Release Date: August 08, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Deliveroo PLC (DROOF, Financial) achieved positive net profit and positive free cash flow in the first half of 2024.
- The company saw year-on-year growth in orders and encouraging GTV growth momentum in the UKI and international markets.
- Deliveroo PLC (DROOF) announced a GBP150 million share buyback program, reflecting confidence in their financial outlook.
- The company made significant progress in its grocery vertical, with grocery reaching 14% of group GTV and strong double-digit growth.
- The PLUS loyalty program saw enhancements, including the introduction of a new Diamond tier and revamped Gold tier, which are expected to drive consumer engagement and retention.
Negative Points
- The company faced challenges with food inflation impacting consumer spending, although this is showing signs of stabilization.
- International markets, particularly Hong Kong, experienced increased competitive intensity, affecting consumer behavior and discounting.
- Revenue growth lagged behind GTV growth due to investments in the CVP, impacting the take rate.
- The company had to make significant investments in targeted promotions to reinforce value perception, which may not be sustainable long-term.
- Marketing and overhead costs, while reduced, still represent a sizable opportunity for further efficiency improvements.
Q & A Highlights
Q: We've seen slightly lower take rates, which is in part driven by oil price transparency work. How should we be thinking about take rates going forward? Is this work now embedded into this lower take rate, or should we expect further downward pressure?
A: (Scilla Grimble, CFO) We think the right thing to do at this point is to invest in the CVP. We see some indicators of improving consumer behavior and a reduction in headwinds, but we're not calling it a dramatic change yet. We will continue to make investments into the CVP in the second half, similar to the first half.
Q: Are you seeing any appetite from new customers to come back over the last couple of months?
A: (William Shu, CEO) We've seen positive inflection in frequency and improvements in retention. These trends also apply to new users, indicating that headwinds are lesser than before.
Q: Could you see further improvement in the gross profit margin in the second half, or do you think the rest of that will be reinvested?
A: (Scilla Grimble, CFO) Nothing material is expected to change in terms of the shape of the gross margin.
Q: Can you comment on the GTV growth outlook and whether you expect an acceleration in the second half?
A: (Scilla Grimble, CFO) We reiterated our guidance of 5% to 9% constant currency GTV growth. We expect some improvement in the second half due to ongoing cohort behavior improvements and the impact of our initiatives, such as the PLUS program.
Q: Can you comment on the progression in the share of orders coming from PLUS towards the target mentioned at the CME?
A: (William Shu, CEO) The share of orders from PLUS is approximately 40%. The new PLUS tiers, including Diamond and revamped Gold, were launched in May. Early signs are positive, but it's too early to draw definitive conclusions.
Q: Are you planning to apply for inclusion into the main 30 to 50 Index with the FDA listing reform now behind us?
A: (Scilla Grimble, CFO) We are engaging with advisors on this process, which takes time and is subject to FDA approvals. It is our ambition to move up into the appropriate listing category.
Q: Can you give more color on the level of overheads in the business and opportunities for further reductions?
A: (Scilla Grimble, CFO) We did a restructuring program last year and continue to optimize the use of contractors. We also aim to improve tooling and automation, which will generate efficiencies in headcount.
Q: How have the latest changes in your subscription impacted the expected 30% uplift from Gold members over a 12-month period?
A: (William Shu, CEO) We expect an increase in frequency and retention due to the new PLUS Gold program. Early data is positive, but it's too soon to draw definitive conclusions.
Q: Can you outline the competitive intensity in Hong Kong and how it has evolved in the first half of the year?
A: (William Shu, CEO) The competitive intensity has increased with the market going from two to three players. This has led to increased discount intensity and more promiscuous consumer behavior.
Q: Can you comment on the competitive environment in the UAE and how you plan to respond to current developments?
A: (William Shu, CEO) We have not seen anything unusual in the UAE. Our business continues to grow strongly, and we have not observed any significant negative competitive developments.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
