Delivery Hero SE

XETRA:DHER

Earnings Call Transcript 2019-Q1

[L. Niklas Östberg, Co]

Good morning, everyone, and welcome to our Q1 trading update. Yes, as you have seen this morning, we had a pretty good first quarter. Order and revenue growth reached its highest levels since our IPO. We managed to beat consensus again for the eighth consecutive quarter and have also increased our full year revenue guidance.The additional investments further strengthen our leadership positions and drove growth in key regions. With significant cash in the balance sheet, we're in a good position to take advantage of opportunities that arise.So before stepping into numbers, we would like to recap our vision and where we are today. We continue to be very early stage of online food delivery, we are seeing rapid changes in consumer behavior, with for us, higher order frequency across the board. As we further scale and drive leadership, we remain focused on achieving our vision to always deliver an amazing experience. We're excited to bring more food and more services to 1.2 billion people that live in our current markets. So now to our Q1 highlights. We had orders up 55% year-on-year to 125 million, gross merchandise value, up 57% on a constant-currency basis to EUR 1.5 billion, and revenues up 93% on constant currency basis to EUR 267 million. This is the fastest we have grown since becoming a listed company.Moving to next slide. Here you can see an acceleration in orders since Q3 when we started to increase our investments. This quarter is even more dramatic. We added 16 million orders in 1 quarter. It was 15 million if we exclude Zomato's UAE business that we acquired. This is compared to the previous year when we added 6 million orders. This highlights a very early stage of our market expansion that we're seeing and the significant opportunity we are capturing with our additional investments.And moving to next slide. So we continued to deliver on our key IPO promises, which you should hold us accountable for. Growth, as number one priority, invest for leadership and build tech and product leadership. On the first one, our number one priority being growth, we committed to about 40% growth in the short to midterm. We are far exceeding this with 93% revenue growth this quarter. Invest in leadership. We are now leading in 33 out of our 41 countries, 80% of our GMV. We process more than 40 million orders per month in more than 4,000 cities, the same applies to our leadership position in own delivery with over 10 million orders per month in about 250 cities. We are delivering multiple times as many orders as any of our competitors combined in our leadership markets. And last, innovation is part of our DNA and we will continue to invest in tech and product leadership to build a third generation on-demand platform. In the first quarter of '19 alone, we migrated 4 additional country operations to our global platforms with a long-term target of 8 regional platforms supported by 1 global platform. We believe this is a winning tech setup for our global business with local differences. We further invested in personalization as well as continued to roll out additional verticals.Now to Q1 business update. We have successfully increased our investment across the group with fantastic results. As mentioned earlier, we added a record of 16 million orders in this quarter investing across all our segments and countries. We have been able to capitalize on this market expansion and greater customer demand. In MENA, we have seen rapid adoption of our own delivery services and been investing heavily in bringing new customers to our platform. We added the most popular and newest restaurants and brands. We have increased our multivertical capabilities such that you can have convenience items like groceries, flowers, beauty products and much more through our Talabat or Carriage brand. And then within 6 months, we are also going to have it in Hungerstation. All of the above is driving massive adoption of our services, high customer loyalty and driving increased order frequency. This also being the case for Asia. Order growth has dramatically increased from 49% in Q4 to 73% in Q1. Here the same dynamics are occurring. Early stage in expanding markets, our delivery services are connecting the most popular restaurants and brands and affordabilities allowing access to a larger group of customers. The same also holds true for Europe and Americas.If we look at additional investments in Q1, we have been able to spend 2/3 on acquiring new customers to our platforms. This is a significant increase in new customers and we will continue to benefit from this for many years to come. Our order frequency has also increased through improved product and technology. This has meant that we are investing at even higher returns than what we originally expected.We have also improved our restaurant coverage. We now have more than 290,000 active restaurants on our platform. This is an extremely diverse restaurant partner network. Less than 4% of our total orders come from any single restaurant chain. If you look at some of our food delivery peers, many have 20% or more coming from single chain, and this changes the outlook on unit economics drastically. For us, that's not being the case.In Q1, we doubled our sales team global -- globally compared to previous year. This allow us to expand even faster to new areas and cities and assure we have a merged or the most unique and demanded inventory in any given location. Further innovation with our product and technology has also been a focus in Q1. This includes our second-generation kitchens and multivertical capabilities it also includes new product features such as the relaunch of subscription service in MENA with Carriage Black. On the M&A side, in Q1 we closed Zomato's UAE food delivery business and completed also sale of our German operations to Takeaway.com. First, these transactions had allowed us to strengthen our position globally and in particular in the MENA segment.Now to next slide, Slide 8. We have updated our order cohorts 2018. You can see that our customers continue to return to our platform and are ordering more frequently. Once our customers start using the platform they require little to no marketing efforts. It means our investments span in new customers is one-off in nature. This creates a highly predictable reoccurring revenue stream that actually increases in frequency over time. And not only do we see our cohorts getting better over time but we also see that the new cohorts are better than the old cohorts. This is a very predictable behavior and it allows us to invest across the business with confidence in future returns. So with that, I'll like to hand over to Emmanuel for our financial deep dive of the quarter.

