Delivery Hero SE (GRAB) Earnings Call Transcript

Hello, and welcome, everyone. We hope you are well, and thank you much for joining our Q2 '22 earnings call. We trust you have all received the press release and the presentation, which we published this morning. These documents are also available on our website. We would like to remind you that this call is being webcast and a replay of the audio webcast will be available later today on our website. With me today, we have Niklas Oestberg, CEO; and Emmanuel Thomassin, CFO of Delivery Hero, who will take us through the most relevant aspects of our Q2 performance and share further details on our outlook and the path to profitability. After that, we look forward to answering your questions. And now let me hand over to you, Niklas.

Thank you, and hey, everyone. Thanks for joining our call today. So Q2 marked another strong quarter for us and, in particular, when it comes to profitability improvements, combined with extending our leadership in our core regions. All segments but Americas, some integrated verticals are now breakeven and around 70% of group GMV is now being generated from profitable countries. And you should expect this profit pool to ramp up materially over the next quarters while we still double down on our investments in selected competitive markets. I should add that the 70% includes Dmarts, so 70% of the countries with and without Dmarts. Coming to our vision. We remain very committed to our vision, and we push hard to build the best experience for our customers. Then moving to the next slide. As an investor in Delivery Hero, you are investing in the global leader in food delivery and quick commerce. Both categories will become very large and profitable mid- to long term. With our regional footprint, we cover countries with around 2.2 billion of global population. This represents nearly half of the world's population outside of China and India. However, you are not only investing in the large food and quick commerce opportunity but the leading platform in Asia ex China, #1 in northern, eastern and southern Europe, #1 in Middle East and northern Africa and the largest food platform in South and Central America, excluding Brazil, and last not least, the largest quick commerce opportunity globally. Moving on. With this setup, we are ideally equipped to achieve our ambitious 2030 targets. First, we aim to generate a GMV of EUR 200 billion to EUR 350 billion. The lower end of this range corresponds to an annual average growth of around 20%. However, we are modeling this based on cohorts and expected acquisition levels. Then secondly, we plan to strengthen our leadership in our existing countries. Long term, we aim to be #1 in every country we operate and we have made good progress towards this over the years. Thirdly, we will continue to invest in technology and innovation to guarantee the best possible customer experience. And last but not -- definitely not least, we run this business to generate attractive profits and cash flow. In the long term, we expect an adjusted EBITDA to GMV ratio of 5% to 8%. We start seeing more and more markets moving towards these levels and our confidence level to get there has increased further. But let's move to our highlights. We achieved strong GMV growth of 18% year-on-year and total segment revenue growth of 38% despite headwinds from lifting of COVID restrictions. In addition, we also made progress to further strengthen our leadership position. We did this also along the lines of moving profitability. We achieved a new record high contribution margin in own delivery, which was mainly driven by Asia and Europe. What makes me really proud is the performance of own delivery business in Asia. The segment has improved consistently over the last few years and is at the same level as group. Our platform business was already at breakeven on adjusted EBITDA level in May, June, excluding one-off effects such as hyperinflation impact in Turkey. The Asia segment, which represents 66% of the group GMV, generated a positive adjusted EBITDA for the entire second quarter. This puts us on a sustainable path to grow market share in the region. In addition, we closed the transaction of Glovo in July. Everyone knows already that they achieved exceptional growth. But more importantly, now more than 50% of their GMV is generated from markets with positive adjusted EBITDA before group cost. As a result of these achievements, we expect a further ramp-up in group profitability in H2 on adjusted EBITDA level while at the same time maintaining high investments in competitive markets. Now on to the next slide, where we take a closer look at the development of GMV and revenue. This slide shows an impressive growth trajectory of recent years and, as you can see, completely unaffected by macroeconomic environment or external effects like changing inflation rates. What you do see is a return to normal after exceptional growth between Q2 2020 and Q3 2021 driven by COVID. In Q2, we achieved strong group GMV and revenue growth, as mentioned, with GMV and revenue up 18%, respectively, 38% from last year. Earlier this year, we explained the particularities of easing COVID restrictions in 2022 and expected year-on-year impact. So after a strong Q1, we experienced some headwinds in Q2. For Q3, we expect to be back into growth with a 7% quarter-on-quarter GMV growth. This will result in a slightly lower year-on-year growth, driven by an exceptional Q3 last year with lockdowns in Korea and Taiwan and some other Asian markets. For Q4, we expect then an acceleration in year-on-year growth as we have an easier comp. This means GMV for the third quarter to land on EUR 10.6 billion, excluding Glovo, and EUR 11.5 billion, including. Now let me hand over to Emmanuel for a deeper dive into the Q2 financials.

