silvia Cuneo, Deutsche Bank]

Thank you, good morning, everyone. I would like to ask my question about the groceries business. And if you could comment at all about what contribution it is adding to the mix. So obviously, you have highlighted how many partnerships were signed from in the early days, but just wanted to get a sense of what was the contribution on 2022 on any metrics you might prefer and how to think about the ramp up of these partnerships in 2023? Thank you.

[Jitse Groen, Chief Executive Officer]

Hold on Sylvia, I will pass it to Andy.

[Andrew Kenny, Chief Commercial Officer]

Yes. Look, we’re certainly very pleased with the progress that we’ve made across grocery and convenience in 2022. I think it’s fair to say that it was very much a foundational year in terms of building relationships and partnerships with many of the major players. And in parallel to that, making some important adjustments, as I mentioned a little bit earlier in the presentation on the product and user experience for this type of offer. 2023 will undoubtedly see further rollouts and importantly, in markets like certainly in Northern Europe, conversion of pilots to full rollout. So early signs pointing to encouraging consumer behavior, those engaging with grocery in terms of metrics like frequency and incrementally. But look, we’re a large business, and so it’s going to take some time for it to become a meaningful part of our business. So, I don’t think it makes sense to disclose the number yet, but it’s certainly something that we’ll be talking a lot more about going forward.

[Silvia Cuneo, Deutsche Bank]

Okay. Understood. Thank you.

[Operator]

The next question comes from.

[Miriam Josiah, Morgan Stanley]

Great. Just had a question on Wolt. Just wondering what you’re seeing from them in Germany. Just interested in your comments there about investing a bit more into delivery in Northern Europe. So just wondering if you think there’s potentially any selection gap there? And perhaps if you could just sort of update us on the overall proposition in Germany, how that is looking in terms of the app experience, selection, delivery times, et cetera? Thanks.

[Jitse Groen, Chief Executive Officer]

Yes. Thank you very much. Just to be clear, on Germany, we have, by far, the largest logistical network in the country. We serve by far the most cities, and we’re going to expand the cities in which we’re active. We can do that because we’re a very profitable business in Germany. We have we have a good example in Holland, right? And maybe I’m insulting Germans a bit, but I think the Germany is like a big Holland. Sorry, Jorg. So everything that we have seen in Holland thus far will happen in Germany. So cities that are currently too small to support a logistical network will be large enough. And therefore, we are investing in that quite a bit also to provide service to national partners. We are, of course, in many countries, the largest partner, for instance, for McDonald’s. And McDonald’s of course, wants us to deliver in the most cities possible. So it’s also something that we’re focused on.

We have quite an expansion plan for it. I know that’s a bit contrary to what the sector is trying to do. I do expect this sector to close cities or to disappear from certain countries in which positions are too small. We’re doing the opposite, because we’re so strong in these areas. And again, these areas are areas in which growth means profits. And therefore, we are making sensible investments. It’s baked into our guidance. You’ve seen us talk about it. I know and just also what Andrew was talking about, we see tremendous growth, for instance, in grocery, but it’s very small for our business. But you’ll see us talk a lot about it in the future going forward, and we need to expand our network now. I’m not saying we’re going to be the savior of the country, but we are the only player that can actually roll out to even a larger footprint with these services because we do have the scale, we do have the profitability and other people don’t.

If you ask me specifically about the competition in Germany. I’ve already said that, that’s a waste of money. You can look at the impact. You get the slide. I think it was Jorg, right about or was it you, Andrew, about our marketing reach in the various European countries. It actually went up in Germany. Now, I know that, that’s not the same thing as market share. But Germany is a country in which we are very strong and in which I think we will just become stronger and we couldn’t care as what other people are doing, if they want to waste their money in Germany, then by all means, they can do it.

You’re talking specifically about Wolt. Wolt doesn’t really compete with us on a large scale. They compete with us in Denmark, in Berlin and in Israel. That’s the extent of the overlap. And so it’s actually quite small compared to other players as far as I’m aware. And therefore, we’re not really minded too much about them. I see that they grow their GTV, but that is actually mostly outside of our country and set outside of the Northern European segment.

[Operator]

The next question comes from Marcus Diebel from JPMorgan.

[Marcus Diebel, JPMorgan]

Hi everyone. My question is maybe for Jorg, on order pooling. You gave the chart that the share in orders clearly goes up. Could you maybe give us the real percentage number, i.e., what is the number of orders that you currently use for pooling? And then the more important question, how does it actually work with your customers in the fall of restaurants? Is there a retail? Can the change basically you pooling, I understand in some markets, you have actually exclusivity to pool? But if you can just tell us a little bit about – more about this and how we should think about this in terms of like what percentage of orders can you actually pool in like, I don’t know, five, six years time? Thank you.

[Jörg Gerbig, Chief Operating Officer]

Yes. So the actual percentage like you saw on the chart actually went up from mid-single digits to in some countries above 30%. The average for all of them is somewhere in between, obviously, and we’re continuing to push for further rollout of pooling opportunities. There is some technical improvements we will make also on the multi-restaurant [ph] pooling side, we will make some advancements, which will drive that percentage further up. At the moment, for our markets, it’s like enabled basically for all our restaurant partners. And also our restaurant partners make pretty good experience with that. And also even from a consumer side, it actually adds further capacity from our network and in most cases even improves the delivery time for our consumers. So overall, a very good proposition and a win-win for all basically partners, consumers, and ourselves.