[Emmanuel Thomassin, CFO & Member of the Management Board]

Thank you, Niklas. Good morning, ladies and gentlemen, and welcome to our trading update for Q1 2019. As you can see here, delivery orders continuing as a strong growth path. In the first quarter 2019, we clearly exceed our expectations. We accelerated the group order growth with 55% year-on-year as well as the group revenue to record growth of 93% year-on-year and this on constant currency.So we are very pleased with the start to our additional investments, and the increase on our growth for this quarter. But now, let's start with the group financials, please. So as a reminder, first, Germany is considered as the discontinued operations since 2018, and hence, it is not reflected in our statement anymore. In -- on terms of orders, we increased by 55% year-on-year in Q1 2019 to 125 million orders. The strong top line growth is linked, but not limited to the further investment we deployed over the last 3 quarters.Our GMV amount EUR 1.5 billion in Q1 '19 and this is representing a growth of 57% year-on-year on constant currency basis. The revenues are growing at the record pace with year-on-year growth of 93% on constant currency to EUR 267 million. The revenue growth is driven by particularly our strong growth rate in MENA in Asia segment. We give you more detail in a sec. On delivery orders are now 25% of total orders driven by great demand for our delivery services and so the take rate is at 17.7%, driven by this increase of own delivery services. Excluding this own delivery, our take rate levels are still very low at the 11.8%, and this is an absolute increase of 0.7% from Q1 '18. So as you can see there is still a significant potential to grow from here. And now let's look at the performance on the 4 operating segments. And I'd like to start with here, with MENA. So the strong order growth in MENA is continuing. MENA is generating 65 million orders in Q1 '19. This is a growth of 57% year-on-year. The GMV growing faster by 70% year-on-year for the first quarter to EUR 747 (sic) [ 745 ] million. And the revenues are [ skinning ] a record growth rate of 147%, year-on-year, and this in constant currency and now amount for EUR 144 million. This acceleration that we see in revenues and revenue growth have been driven by the demand for own delivery services. They are -- own delivery orders that we deliver ourselves are now 26% of the total orders in MENA and so as a result the take rate increased to 19.3%. In MENA, as Niklas said, we continue to roll out additional verticals along with increase in the efficiency of our delivery network and so reducing the cost per order. Overall, and despite the significant investments we are making in this segment, we continue to expect the full year '19 adjusted EBITDA to be positive at EUR 70 million. The acquisition of Zomato, online food delivery business in UAE, have been completed for the first time from March 1, '19 onward. And we decide that no like-to-like adjustments would be made given this impact on the group revenue is very limited to 1.5%. So now, I'd like to continue with the next segment, in Europe.Again, here, Germany is considered as discontinued operations and therefore, they are not -- they are excluded from this year's as we officially closed the year, the operations on the 1st of April, '19. Europe is generating 19 million orders in Q1, this is a year-on-year growth of 39% and the GMV grew by 35% on constant currency to EUR 232 million. the Europe revenues grew by 37% on constant currency to EUR 37 million. Looking at the own delivery, the own delivery orders are now 10% of the total orders and the take rate increased to 15.9% at the end of the quarter. So likely for Europe, we remain on track to breakeven during H2 2019.Now let's move to the next one in Asia. Asia have been a focus area for investments for us in Q1 '19, we expand in many new countries, cities and also our neighborhood across the Asia segment. As a result, the segment is now generating 30 million orders in Q1, which is a significant acceleration of 73% year-on-year order growth. Asia, GMV increased by 54% on constant currency to EUR 416 million, and the GMV grew slightly slower than the orders due to our affordability campaigns and decrease of our minimum order value or MOV. The revenues reached EUR 67 million for Q1 growing at 61% compared to Q1 '18, on constant currency basis. And this, despite the affordability that I mentioned before and also lower prices for customers. So the stronger revenue growth is also due to the increase of our own delivery orders, which now stands at 29%, 29% of the total orders generated.The take rate for Asia increased to 16%, and this, despite the investments in affordability that I mentioned just before. However, due to the successful adoption of the affordability campaigns, we not -- the reduced average basket size to now EUR 13.69.And finally, ladies -- Americas. Americas generate 10 million orders in Q1, which represent the growth of 35%, however, this growth increased to 44% if you accounted the investment of Brazil. GMV grew by 19% in our constant currency and on constant currency, the growth would have been by 44% amounting to EUR 115 million for the quarter. As you can imagine and you know, we're facing some FX headwinds in the region and this is impacting our reported results in euro significantly for America.The revenues grew by 76% and amount EUR 20 million. This is partly driven by our own delivery as well as the rollout, the continued rollout of our multivertical offering, including groceries and other demand items. Again, in Q4 -- in Q1 '19 like in Q3 and Q4, revenues as well as GMV for Americas, have been impacted by the application of the so-called IAS 29, means the hyperinflation accounting for our Argentinian operation. That came into action since Q3 '18. And the impact of considering Argentina as a hyperinflationary country, was negative by EUR 400,000 in Q1, regarding revenues but negative of EUR 2.8 million in terms of GMV for Q1. The proportion of own delivery orders is now 30% of the total orders for America. And now ladies and gentlemen, I hand over to Niklas for the guidance 2019.

[L. Niklas Östberg, Co]

Thanks, Emmanuel. Now to the outlook. On the back of the successful start of the year, we have increased our revenue guidance to between EUR 1.1 billion and EUR 1.2 billion, to give you some more explanation, we quickly look at the revenue bridge. So if you take the midpoint of the previous guidance range, of between EUR 1.08 billion and EUR 1.15 billion as a starting point, next you add full year revenue impact of the acquisition of Zomato's UAE business, which is expected to be EUR 18 million from March through to December. Then you account for the positive FX impact from last time reported, which is about EUR 1 million. And finally, we had the business outperformance which will get you to our new revenue guidance range of between EUR 1.1 billion and EUR 1.2 billion. As said revenue guidance now at EUR 1.1 billion, EUR 1.2 billion. In terms of adjusted EBITDA guidance, we expect to reach our previously announced adjusted EBITDA guidance of between negative EUR 270 million and negative EUR 320 million. As outlined previously, we will invest more in the second half of 2019 than in the first half of 2019. This is because it takes time to scale up our investments spend across our countries.In terms of profitability on a segment level. We expect MENA to remain the most profitable segment and have a full year adjusted EBITDA of EUR 70 million positive. This is despite the fact that we have invest significantly in this region and rolled out multivertical platforms there. Europe is expected to reach breakeven during H2 2019.We are extremely pleased with Q1 as you can understand. We have continued to increase our investments throughout this year, and we never felt more confident in our market position and the business growth. With that, I'd like to hand over for Q&A.