Thank you, Niklas, and welcome also from my side. Let me start with the performance of each of the business segments. Our platform business in Asia performed well in Q2, reaching EUR 6.5 billion in GMV and EUR 938 million in segment revenue, which corresponds to growth rate of 16% and 30% year-on-year, respectively. The GMV on a quarter-to-quarter basis declined as Q1 still saw benefit from COVID restriction in Korea and Q2 experienced the full impact of COVID opening and easing of restrictions. For Q3, we expect quarter-on-quarter growth of 8% to EUR 7 billion. The second half of the year usually generates materially higher GMV than the first one, with Q3 seasonality particularly beneficial for food delivery as it is extremely hot and humid in the region. We continue to follow our strategy to push up our profitability during the quarter with AOV increasing close to 20% year-on-year as we actively manage the basket size. And furthermore, we had a clear focus on value customers through our new audience targeting tool. This tool allows us to segment customers and to incentivize with different discounts and minimum order value, helping also to reduce porter costs. And we expect this tool to enhance our operation going forward, allowing us to further enhance AOVs while improving gross profit. In South Korea, we phased out the promotional campaign of Baemin 1 delivery service, and we successfully launched our ad tech service CPC. We have experienced very attractive vendor penetration in a very short period of time with a large numbers of restaurants signing up through -- set booking. And these restaurants are generating a very active return on advertising spend. And those we are experiencing higher retention rate. We expect advertising in South Korea to reach the levels experienced in other regions in the long term. We also introduced service fees in 3 markets in the APAC region with Taiwan being launched in June. We continue to roll out service fees to other markets in the region where we see rational competition. Now I would like to bring 1 point to your attention. As you know, the Asia platform business generated close to 70% of group GMV. And for the first time, this segment has generated positive adjusted EBITDA for the quarter. And this is a significant improvement year-on-year, and we expect to continue to build on this in the coming quarters. And just a side note, the adjusted EBITDA is here after the allocation of GoCart. So now on to the MENA segment on the next slide. Strong Q2 for the platform business in MENA, achieving a record high GMV of EUR 2 billion, which marks a 25% year-on-year increase. Excluding Turkey, GMV grew even 35% year-on-year. Segment revenue posted considerable growth, increasing by 43% to EUR 515 million in the quarter. In Turkey, we successfully migrated to the Pandora platform, and this will allow us to improve both from a technology and product level, enhancing customer experience. Pandora is the more customer-friendly user interface, and we have already seen a clear increase of 8% to 16% of nonsubsidized GMV from pre migration. Migration will not only offer a nice interface but also allow us to offer new services such as our subscription, pickup, dining and loyalty program. Overall, we continue to gain market share across the region while growing adjusted EBITDA and improving the margin profile for the segment, excluding Turkey. Now turning to the next segment, Europe, on the next slide, please. The GMV in Q2 total closed to EUR 700 million, a 3% year-on-year decline. However, this was mainly driven by the deconsolidation of the Balkan countries. So on a like-for-like basis, excluding diversed and also closed businesses, GMV grew by 8% year-on-year and therefore above our European peers. The segment revenue grew by 4% year-on-year to EUR 156 million, with a sharp increase in advertising revenue, which now stands at 2.3% of GMV compared to 2.1% in Q1 2022. And we expect this positive trend to continue also into the second half of the year. We have also rolled out service fees in Norway and Finland, completing our service introduction into the Nordics, and we will continue rolling out the service fee also in Europe where competition is rational as well. Including our global peers, GMV in the European platform business increased by 33% year-on-year to EUR 1.6 billion in Q2. Here, we would like to point out that we intend to publish the figures for Delivery Hero, including Glovo on a pro forma basis as we have done for [ group ] in the past from the Q3 trading update onwards. We then also adjust historical figures and make them available to you. Now I would like to briefly comment on our operations in the Americas on the next slide. Our platform business in the Americas segment performed very well in Q2, reaching EUR 674 million in GMV and EUR 178 million in segment revenue, which corresponds to 45% and 48% growth year-on-year, respectively. Excluding the tailwind of -- from the hyperinflation, GMV growth would have been about 3 percentage points lower. We continue to optimize unique economics in the regions, which includes minimum order value, cross-selling and less delivery fee campaigns. And this, together with the inflation impact and the strong underlying demand for [ pullover ] for AOV by 23% year-on-year and drove gross profit margin to record high with a 1.6% point improvement year-over-year. Operation in the region are developing nicely with recent services launched in key markets such as subscriptions in Argentina, Chile and Peru. And new offerings such as this allow us to increase our leadership in the market. Here, we have also introduced service fees in Chile. And similar to the other segment plan to roll out for the market where we see rational competition in the coming months. Now on to our Integrated Verticals on the next slide. Both GMV and segment revenue present strong growth year-on-year, reaching EUR 439 million and EUR 397 million, respectively. These are 75% and 68%, respectively, above Q2 of last year. And these growth rates are also reflecting a higher GMV per store, which is a key driver for the profitability. As we continue to optimize our service, our product assortment, improve our SKUs, AOV increased by 27% year-on-year, and we expect this trend to continue as product recommendations will improve and customer adoption increase. At the same time, we have now reached suitable customer coverage with a coverage footprint of 1,125 stores, which corresponds to net addition of only 3 stores in Q2. But given the current funding environment in private market, we also expect our competitors to remain more rational. And going forward, we continue to open new stores in selected markets but only when current stores achieve the targeted capacity. We also plan to rationalize during the second half of the year between 50 to 100 stores, which are not reaching the necessary scale to generate attractive economics. So now let's move to next slide where we discuss our contribution margin. Here, we continue to improve the profitability of our own delivery business. As you can see on this slide, the contribution margin before vouchers now stand at close to 7%, and we expect further improvement in the second half of the year. A small regard -- a small remark regarding this point. Since Q2 2022, this chart also includes the contribution margin from Woowa. Keep in mind that Woowa had negative margin on delivery in Q1, so the increase quarter-on-quarter would have been even sharper with Woowa included. The Asia segment now is in line with the contribution margin of the group level. And we believe this is a huge success as we are talking about a margin improvement of more than 15% over the last 3 years. Europe has also made significant improvement in own delivery, the lags on our other segments as the region is just not at scale yet. We do believe Europe has a very good chance to achieve the same margin level as the group. Glovo, for example, already has a contribution margin of more than 5%. And even these numbers might not be fully comparable, we believe that it gives a clear indication on the long-term margin upside for Europe. So I would like to point out also that we start with our own delivery model 6, 7 years ago. But as recently as 2 to 3 years ago, a few investors believe we couldn't make money on. Even some of our competitors made vocal claims that own delivery doesn't work. We hope these graphs give you confidence that it can. On the next slide, you will also find the contribution margin after cost. So here, as you can see, the fully loaded contribution margin after vouchers has reached a new record high and is positive in all 4 segments. And here again, you may remember that we made a significant push towards own delivery in 2019, where many people question whenever we can ever generate profit with our own delivery business. And now you can see that this slide here, every single segment in Q2 is generating profit per order even after voucher cost. We explained in the past that they consistently work on reducing our voucher intensity. And here, as you can see, vouchers as a percentage of GMV have further declined by [ about ] 3 percentage points year-on-year to 2% in Q2. So for clarification, these numbers are including Woowa on a like-for-like basis. And for the remainder of the year, we expect the level of [ voucher ] to continue in this trajectory. In addition, I would like also to take this opportunity to refer to our noncommission-based revenue, or NCR. This mainly includes advertising revenue and stood at 2.1% of GMV in Q2, up from 1.5% in Q2 2021. And this include -- exclude Woowa, which we only recently introduced ad tech in South Korea. This hard margin revenue are not including in the contribution margin, as you can see on this slide. Now on Slide 16, we present our cash flow bridge. Following the syndication of a term loan in the amount of EUR 1.1 billion in April, cash position stood at a comfortable level of EUR 2.9 billion at the end of H1. And on top of that, we have an undrawn revolving credit facility of EUR 425 million, which gives us additional flexibility. And you may notice here that the RCF has increased from the EUR 375 million originally communicated. This is mainly due to stronger demand from lenders during the syndication. As we progress on our path to profitability, cash consumption significantly improved compared to H1 2021. One key driver for this was our reduced M&A activity. In addition, capital expenditures were somewhat more moderate, so that the CapEx to GMV ratio was only 0.7% for the half of this year, and we expect the CapEx to GMV ratio to stabilize around this level for the full year. That's the but not least, the working capital, in fact, was neutral to the cash flow development, and we expect further progress here in H2. Our cash flow position of EUR 2.9 billion does not include the recent -- the investments of Zomato shares, which was executed in July for close to $60 million. And furthermore, we hold investments in Deliveroo, Just Eat Takeaway and then Rappi that are currently worth around [ EUR 390 million ], providing an additional layer of capital. So against the background of more than EUR 2 billion in total available liquidity, a large investment portfolio that can quickly turn into additional cash, if needed, and our progress throughout generating profit adjusted EBITDA on group level in 2023, we view our cash needs as the implied corporate for -- over the outlining our reason. So that's also why we have started the partial buyback of our 2024 convertible bonds with a nominal value up to EUR 85 million, which equal approximately 10% of our 2024 convertibles. Now on Slide 19, where we share additional information about the path to profitability with you. What you see here is the strong expecting trajectory of our profitable platform countries. In the first half of the year, these have already generated a significant increase in adjusted EBITDA to over EUR 200 million, reaching a positive adjusted EBITDA to GMV margin of around 1.5%, including group cost. All these countries will reach further scale, and we continue to improve our unique economic by trusting minimum order values, reducing predelivery campaigns, increasing our marketing efficiency through smarter targeting tools, et cetera, et cetera, and we expect the same countries to generate an adjusted EBITDA of more than EUR 400 million in the second half of the year alone. And therefore, we expect the profitable platform countries, which account for 70% of group GMV to generate adjusted EBITDA of more than EUR 600 million in full year 2022, again after group costs. So this gives us the confidence that we are on the right path to generate positive adjusted EBITDA on group level, including Glovo in 2023 already. So now let me hand back to Niklas, who will update you us on Glovo starting on the next slide. Niklas?