[Marcus Diebel, JPMorgan]

And so there’s no veto [ph] at all. And the share, you said can go, you said in some markets it’s 30% with the change?

[Jörg Gerbig, Chief Operating Officer]

Yes. In some markets we even exceeding 30%. No, I mean, the partners are actually happy with the way how we do it with some of the bigger partners actually. Some of our competitors were even more or less forced to stop pooling, while we could continue because they were actually happy with the way how we are operating with this and how we are managing the pooling.

[Operator]

We’ll now take our last question from Sreedhar Mahamkali from UBS. Please go ahead.

[Sreedhar Mahamkali, UBS]

Hi, good morning. One quick follow-up on grocery and the question please if you don’t mind. The follow-up you said was your comment on investment in grocery. I know you said that’s baked into the EBITDA 225 million. Can you give us a sense, what is the level that you’re thinking? Is it tens or millions in any kind of shape we can think of next couple of years? That’s the first one as a follow-up. And secondly, can you discuss maybe a little bit more into the SE/ANZ segment? Clearly you’re improving quite materially there, but paint a picture over the next two, three years perhaps. Is it reasonable to expect it to reach breakeven in a couple of years’ time and then profits in three years, clear delta seems to be Australia. So if you could talk through maybe the top markets there and profile there for us to model properly? Thank you.

[Jitse Groen, Chief Executive Officer]

Yes, thank you. I will – let me take that second question first. So I think that the difference between the segments is usually scale. SE/ANZ is a bit of a mixed bag. We have very strong positions in countries like Spain and Italy, but those positions are in absolute numbers, smaller, for instance, than our position in Holland. And of course, these countries are larger than Holland, which is usually the reason that these markets are not profitable. We’re also dealing with an irrational competitor over there. That doesn’t help, of course. But that’s the situation in, let’s say Southern Europe, they have Israel. That’s mostly a B2B business. That’s actually quite a good business. We have Australia in there that needed to move from fast growing to just stabilizing. And we have right sized also the investment in these countries because obviously, Australia was going 200% or something like that.

So you can invest quite a bit of money into that sort of trajectory. This is also why we’re so big now in Australia. But these businesses need to also become profitable. And our general aim in the business is to get to no burn of cash as soon as we possibly can. And therefore that also applies to Southern Europe and Australia. But you can’t build large sustainably profitable positions without investment. You could also have looked at Germany in 2017. You would probably have given me the same story. You’re losing money there, true. But we have an aim with the investments. That doesn’t mean you should expect the same sort of level that you’ve seen last year in these segments. We are very conscious about cost control. I hope you can see that also in the presentation. We are not done with that. We are, however, also seeing the opportunity in most of our markets to actually cement our positions and to create at the same time quite some profits. So I think that is not different in these countries, but it’s a bit further up.

To your grocery question, not going to disclose the level of investment, but let’s say that we have good control over that EBITDA target. For us, the aim of the exercise is we want to be able to take a country like Holland, right? So we have the largest logistical network by far of any player in Holland. And of course we also have a huge marketplace business. But I’m personally annoyed that we’re not everywhere and therefore we need to make sure that we are in the cities and the towns in which we think we can support running a logistical network at a profit. And it doesn’t need to be a profit now, but we need to know and understand when we’re going to return a profit there. It requires investment. I think the way we feel about it as a business is that it’s fine to invest in those stocks, [ph] but then of course in the larger cities, we need to be profitable with the logistical network.

So it doesn’t necessarily require a lot of investment. But at the same time, we’re also investing a lot in our technology. We have still quite some platforms that are separated. Sometimes we have part of the platform that already are the same, but we have quite a tech effort on automation, simplifying the platforms, improving our customer service as Jörg was talking about as well, we don’t want to have our customers waiting for a reply. We want to immediately reply to them. And of course humans cannot do it, but computers can. So we’re investing a lot of money into improving our business. There’s a lot of cost there that would not exist if we get a couple of things done. And also there, we are investing in our tech teams and we are investing in our platforms quite a bit and that will continue.

So doing a bunch of stuff, we’re very comfortable around the EBITDA. Obviously, if we can get a bit higher EBITDA out of that, we’ll try the most important thing for us is how do we cement our positions further in the market in which we’re already huge. We’ve spoken a bit about Germany on the call, but it is really important to understand that we are very large in certain markets. These are the profitable positions now, but also of the future. And this is what we should be going after also this year. And we hope that it will also give us a bit of additional growth.

[Sreedhar Mahamkali, UBS]

Thank you.

[Operator]

As there are no further questions, I would like to hand the call back over to Jitse for any closing remarks.

[Jitse Groen, Chief Executive Officer]

Thank you, everybody. I hope we were clear in the presentation and we’re very optimistic about this year, but also the future. And the company is looking a lot better than, for instance, the beginning of last year. So we’re quite excited as a management team. And I thank you for your attention.