[Operator]

The first question is from John King of Bank of America.

[John Peter King, Research Analyst]

Congrats on the good start to the first quarter. I was going to dig actually into some of the results from 2018 obviously with the annual report published. Emmanuel, on the gross margin side I think second half stepped down again, somewhere into the mid-40s on a reported basis. I'm just wondering, is there anything that depressed that result? What would you expect in terms of gross margin development as we look forward into 2019? And then the second one may be related, but I think looking at the disclosure on the commission rates, it seems as so though that delivery order commissions must have fallen. I may be wrong on that but, I guess, perhaps that's a feature of some of the delivery discounts. So perhaps you could comment on what the run rate is for commission rates on the delivery orders at the moment? And I guess, I'd just be interested in general, perhaps for Niklas, your view as to the sustainability of some of the prevailing price points in the industry right now, it feels like people are burning quite a lot of cash. Do you think this is a matter of just purely scale or do you think ultimately, we probably need to see commission rates and/or kind of consumer prices rise in order to square the circle on economics?

[Emmanuel Thomassin, CFO & Member of the Management Board]

Well, thank you very much, John, for the questions. I start with the gross profit margin. Yes. You're right, I mean, as we develop our own delivery services obviously the cost of sales are increasing, so the margin is -- the declining of the result of the margin is a result of our investments in own delivery. Having said that, we look also obviously at the absolute numbers and we look at the unique economics of our own delivery. So yes, the margin will reduce or reduced and we continue if our own delivery proportion is increasing but in absolute numbers, we remain very positive. The commission rate I -- probably here have a positive view from our side. Because we don't push so much on commission, I mean, the take rates is about 17.7% now and 11.8% without our delivery and we don't -- we not aggressively increase our commission rates across the regions, we much more focus on getting market share. So here there is room for growth, for sure.

[L. Niklas Östberg, Co]

Yes, on the sustainability. I think we have probably been the most aggressive of all. We've been free delivering in many markets, we have reduced also minimum order value. I think in a couple of markets, there have been exceptions of the players to have very small proportion of logistic being equally or in 1 or 2 cases, even more aggressive. I think overall, we have been the most aggressive one. And despite that, we are driving good view in the economics here. I think it's partially also because we have been very diligent on making sure that we have a commission rate that actually makes sense and where I think most of our competitors don't. They give away on a free for restaurants or sign-up on the same contracts on 15% and the delivery below 10 minutes, it's clearly not going to work out. And I think, that is not going to last for long. But I think, when you look at us, we have been very prudent in making sure that we take a commission rate that actually works. And despite that because we had the scale and the restaurants and restaurants chain have been happy to sign up on those commission rates while I think, for the more early entrance state they were forced to give away the service for free or at a very low cost.I think, also a little bit different here for us being that we don't have the same concentration while I think, many of our competitors will have more than 50% of same concentration so they will have McDonald's, Burger King that's almost like -- almost only or 50% plus of their business. And, of course, you will not make [ any ] economics on McDonald's, that will never be profitable on the current commission that they charge. So the question is, is it going to be sustainable? Well, it is sustainable for us, but it also requires that your prudent on the pricing, and I think most our competitors haven't been that. And that's a big advantage for us.

[John Peter King, Research Analyst]

And maybe if I could just ask one follow-up. I don't know how much you can comment on the situation at Hungerstation with the management departures. But any comments, I just wonder whether you -- there is any concerns that that's got other implications for you, you think that's dealt with the departure of the staff?

[L. Niklas Östberg, Co]

No. I think. It started becoming increasingly important market for us with a larger proportion of own delivery and also the need for multivertical. And because of this, we also put Yousif Abdulaziz, who is a Saudi national now and the previous CEO of Carriage to take the lead in this. Carriage, under his leadership, has done an excellent job in executing and rolling out logistic across the region, including multivertical capabilities. So I think, this is a very strong change that I believe will further strengthen our position in the Saudi market. Former CEO, Ebrahim, continues to be a minority shareholder in Hungerstation and is also fully aligned in terms of his incentives to continue to grow the business. So I think, we be probably in a stronger position there. And as mentioned earlier, we are now even accelerating certain prior development skills in own delivery, multivertical so I'm very optimistic for the short and the mid and the long term.

[Operator]

The next question is from Andrew Gwynn of BNP Exane.

[Andrew Philip Gwynn, Senior Food Researcher & Analyst of Food Retail]

Three questions if I can, just on the EBITDA guidance. Obviously, you have changed your revenue guidance but no change on the EBITDA? So presumably we're just, sort of, moving within the tram lines rather than anything, no sort of extra step up investments. Secondly, just on the investments, I mean, when you, sort of, announced that you were still a little bit unclear as to exactly where the extra investment was going to go. I am just wondering if you can give a little bit more color on what your latest thinking is? And then, sort of, connected just for the final question, is on those non-leadership markets. Is there a significant change in how you're thinking about your position there? I mean obviously you talk a lot about M&A opportunities, but should we expect a significant change in strategy?