Thanks, Emmanuel. So on July 21, we registered a capital increase and completed the global deal that we first announced back at the end of 2021. We announced a total of 10.3 million -- or issued -- sorry, we issued a total of 10.3 million Delivery Hero shares to Glovo's former shareholder. The final settlement and allocation of Delivery Hero shares to the sellers is still ongoing with the listing agent. With the shift in our share price, the transaction value for the acquired 50% nondiluted stake of Glovo totaled nearly EUR 400 million, including the previous ownership in the company. Delivery Hero's stake in Glovo now accounts for approximately 94% on a nondiluted basis. As earlier announced, the European Commission made an unannounced inspection in relation to Glovo. Such an inspection is likely to take at least 2 to 3 years or even longer, and any potential negative outcome will be challenged. As a standard procedure and calculation methodology, we may build and accrue, which by no means should be understood as an admission of guilt or wrongdoing. As of today, we assume a total contingency below EUR 100 million for both Glovo and Delivery Hero. Let's then go to the next slide, where we see Glovo's impressive growth trajectory. So as you can see, Glovo has developed exceptionally well over the past few years from generating close to EUR 100 million GTV, so transaction value in 2021, to around EUR 4 billion this year. Furthermore, the profitability has improved. Glovo is expected to generate a profit contribution of more than 5% of GTV this year. The company has developed a proven expansion playbook into underpenetrated markets and has consistently achieved strong GTV growth in new countries from shortly after the launch. Glovo has also been very successful in integrating acquisitions in food delivery, quick commerce and adjacent verticals in various countries. And last but not least, we see a lot of synergies where Glovo can leverage our tools and services to further improve their operations. Moving to the next. One thing that we really like about Glovo is their ability to build leadership position in a cost-effective way. Glovo leads in the vast majority of the countries with more than 70% of its GTV being generated in countries where it has a #1 position. On a combined basis, Delivery Hero now generates more than 90% of group's GMV from countries in which it is the #1 player. We are confident that the leadership position of Glovo's countries and look forward to a very positive future. In the first half of 2022 alone, Glovo continued to expand its footprint -- foothold and further gained share in this #2 markets in Western Europe. Furthermore, the strong leadership in Eastern Europe, Central Asia and Africa will favorably benefit Glovo in the long term due to the secular growth expected in these countries. And again, last but not least, the volume in Ukraine has started to recover and now stands at almost 60% of pre-war levels. More importantly, Glovo's geographical footprint is 100% complementary to our own. This expands our TAM in attracting fast-growing countries. Glovo's current footprint translates into an incremental total addressable population of around 700 million people. Combined, we have the ability to serve more than 2.2 billion worldwide. Now turning it back to Emmanuel for the outlook.

