Revenue Radar: Deliveroo achieves profitability milestone

Deliveroo plc, the global food delivery platform, has released its interim financial report for the first half of 2024, showcasing solid growth and reaching key profitability milestones. The company reported increased revenue, positive free cash flow, and a profit for the period, despite ongoing economic challenges in many of its markets.

For Deliveroo’s full financial performance, click here.

Key Financial Highlights:

• Gross Transaction Value (GTV) grew 6% year-over-year in constant currency to £3.69 billion
• Revenue increased 2% in constant currency to £1.03 billion
• Adjusted EBITDA rose 57% to £61.7 million
• Achieved positive free cash flow of £3.2 million
• Reported a profit for the period of £1.3 million, compared to a loss of £82.9 million in H1 2023

The significant improvement in adjusted EBITDA and the achievement of positive free cash flow demonstrate Deliveroo’s progress towards sustainable profitability. This marks a turning point for the company, which has historically prioritized growth over profitability.

The positive profit for the period, albeit modest, is a stark contrast to the substantial loss reported in H1 2023, indicating that Deliveroo’s efforts to optimize its operations are bearing fruit.

Modest growth in key operational metrics:

• Orders increased 2% year-over-year to 147.4 million
• Gross Transaction Value (GTV) per order rose 5% in constant currency
• Monthly active consumers remained stable at 7.1 million

The company reported strong performance in its UK and Ireland segment, with GTV growing 7% in constant currency. The International segment showed signs of recovery, with GTV growing 5% in constant currency, driven by improvement in France and continued strength in UAE and Italy.

The stability in monthly active consumers, coupled with the increase in orders and GTV per order, suggests that Deliveroo is successfully encouraging more frequent usage among its existing customer base. The stronger performance in the UK and Ireland, Deliveroo’s home market, provides a solid foundation for the company

The recovery in the International segment, particularly in France, is encouraging, but the company may need to focus on strategies to accelerate growth in these markets to balance its geographic exposure.

Enhanced Consumer value-prop

• Launched a new premium loyalty tier, Plus Diamond, in the UK
• Expanded grocery offerings, reaching 14% of Group GTV
• Introduced retail proposition in Kuwait and Hong Kong

 The introduction of Plus Diamond and the expansion of grocery and retail offerings demonstrate Deliveroo’s efforts to diversify its revenue streams and increase customer loyalty.

The growth in grocery to 14% of Group GTV indicates that this strategy is gaining traction. These initiatives could help Deliveroo differentiate itself in a competitive market and potentially improve customer retention and frequency of use.

Improved profitability

• Gross profit margin remained stable at 10.4% of GTV
• Adjusted EBITDA margin improved by 60 basis points to 1.7%
• Marketing and overheads as a percentage of GTV decreased by 60 basis points

 The improvement in adjusted EBITDA margin while maintaining a stable gross profit margin suggests that Deliveroo is successfully leveraging its scale to drive operational efficiencies. The reduction in marketing and overheads as a percentage of GTV is particularly noteworthy, indicating that the company is becoming more efficient in its customer acquisition and retention strategies.

This trend will be crucial for Deliveroo’s long-term profitability goals.

Outlook and Capital Allocation

• GTV growth in the range of 5-9% (unchanged)
• Adjusted EBITDA expected to be in the upper half of the previously guided range of £110-130 million
• Positive free cash flow expected for the full year

Deliveroo announced a new £150 million share buyback program, reflecting confidence in its financial progress and outlook. The company reported a net cash position of £662.1 million as of June 30, 2024.

The maintained guidance for GTV growth suggests cautious optimism from management, while the upgraded expectations for adjusted EBITDA indicate confidence in continued operational improvements. The substantial net cash position and the announcement of a share buyback program demonstrate financial strength and a commitment to returning value to shareholders.

However, this also raises questions about the balance between returning capital and investing in growth opportunities, especially in more challenging international markets.

 Deliveroo’s H1 2024 results demonstrate the company’s ability to drive growth and achieve profitability in a challenging economic environment. The positive free cash flow and profit for the period mark important milestones in Deliveroo’s financial journey. However, the company faces ongoing challenges in some markets and continues to navigate complex industry dynamics, particularly in relation to rider status and regulations. As Deliveroo moves forward, balancing growth initiatives with profitability improvements will be crucial for long-term success in the competitive food delivery market.

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