[L. Niklas Östberg, Co]

[ Let me ] quickly cover. So on the EBITDA, yes, we have not changed the guidance. Of course, we are delivering higher growth and revenue and also profit contribution than probably even we expected. But at the same time, we see the investment working out so well so we see no need for us to, kind of, improve our EBITDA guidance but we rather reinvest. And we believe that we can reinvest that good return so therefore, we are not going to change our EBITDA guidance but rather invest a little bit more with extra profit contribution that we are generating here. In terms of where it goes, we intentionally didn't be too specific here, but from a comparative point of view, but for also for us to be able to reallocate where we see the best return and want to be very agile on this one. I think where you see we have invested a lot in Middle East. We -- you can see in the growth in Asia obviously where we go from kind of 47% or so to 74% growth in 1 quarter so clearly, some good investments here but no granular detail in secular-ish market. In terms of where we invest, and a 2/3 of it being in marketing, the remaining 1/3 pretty equally spread between sales, affordability and product development so that should give you some hints there. In terms of the non-leadership markets, I think we have 4 or so markets or 4, 5 markets, which are small and non-leadership. Here, of course, we have to evaluate our -- and if we are willing to make big investments to catch up or rather find alternatives. I think then there are a couple big or large second markets. Here we are clearly going to invest and we believe that we are going to win leadership. It might take, kind of, years to get there, but I think if you look at the current direction in those markets then I'm very optimistic that in the mid- to long-term, we will be a leading player organically. But we are always open to acquiring any of our competitors. I don't think there is an option that we would sell in any other markets or in those large non-leading where we think that we can win.

[Andrew Philip Gwynn, Senior Food Researcher & Analyst of Food Retail]

Sorry, just to follow up on that. Has the sort of, pace of the opportunities presented to you, has that changed substantially over the last 3, 6 months?

[L. Niklas Östberg, Co]

I think we always keep an open dialogue with all players. I cannot comment if more or less and we are very focused on our business and making sure that we build leadership and if we build leadership all options are available so that's our main focus. And then if something comes, then we will opportunistic act on it.

[Operator]

The next question is from Joe Barnett-Lamb of Credit Suisse.

[Joseph Barnet-Lamb]

I've got 3 from me. So starting with MENA, which again has performed incredibly well. Can you talk a little bit about any specific countries that drove strength there and also the degree to which multivertical delivery logistics fuels some of the MENA performance? Secondly, great strength across the group, but, I guess, the one area that may be potential spot of weakness is Americas, I think, you previously flagged Columbia and Canada, can you talk a little bit about performance across the Americas in the region? And then thirdly -- in the period sorry? And then thirdly, just with the German deal behind us, could you comment a little on the evolution of the European segment? And specifically, anything you can say with regard to evolution of gross margins post the German sale?

[L. Niklas Östberg, Co]

So MENA, I think, it's across the board, I -- there is no market where we see weakness. And we see markets that have been around for a long time like Yemeksepeti, it's growing faster than -- on an order basis as they say, than we have seen years ago. So when we acquired the business, it's growing faster than back then in 2015. Of course with FX and so on it's a little bit different. But on the fundamental order basis there -- same with Kuwait, it's been around for 12 or so years. It has a scale with almost 1 order per inhabitant in that country now per month and it still grows fantastically, so still growing in mid-double-digit percentage terms. We also see the new markets having incredible growth and, of course, Saudi being very promising, Egypt very, very promising. Sorry, I couldn't put out any one single market, I'm very pleased across-the-board. In terms of the multivertical, of course, it adds a little bit we should be honest it's a little bit -- it's still early stage, the main part of our business is still, of course, prepared food. But we want to have the best offering and we should make sure that we always have the best offering, and that's why we also offer this as a part. But it's still a single digit number that is coming from this multivertical here. Americas, yes, it's a very mixed picture in that sense. You have the Clickdelivery business that we under prioritize. It's now being migrated into PedidosYa. It's tremendous performance if you look at Argentina, if you look at Chile and SWAN is growing tremendously some of our fastest growing market, we're outgrowing Rappi, we are outgrowing on a global, we're outgrowing Uber, we're outgrowing everyone there, in absolute terms, of course. Because we're at a much larger scale but so I think, Pedidos team has tremendous performance, now we migrate to over those other markets, to that team, we'll see if we are going to push it or if we rather focus on markets where we are clear leader and where we know that we are going to win. In terms of Europe, strong economics, good growth, very good market, you will have some of the early stage market where we invest heavily to drive leadership that also includes some affordability and keep in mind when you're growing with hundreds of percent in some of those markets then your economics will be a little bit worse on the unit economic side. But I think, looks very good. In terms of Germany, I'm not sure if that was the question or rather departure from Germany. We continued to see positive economics there as we [ improvise ] the business but also through remembering H2, we significantly increased our investments to bring it at similar levels as Lieferando and we focus our efforts on Lieferheld brand. And with that, additional investment Lieferheld was the fastest growing brand in Germany and that remained the case in Q1 where Lieferheld grew with 37% versus 31% for Lieferando -- 36% versus 31% for Lieferando. We also achieved 70,000 restaurants online as we start to scale up. That was the most restaurants in Germany, those with active online. And on a combined level, Lieferheld also outgrewed Lieferando and in downloads and acquisitions so I think you could clearly, see how the effect was happening there. How we scaled our business and start to build growth for 2019 and onwards. But that also means that economics were taken down. We aggressively invested in affordability and therefore, we saw very positive unit economics in the first 3 quarters, while we actually went to the negative, which was also partially why our conservative view on certain accruals for the historic dates between 2014 and 2019. So yes, now I call both Germany and Europe here on unit economics.