Well, thanks, Niklas. Coming to our outlook, which we updated during our Q2 primary results a few weeks ago and are now reconfirming. Now we discussed earlier today, GMV performance Q2 experienced COVID headwinds, which limit year-on-year growth. We expect Q2 to show quarter-on-quarter improvement and Q4 to grow around 20% year-on-year. In addition, we expect the overall competitive environment to continue to ease, giving us the opportunity to shift our focus to a bit more from growth to profitability while still maintaining and even expanding our leadership positions. As a result, we reduced our GMV guidance and raise our adjusted EBITDA target. For the platform business, we continue to anticipate a positive adjusted EBITDA for the full year 2022, excluding Glovo. And including Glovo, the platform business will be profitable in H2 2022, with the business breaking even during Q3 and generating an adjusted EBITDA of EUR 40 million to EUR 120 million in Q4, and this is including the negative EBITDA of Glovo. So furthermore, we will reduce our investments in Integrated Vertical segments with an adjusted EBITDA now expected to amount to up to negative EUR 475 million, down from the original projection of EUR 525 million. I would like to point out that the EUR 475 million is a maximum amount we will end up investing but may end up below if the current positive development continues. However, the lag improvement in profitability will happen in 2023 as we start reaching targeted GMV level per store. Including Glovo on a pro forma basis, for the full year, we have adjusted GMV to our EUR 44.7 billion to EUR 46.9 billion range. This marked a very healthy growth from 19% to 25% year-on-year. The adjustment to GMV also trickled down to the total revenue -- segment revenue, which we expect to range between EUR 9.8 billion to EUR 10.4 billion. In terms of adjusted EBITDA margin, we expect a range of negative 1.5% to minus 1.6% for the group in 2022, including Glovo on a pro forma basis. And again, we will achieve this while we accelerate some of our investments in competitive markets. And in 2023, we expect to generate positive adjusted EBITDA for the whole group, including Glovo. And furthermore, we are not only looking at adjusted EBITDA but also have a clear focus on boosting our cash flow generation. So now on to the next slide, where we look into our long-term margin target. So this overview have been introduced during the Q1 trading update and illustrates how we expect to reach our long-term adjusted EBITDA margin. We reconfirm the 5% to 8% margin target, which we believe we can reach without significant reduction in marketing and overhead, but may need improvement in our gross profit. And the combination of increased revenue and improved cost structure will drive gross profit from the 5.1% achieved in 2021 to a range of 10% to 13% in the long term. In Q2, we've already seen healthy progress of the gross profit margin has improved to 6.2%, including Woowa. So we believe we are clearly moving in the right direction by improving unique economics throughout our market. Furthermore, we start to also see a further upside by improving marketing efficiency. So we hope you find this deep dive helpful, and we are now looking forward to answering your question. Christoph?