[Operator]

The next question is from Andrew Ross of Barclays.

[Andrew Geoffrey Ross, Research Analyst]

I've have got 3 questions as well. First one's on your share of associates, which you've given some more details on in the annual report, EUR 39 million loss. I guess most of that is Rappi. Given your 20% shareholder value a Board member, can you talk a bit about how the unit economics are developing at Rappi? And I guess, given how much cash they're burning, can you talk about the funding situation there, whether they need to raise more. Whether you'd be open to participating in Flash kind of big tech getting involved to making that segment a bit hotter. Second question is on Careem. Obviously, it's now being taken over by Uber. Can you talk a bit about Careem NOW food business in terms of has it got traction at all in any of the markets your in and MENA? I mean just give a sense of Careem NOW's positioning right now? And then third question is just a follow-up on the comment you made earlier Niklas on big markets where you are not a leader and I guess one of those is clearly Korea. Can you talk about the market share in Korea, over the last quarter both in terms of orders, users downloads et cetera. So -- to give us a sense of the extra spend your putting in is actually working in terms of market share on the grounds.

[L. Niklas Östberg, Co]

On Rappi, I'm a little bit hesitant to share any insight here. I would leave it up to them. They are performing really well. Very nicely, of course, unit economics is at early stage and to be seen how we're moving it up there. I cannot share if we're participating or not in upcoming financing.But we do see that's a very strong shareholding and I think we're proven success by being very early investor in this in global, and I think we made the right call in doing so. And that's the advantage, of course, being highly involved in our business, understanding economics, being able to forecasting better than probably most other investors. So I'm obviously very pleased with the both of those investments.In terms of Careem. Yes. They've been around for quite some time now. Careem Eats. So they have been around for 1.5 years, 2 years. But it's still, I believe -- but it's still on a fairly small level. I don't know if the combination with Uber now makes a difference. Uber has also been around for quite sometime in Middle East, but I'm not sure if it has been a focus or not. I don't know if the combination makes it a stronger player or not, but to be seen. I think on ride-hailing they are obviously very, very strong. Both fantastic companies there.In terms of Korea, so we have seen very good traction here and we're very happy with the investments. [ indiscernible ] also partially the contributing factor to the growth in the whole Asia segment. So we are growing now at high double digit, may we can move it to triple digit in terms of growth, but yes, I do believe that we are gaining market shares fairly rapidly in terms of downloads, and so on it's -- yes, we are doing well.In terms of size, I know they're much -- they're still a much larger than us. We have a long way to go, this is not going to be catching up in 1 or 2 years. This will be catching up over the next 5 years, at least. But we clearly, see a good return on the investments we do. And we're willing to keep on making those investments until we see that we have gain leadership.

[Operator]

The next question is from Monique Pollard of Citi.

[Monique Pollard, Vice President]

Three questions from me as well if I may. The first one, just on the EUR 16 million of revenue from core business outperformance that you're expecting for 2019, is all of that a higher return on the investment that you're putting in? So you're getting more than the EUR 45 million that you're expecting for 2019. Or is some of that just underlying outperformance? And then secondly, we touched on the Americas but specifically Colombia. Has the performance in 1Q been better than the disappointing performance in order growth that you talked about for 2018? And then finally, just trying to understand, is there any specific or meaningful impact of the Easter timing that changes the 1Q versus the 2Q result? And also, does the World Cup have any kind of material impact on the business as we go into 2Q?

[L. Niklas Östberg, Co]

I mean, yes, so I wasn't fully understood the first question with the EUR 16 million increase in core business performance. Could you repeat the first one?

[Monique Pollard, Vice President]

Yes. I was just trying to understand how much of that EUR 16 million is being driven by the higher revenues from the investment than you originally expected.

[L. Niklas Östberg, Co]

Yes. It's a tough one to answer because we are doing so many things in parallel on product improvements, multivertical improvement in -- increase in marketing spending is one. It's hard to say where all the performance is. I would say the EUR 16 million is overperformance what we expected. And of course, we expected to deliver some of the multivertical, some of the product features, some of the personalization, so I would say that the larger portion of that is probably still by the investments that we've made. It's probably the largest portion of that -- or better return on the investments we have made is probably a larger portion of that overperformance.In terms of Colombia and those markets. Yes. It's a very mixed views, where we have PedidosYa. It operates 5, 6 markets down in Latin America doing tremendously well. You have Brazil in there, which we sold but is still included in the numbers. That will take it up to 45%. And then we have Clickdelivery, which is Peru, Ecuador and Colombia, where we clearly dropped the ball there and we have to take the learnings and making sure that, that doesn't repeat in any other markets. So I think here we clearly dropped the ball, and therefore, we also see very weak growth in this part. And that kind of gives an average, which is then 44% I believe, excluding Brazil. But I do expect going forward that this would be an acceleration in growth as we conclude through remaining part of the year, then driven by PedidosYa.In terms of Easter time, no, we don't see a big effect -- might have been -- yes, we don't see a big effect on a group level. It -- that there are a couple of extra holidays, which is good, but then there are a couple of days, which are also bad. So on average, Easter is -- has not made any impact that you have to take into account or worthwhile mentioning.The World Cup, we see normally marginally improvements across the World Cup, but it's very marginal. So this is also on a group level not significant or not going to be significant.

[Operator]

The next question is from Silvia Cuneo of Deutsche Bank.