Great. Thank you. So before we start with the Q&A, a quick remark from my side, please. [Operator Instructions] So now let's kick it off with the Q&A. Operator, please go ahead.

[Operator Instructions] We have the first question from Andrew Ross from Barclays.

My question is about Slide 19, which is very helpful. Thank you for putting that up. I think if I added ARPU implies there's about EUR 30 billion of GMV in profitable markets this year. And if you look at Q4, it looks like it's going to exit with a margin on GMV of just above 3%. Is there any reason why that just above 3% shouldn't go higher into next year? And if we were to assume some GMV growth, I'm getting to maybe an EBITDA from profitable markets of well over EUR 1 billion next year. So perhaps just help us with the math on whether that sounds sensible.

Thanks, Andrew. This question is for Emmanuel, but I'll start off and cover afterwards. So you're right, there is no reason why this percentage would go down unless something unforeseeable happens. But you're correct that we would expect was it go slightly up has improved, in particular, on ad tech services. We might not rush it to get it to 5%, 6%, 7% so we'll take it slow. But you're right, there is no reason why it would go down. But again, and we should be careful in setting expectations too high here. Also keep in mind then that your assumption is correct around the EBITDA for the profitable markets. And keep in mind that we have Integrated Verticals will still make losses next year. You will still expect that some countries will still make loss next year. So yes, it's been a little bit careful and not setting the expectations too higher.

Yes, I can only echo Niklas here. I mean, Andrew, mathematically, you're absolutely right. Your assumptions are correct. Obviously, we don't guide for 2023. And we are cautious in general in our projections, but we don't see any reason mathematically and logically why it should not go in -- and your logic is right, but we won't guide on 2023.

And maybe out here I was to drive down expectation a little bit. We are a company. We are going to go through leadership and an estimation that we have all these profitable countries generate good EBITDA and we'll continue to increase EBITDA there. And we are willing to reinvest some of that profit also in markets where we are underpenetrated or where we see an opportunity to gain or improve market position. So as I said, we are not going to think short term about this. We think in the long term, and we will reinvest money or making sure that we are becoming the leader in the markets of operating.

The next question is from Miriam Josiah from Morgan Stanley.

Just on the Dmarts, so now you've reduced the pace of your store biddings. Do you have any more visibility on when you'd expect that segment to break even? And then how should we think about the GMV EBITDA impact from the 50 to 100 stores you're planning to close, particularly thinking about sort of the pace of losses into next year? And then next if you could just give us any update on the unit economics that you're seeing in your best-in-class markets.

Right. So also Emmanuel to answer. But generally, we don't give the guidance on next year and neither on platform or on Integrated Verticals. But what you do see and what you might include going forward is the gross profit that we generate in the Dmart because that looks very attractive. It looks very similar to the contribution margin development that we saw in kind of Asia type of scenario and where it moves very quickly into positive contribution margin. So we might share that to give people confidence that we can drive profitability. But again, we are not yet in a position where we have the scale that we want to have before we drive to profitability. So we should expect this year, there's still a lot of investments to keep growing the top line to the right level. Next year, you will start seeing that benefit in contribution margins and hopefully then at some point, it will also cover our overhead cost in that vertical. But we don't give more guidance on that.

Maybe I can also continue on that. As I mentioned before, the slowdown on the ramp-up of members of Dmart, we know the next 3 Dmarts that we opened in Q2, we can assume that we are concentrating our efforts on driving better unique economics from the Dmarts and that will be the main focus for the rest of the year. So that until the end of the year, we want to be in a position where the Dmart that we have in our portfolio generates on the path to generate healthy unique economics for 2023 onwards.

The next question is from Giles Thorne from Jefferies.

A question for Niklas. It's an oversimplification, but the past 6 months in Delivery Hero moved from being on the offensive to being more on the defensive as you address your cost of capital challenges. Given the evident momentum and given some of the easing in those cost of capital challenges, and I appreciate, Niklas, you touched on this a moment ago, but looking into 2023, where and when do you think you would go back on the offensive, which start to use your balance sheet to make step changes in your market position or your growth? Any color on your thinking about?

Sure. So I think, in general, we've been surprised, even we have been surprised how easy we have been able to drive the profitability -- or increase profitability and platform profitability and not group but platform profitability. And we see -- we've been speaking about that in the past that you only need to move things like 0.5% to 1% and things just dramatically change. And that percent hasn't or whatever number, a small percent hasn't really changed the competitive dynamic at all for us. I think we have been gaining share in little core geographies, but we haven't lost really market share more than maybe a couple of places. So I don't really see a need for going more offense/defense. We can be on the offense and still make more money. And I think also the fact that we have these profitable beautiful markets that is generating very high EBITDA. We continue to drive higher EBITDA. That gives an opportunity to, over time, just to wear down our competitors gradually and slowly without actually having a big impact on our kind of overall group performance of profitability. So I think it also, a little bit for that reason, gives us a strategic edge, the fact that we are very close to profitability, and we will be there very soon. It gives us room to fight harder. But again, I wouldn't assume that now we're going to double down and it turn from profit to loss making and that will not happen. We will drive increasing profitability. The question is just how fast are going to drive that profitability. And I think we're in a very strong position to, with 70 markets, this majority being a clear leadership, I think we're in a strong position to pick a few markets where we're going to double down and it's barely going to be simple to our overall P&L.

The next question comes from Rob Joyce from Goldman Sachs.