[Silvia Cuneo, Research Analyst]

Congratulations on the results. My first question is on the reinvestments. Can you give more color about how much capital is being deployed already? Have you started to deploy the EUR 250 million on top of the EUR 160 million originally announced in August last year? And then if most of this is going to be spent in the second half, is it fair to assume momentum can continue to accelerate during the year? Then second question about Asia. That's the region where order growth accelerated the most. Can you please talk about which countries are particularly driving this acceleration? Is it coming from Korea? There was an article in the press recently about the South Korea subsidiary planning to spend almost USD 90 million in marketing and recruiting. And then finally, on the order growth, can you share some more detail about the new customers' ordering habits? And what percentage of the new customers you acquired with affordability campaigns have already ordered for the second time?

[Emmanuel Thomassin, CFO & Member of the Management Board]

Thank you very much for your questions. In terms of investment deployment, you can assume that deployments will be equally between the 2 parts of the year, so the first 6 months and two 6 months. So we deployed like the 1/4 of the investments that you mentioned, the EUR 250 million, in Q1. This is one of the reasons of the return that we see and the evolution. So you could expect to see Q2, Q3, Q4 to have 1/4 of these investments in general.To the Asian countries, not only Korea, as Niklas mentioned, is doing really well, but other countries like Taiwan, Thailand are -- and other countries in this segment are doing really, really well with high growth. So we're investing not only in Korea but also in these countries. And we see also very, very good results in return on investments in these countries. The last question was on new customers.

[L. Niklas Östberg, Co]

Yes. So the reorder rate, the new customers come from affordability, and we see overall a higher repeat ordering behavior of the customers that are acquired now than we have done in the past. So that is a very good sign. We do not drill down into -- or at least, we do not disclose reorder rate by different campaigns and different activities. Obviously, that's something that we monitor very, very closely as we -- as the lifetime value, some different channels, different campaigns, different activities. But we don't disclose, but overall, we have better reorder rates now than in the past.

[Silvia Cuneo, Research Analyst]

Okay. Just I wanted to clarify on the reinvestment. I thought earlier you said you were going to invest more in the second half of the year, why you [ indiscernible ] tactically acquired -- I mean it's even mostly.

[L. Niklas Östberg, Co]

Yes. So it's difficult to invest at a good return, this amount of money or increased investment this amount of money. That's why there is a little bit more attribute to second half versus the first half. I think we should also be realistic. As we get to scale and the size we're having, it's of course going to be very hard to keep growth up at these levels. [ And I know ] that's nothing that we commit to. Of course, we see things very promisingly in Q2. So I do think that we can expect a good Q2. But I don't want to commit to second half. I think it will be a great year overall but of course, accelerating year-on-year at the scale of 125 million orders in a quarter, that -- that's obviously a big, big challenge.

[Operator]

The next question is from Rob Joyce of Goldman Sachs.

[Robert Joyce, Equity Analyst]

Three from me. Just following up on some earlier ones. So firstly just on Korea. Can you confirm -- I think you said previously that you're profitable in Korea at the EBITDA line. Can you confirm that's still the case and the sort of organic path-to-market leadership can be achieved while remaining profitable? Secondly, just wondering if you could clear up something you said earlier about dropping the ball in certain markets just so we know what that kind of involves and on how you avoid that elsewhere. And then the third one is, clearly, the investments look to have been pretty successful early doors. Is the other signs there that beyond 2019 there may be scope to put some further investment in and actually secure some further growth beyond the initial investment phase?

[L. Niklas Östberg, Co]

I can quickly cover. So Korea -- and now we are scaling beyond the organic growth. That would have been a good strategy to continue. But we feel like we want to really win the leadership here, and therefore, we are going to go into the negative with extra investments. But we all know how it works for the business. The investments goes into new acquisitions, new growth that is continuing forever, and we could scale back at that point in time to profitability. Obviously, that is not the strategy that we will pursue. But eventually, with higher size and larger scale, even that will capturing larger marketing investments and that will then also drive back into profitability. But in the short and midterm, you should expect that we will go and keep on being in -- investing significantly more than what we have done in the past.On dropping the ball when we speak Clickdelivery, I think we didn't pay enough attention to the product offering. It was a very small market, small platform, was -- therefore, it was [ probably lost ], not in the priority while we were laser focused on the Middle East and also Asia, partially also some European markets. I think we didn't have enough attention to Clickdelivery platform, which was a couple of percent of our business. The product offering was clearly behind or getting behind on Rappi with the multivertical subscription features. We were not focused enough on the restaurant acquisition side getting the best accounts onboard. Logistics, we didn't expand logistics fast enough. We -- only until recently, we had only a couple of percent of logistics there. So overall, we had a significantly worse proposition, and that is not the sustainable way to drive a leading company in a region. So yes, that's why we are very fast in launching multivertical we are fast in launching subscriptions. We are fast in driving logistics to be able to add the best accounts to our platform. We are fast in making sure we have McDonald's and Burger King and all those key accounts on our platform. So I feel confident that in the current setup, we are stand very strong in those other markets.In terms of the successful investments and if we would expand it further and then -- that will be no. We think that we are investing at very high pace right now. We are not yet at the level where we need to be in terms of our investments in order to reach the EUR 270 million-EUR 320 million, so we still have to be smart in finding ways and new opportunities. I'm very sure that we will be able to deploy all of it successfully, but this is not an easy task if you want to have a good return on it. But yes, not for this year, I do not expect that we'll be able to increase it further and have a good return on it.