Pretty much a sort of a follow-on from Charles, I guess. I'm just in the right math in sort of 30% of the platform business where you're not making money, you're probably going to lose around EUR 500 million this year. And then if you can just confirm how much of this is coming from the top 5 loss-making countries. And how committed you are to staying in these markets, that would be great.

So yes, you're absolutely right. So basically, conclusion of what we said in next 2 deals was, we have so much profitability and there are so few markets that are negative. And some of those markets is negative not because of the competition or anything. It's just that it's early stage. Take Latin America, I don't consider us having competition in more than either 1 or 2 markets of relevance at least. But we still are profitable because we're early stage and same with Glovo. We are a clear leader in many of those markets and we still don't make money because we think we're early stage. So you only really speak about the comparative side of things where we might want to double down to maybe 4 or 5 markets. And here, we are. We are putting a significant amount of money in. Maybe put a little bit less money in the last 6 months than we would have normally done. But I think it's still fairly significant. I think we always will -- we are, as we will assess what is the best way for us to get to leadership. And I think in all but 1 or potentially 2 markets, I think we are going to get there by organically invest and then double down. And if you want to buy someone buy someone, I think there are 1 or 2 markets where we may consider that the cost will be too high that we would consider partnering with someone else to get there in an easier way. But we're really speaking here about maybe 1 of our 2 markets. But yes, it's quite significant.

So are there and then the losses in those markets, Niklas, is that -- we're talking hundreds of million, EUR 100 million, EUR 200 million in just those 1 or 2 markets?

I can't comment. But I would say that there are -- you have the markets where we're still early stage. Let's say some global markets where it just is it or Latin America, where can you see they're getting into profitability, and we are losing a decent amount. I don't have it on the top of the head, the EUR 180 million or something million. And we -- but it's clear tracking towards that profitability. And there are some losses in a couple of markets where it's high comparative. And yes, there are probably -- yes, we're at least on a combined basis, if we take 1 or 2 markets combined is probably in 3 digits, low 3 digits.

Maybe one comment on Americas. I think what is very -- they are not breakeven and are not profit-making. But at the same time, you see the progression over the years, which improved quarter after quarter. The trajectory is very clear. So as Niklas mentioned, this is early stage market, but the trajectory and the path is very clear on main KPIs that we are driving. So this is a loss-making segment, let's say, geographically, but we clearly see the improvement over time.

And I think maybe since we are on the Glovo talk like also speaking, we had some losses coming there, too. 50% of their business is now EBITDA positive before group cost. And it's not going to take long before the business is almost like -- it's very -- yes, it's not going to take long before the business is kind of profitable before group cost like overhead and central costs. And then you keep on growing. And if you have, let's say, 5%, 6%, 7%, 8% gross margin and then you double the business, then you very quickly get into the profitability. So it's all about driving that scale. And I think we have, as I said, Latin America is a good example of that. How now we start seeing how it is vastly moving towards -- how it's going to start moving to diverse profitability and not because we're cutting costs. And we are optimizing efficiencies and so on, but mainly getting there because of size and margins.

The next question comes from Marcus Diebel from JPMorgan.

Thank you again for providing the profitability side. I think given the previous comments and following up on Andrew's question, so if the platform business all in, so not only the 70% profitable business, all in for the platform business, you're guiding for, let's say, around about, let's say, EUR 100 million, that should be around EUR 500 million for next year. You commented, I think -- and you just remind me previously that the Integrated Verticals business or each Dmart takes about a year to ramp up and to turn profitable. You highlighted that on a net base, you don't open any new Dmart. So that means probably a slight loss. And for Glovo, you obviously talk about the improvement of EBITDA versus the EUR 300 million you're currently guiding for this year. So all this, which is just the math and gets me to about EUR 300 million-plus in EBITDA all in for the group. Again, I know you don't guide but given your comments, this is just pure math where you should end up. And if you could just came to understand if my math is correct.

I think your assumption is reasonable. I do think that the current consensus is very conservative. And I think as you correctly pointed out, given the profitability and the profitable markets and that Dmart is getting closer to there as well as Glovo will get closer to there and America, we're going to get closer. So all markets are going to get closer to profitability. So I think your assumptions are not completely off. We will not yet guide for next year. I hope it still stay a little bit conservative to -- yes, we also want to have -- we don't know how next year will look like. I think currently, we have plans that are fairly positive. But again, the market might change and things might happen, and we would like to have that flexibility.