[Robert Joyce, Equity Analyst]

And just quick follow-up. On delivery, are you still confident that the sort of gross profit per order dynamics you can eventually get to parity there with the marketplace?

[L. Niklas Östberg, Co]

Yes. You hear some hesitance there in my answer. It is a tough play out there. As I said before, we have been very prudent in making sure that we still sign them up on good commission rates and that we can actually build that sustainability and have the same economics. But it requires us to be very efficient in our delivery operations. It requires us to work on additional services and so on. So I think it will take time until we would be there. We are very clear that it will be positive. But if we will be at parity, I think in many markets, but on the strong competition, then it's of course much harder in particular in the short and the midterm. Yes, that's my honest answer.

[Operator]

The next question is from Giles Thorne of Jefferies.

[Giles Thorne, Equity Analyst]

I just wanted -- I wanted to start by picking up on the news that Carriage is going to be launched in Egypt where you already have an existing marketplace brand. Generally, it feels like we move towards brand rationalization rather than fragmentation, so it'd be [ just ] to understand why you're doing this. I'm guessing it's something to do with rolling out multivertical in that market. But it'd be interesting to hear what you have to say. Second question was just turning to Deliveroo launching in Kuwait. I don't want to ask what you think the impact will be on you. It's actually a different question. I'd be interested in your perspective on what it is about a market like Kuwait where order frequency is famously already very high that Deliveroo sees that it can come in 12 years late and be relevant. So be interested to get your perspective on that. And then lastly, I want to just come back to a question I've asked previously in this forum, which is just again, Niklas, how are you think about funding a competitor put bluntly. So this is in the context of Rappi and participating in future funding rounds. What is your thought process around putting fresh capital to work in a business that you're competing on the ground with in certain countries, your latest thinking there?

[L. Niklas Östberg, Co]

Thanks. Great questions. So on Egypt, well spotted. I think Egypt is still a fairly early market in its development. We have -- our business has been around for some time, but we still -- it's a little bit more of a marketplace business, and we -- the reason why we're so well ahead I think, in many cases, when it comes to multivertical, on logistics and so on is that we have been doing it for a long time. And that's where you see somewhere our peers, they have not and it will take them many, many years until they get to the point where we are today.I think Otlob is probably a little bit behind overall the group in the development in its offering, and it takes that time -- it takes time to change that behavior, change that brand perception. That's one. And that's why we felt that we have to act very fast and we have to go in with our own play, which is Carriage here because they have a multivertical offering. They have a very strong product subscription, and they have great logistics, which is based on our internal system or global solution. So therefore, we decided that let's go in and make sure that we have the best offering rather than trying to take 6 months to 12 months to reshape the offering at Otlob in this case.Now Otlob is also migrate over to Talabat, which should help the product offering as one and speed it up. But as always in these migrations, it takes a little bit of time to get things in order. We just didn't feel like we had the time. That's why we decided to go very aggressively and go in with Carriage. Long term or midterm, we're probably also going to rationalize back here to be one brand. But in the short term, we felt this is the best way to making sure that we capture the market and don't give any space to any new entrants like we did in Colombia.In terms of Kuwait. Yes. I guess the logic will be it's a big market, and there will always be some consumers that had a bad experience or they will be -- or they just want to have another brand to try out from time to time. And if they can only capture 10% of the market, they feel like they can get a big business. And that's always possible. Like to get 10 or so percent of a market is possible, maybe even 20%. But the question is where that leads you. Sitting on a 20% position in the midterm or long term is not very attractive. But yes, if you want to grow some orders, I think this could be an easy way to get some easy orders. But if it's a sustainable strategy, I doubt it, but to be seen.Yes, the funding of a competitor is an interesting one. We obviously feel that we have to be better than -- and we shouldn't care so much about competition. We should [ do ] our best. And if we do the best, and then we are going to be leading and winning. In some of those cases is also not so overlapping, so we feel like we rather want to be part of that. There is some overlapping, but we don't really care about that overlap so much. It's going to be competition from them or it's going to be competition from someone else.And we will see long term who's the stronger in those overlapping markets, and there will be strategic considerations along the path. We see a strong benefit of actually being involved in those companies, sitting at the table, understand the best learnings, the insights, and we want to stay at that table, also sitting in a good position for any future strategic considerations. So that's why we want to make sure that we are a strong shareholder sitting at those tables. And that will also define if we are going to participate or not in future financings. Yes.

[Giles Thorne, Equity Analyst]

If I may, just a follow-up on that last answer. Has there been -- well, are you contractually unable to take any type of proprietary technology or know-how or personnel out of Rappi and Glovo? Is that something that you're not allowed to do by contract? And then if it isn't, have you taken any technology or people or know-how out of those businesses and put them into your controlled operations thus far?

[L. Niklas Östberg, Co]

So these are 2 different businesses, and there is no extra clause that we are not allowed to use anything. But I think that's normally in the shareholders' agreement and confidentiality agreements and Board member agreements that when I sit in the Board of Rappi, I'm not allowed to use that knowledge, of course, in other places. That will be use of confidential data, so I will have to disregard my knowledge that I gain in those roles when I operate Delivery Hero. But yes, there is no special clause there that we, in particular, would not be bound by nonconfidentiality or such, yes.

[Operator]

The next question is from Jurgen Kolb of Kepler Cheuvreux.

[Jurgen Kolb, Analyst]

Most of my questions have been answered. One remaining really on the part of the subscription. Maybe you could elaborate a little bit in how many markets you've already introduced it, what your current experience is there and about a potential rollout to other markets.

[L. Niklas Östberg, Co]

Sure. So we've done subscription for a long time, but we were not very successful in our first situations and only recently we felt that we had a subscription offering that was very compelling and actually worthwhile for us. So yes, I don't want disclose our plans and so on globally there, but overall, we are happy with the subscription programs we have now in place. Of course, doing subscription, you have to be very careful that you don't dilute your economics, and I think you have to find the right balance between having a subscription program that increases frequency without diluting your economics. And I think that's something we have found and then we are happy with. But it's a very critical one, and we have to assess by market by market, economics by economics. And yes, I believe so far we have been happy with the latest results.

[Jurgen Kolb, Analyst]

Would there be any chance to indicate like how big the share of subscription is in terms of your orders or any indication of one of the strongest markets maybe?

[L. Niklas Östberg, Co]

We see a very strong uptick in usage of our subscription programs in the markets we're in because we have very loyal customer base that orders very frequently from us, and therefore, they find it beneficial to pay a subscription fee in order to have -- take away the mind space of having to think about delivery fees and other promotions that we do there, other benefits that we give in terms of [ growth ] preference to those users. So we have a very strong uptake there. I will not give any percentage now unfortunately.

[Operator]

The next question is from Sarah Simon, Berenberg.

[Sarah Simon, Analyst]

I've got a few questions as well, please. First one was, Emmanuel, can you update us on the cash position now given the Zomato deals and also the delivery -- sorry, the sale of the Takeaway shares. Second question, can you remind us what the Zomato valuation was in terms of when you put the $50 million in? The third one, just in terms of delivery obviously in some of the segments, it's heading out towards 30. Do you have a sort of updated -- in terms of percentage of orders that you're delivering, do you have an updated view as to where you think those markets might go? And then the final one was just so we can put it into context. Have you got any indication in terms of what percentage of GMV is coming from the multivertical stuff, i.e., what is not traditional food delivery?

[Emmanuel Thomassin, CFO & Member of the Management Board]

Well, we start with the cash position. So we don't disclose our cash position right now at the end of the first quarter. But as you can imagine, we received the proceeds of Takeaway, so we received the EUR 508 million of cash that we announced in December. This is done. We also had the [ wide collar ] that generated around EUR 200 million. So we have a very strong balance sheet. We didn't disclose the purchase price of Zomato, and obviously, I won't do it now. But right now we're still in a very good position cash-wise and have a very strong balance sheet. On top of that, we still have [ our ACF ], as you know, about [ EUR 20 million, EUR 25 million. ] That is still available for us. So I think we are, after this first quarter, in a very strong position in terms of growth and in terms of strong balance sheet.

[L. Niklas Östberg, Co]

On the own delivery, 30% is what we have said would be for the year. We were at 25% in Q1. So it will increase. Partially, the increase is driven by market mix in here as well. We still see that there is a significant number of countries and cities -- sorry, cities where delivery will make less sense and have that sustainable. So therefore, we expect that there will be still also in the long term the majority being marketplace there.In terms of percent of GMV for multivertical, we do not disclose. But as mentioned before, it's a single-digit number for the markets where we have launched it. But yes, so that will also be single digit for the group or low single digit then for the group. But -- and it will -- and the food will still be by far the largest vertical. But we want to make sure that for those frequent users they can also come to us for those needs. Yes.

[Sarah Simon, Analyst]

Great. And sorry, Emmanuel, can you remind us what was the Zomato, this funding round valuation?

[L. Niklas Östberg, Co]

Right. So the $50 million that you mentioned, so we do not disclose that, but I'm very happy with the -- allowing them -- allowing us into their round, which was closed before. And I do think that it was clearly below in the future funding rounds.

[Operator]

The last question is from Marcus Diebel of JPMorgan.

[Marcus Diebel, Research Analyst]

One more question. Last -- just to follow up on the delivery with -- where there's marketplace debate where the share might go. Europe's traditionally lower in terms of delivery so for many different reasons. But also specifically for Europe, where do you see this share might go? And also across the different countries in which you operate, do you see already some initiatives at some restaurants, marketplace restaurants move into delivery? We've seen some examples of them using delivery services in peak hours. But is that a trend? Or is it certainly something that is not really happening yet? I mean previously you said it's relatively small as an impact. But has that changed? That will be my questions.

[L. Niklas Östberg, Co]

Yes. So I think it's a little bit market by market there, and it also connected strongly to regulation and certain unit economics for labor versus the average basket values. So we've seen some markets it is beneficial to use an external partner like us for doing the delivery of that restaurant. In some markets, it makes more sense to have small restaurants being the owner of their own logistics. So if you take some of the European markets, which are strongly regulated and where the difference between high income and low income is not so large, then restaurants might want to keep their own logistics there.I think that is also the case in many places where they want to keep their independence and have built up their logistic capabilities over many, many years. They are hesitant to move to another one's logistic solution, and we also don't encourage it really. So I think that will remain them being the owner of it. But it's a little bit market by market. I don't say that there is an overall trend that they want to move away from it. It's rather new restaurants moving to delivery, and they, as -- at least as the first step, want to use an external party to help them doing that logistics but very few existing delivery restaurants that will move to a third party.

[Operator]

There are no further questions. I hand back to the speakers to the closing words.

[L. Niklas Östberg, Co]

Yes. Then thank you, everyone, for your tremendous support. We are very happy to have you as shareholders. And yes, I'm very proud of what the team has been building, and I'm very grateful to be part of this amazing company. And I'm very opportunistic -- or optimistic about the future. And yes, thank you very much for your long-term support.

[Emmanuel Thomassin, CFO & Member of the Management Board]

Thank you very much. Have a good day.