Hello everyone, and welcome to Talabat's Earnings Call for the Fourth Quarter and Full Year of 2024. My name is Shadi Salman, and I'm heading investor relations here at Talabat, and I'll also be hosting today's call. This is Talabat's first set of financial results following our IPO, so it gives me great pleasure to be presenting this today. All participants are currently in listen-only mode, and we'll have a question-and-answer session at the end of the presentation. In the meantime, please feel free to use the Q&A feature in Zoom to post your questions in writing as we go through the slides. Written questions will come to me, and I will then read them out and have them answered live in the Q&A session. Do include your name and your organization as well.
You're also encouraged to ask your questions orally by using the raise your hand feature on Zoom, and we will then hand the floor over to you to announce yourself, your firm, and then ask your question. We will try to prioritize these live questions where we can. Please be aware that we are recording this webcast to offer a replay through our website afterwards. This will be within the investor relations section of our website at ir.talabat.com. A replay can also be accessed by using the same registration link that was used to register for this call. For any members of the media, please be reminded to share your questions separately with Talabat's corporate communications team. Today, I'm pleased to be joined by Tomaso Rodriguez, our CEO, and by Khaled Al Faqsh , our CFO. But before I hand over, just a few housekeeping points first.
I'll refer to the disclaimer slide at the end of this slide deck, particularly with regards to forward-looking statements. This includes our guidance for 2025 and our dividend policy here at Talabat. For today's agenda, Tomaso, our CEO, will take us through some key highlights for what was a strong fourth quarter and full year that delivered great experiences and convenience for our customers. We'll also recap Talabat's key strategy objectives and progress made against them with a closer look at some of the initiatives we've been focused on. Following that, Khaled, our CFO, will go through our financial results in more detail, particularly the main line items that we have disclosed today within our unaudited preliminary pro forma results, as well as financial guidance for the full year 2025. This will then set us up nicely for Q&A. So with that, let me hand it over to Tomaso.
Thank you very much, Shadi, and welcome everybody. Thank you for joining our first earnings call. We're very excited to report our numbers for Q4 and for 2024. But before we dive into that, just allow me to recap a bit about our company and our key strengths, especially for investors that may not be fully familiar yet with our business model. We are the leading on-demand online food ordering and delivery grocery and retail marketplace for the MENA region. We operate today in eight countries across MENA, sorry, across GCC plus Egypt, Jordan, and Iraq. And as of 2024, we have around $7.4 billion of GMV, growing double-digit and highly profitable business. The key strengths of our business reside in a few factors. The first one is we operate in a very large and fast-expanding addressable market. Our population urbanization rate of our region is very high.
Internet penetration is around 99%, and more than 70% of people that live here are below 40 years of age. So we have the secular tailwinds that boost the growth of our business in the upcoming future. The second point is we are a clear market leader in every single market we operate. We are the number one player in every market, and we have a big gap versus the second player in every of the countries we operate in. The third point is really our business resides on very powerful network effect, meaning that the more you add restaurants and partners on the platform, the more you add riders, the better the service becomes, and the more customers will come to you. And this flywheel kind of aligns itself and grows over time. Again, we have a fully multi-vertical ecosystem. We don't just do food.
We also have a business in grocery and retail, and we have an ecosystem play that ties everything up together. A subscription product that is a tPro, a rewards program, a co-branded card and fintech strategy, a post-paid product, and all these products, they complement each other and increase the stickiness and the loyalty of the customers on the platform. Lastly, we have a clear strategy for the growth in the future, and I'm going to touch base a bit about that later in the presentation. We can go to the next slide, so in terms of 2024, let me share a couple of numbers. Our GMV grew by around 23%, reaching $7.4 billion. In terms of Management Revenue, we're up 32% year- over- year, $3 billion.
Adjusted EBITDA, we expanded our margins by 1.4 percentage points year-over-year, reaching 6.7% of our GMV, and that means a 55% year-over-year growth, almost $2.5 billion. Lastly, when it comes to net income, our growth has been 64% on a year-over-year basis, reaching almost $350 million, and that equals to a margin expansion of 1.2 percentage points, meaning 4.7% of our GMV. Based on the strong results of Q4, the company intends to increase the dividend payment to $110 million versus previous communication of a minimum of $100 million. This is subject to board and shareholder approval. We can go to the next slide. So diving deep a bit more into our long-term strategy, this is the same slide that we presented throughout our roadshow pre-IPO, and we keep expanding on this strategy. But just to recap, we are focused on three main pillars.
The first one is going deeper and penetrating much more the categories of business we are in, and this comes with expanding the customer value proposition, growing our demand both in terms of acquisition and frequency in our business, and increasing our multi-vertical adoption. The second pillar is about loyalty and all these ecosystem products that we are adding to our core value proposition. These are like Talabat Pro rewards, our co-branded credit card, our post-paid value proposition, et cetera, et cetera. And lastly is going much deeper into the relationship and the partnership with our partners and vendors. And this means going much bigger in AdT ech solution and in products that provide a very good return on investment and visibility to our partners, both when it comes to restaurants and when it comes to CPG and grocery partners.
All these strategies are underpinned by very powerful macro tailwinds of the region, where we have a very big growth in population, urbanization that keeps increasing, and as I said before, more than 70% of the population in the region is below 40 years of age, and all of this is helping us grow the business and boost the top line. Double-clicking a bit on our customer value proposition as the first pillar of our strategy, let me explain a bit what we've been doing in Q4 around that. I think the biggest update is our complete revamp of the Talabat app. Our first app actually was born in 2016, and that was a fully food delivery company. So we just had one product, and it was food delivery, and that was our first version of the app. In 2021, we became a more multi-vertical app, right?
So we started having a multi-vertical launcher and thinking a bit more about how can we help our customers discover more services and more products and grocery every day, et cetera. But as our offering has kept expanding over the year, we are now at the point where we have a lot of products and a lot of services that our customers can discover in our app, and we have to rethink a bit our strategy. And I think the key word for our 2025 app is really around personalization. And personalization means that each customer, each and every customer will see a different version of the app, and that will help them discover more products and services and try to enhance the customer conversion across all the steps of the funnel. We move to the next slide.
What has really changed in the app is really a couple of things. We want to make sure that for every customer, we showcase the relevant choice. And so all the vendor listing, grocery listing, and in all the cases where we can create a personalized experience and try to convert the customers to order, we do that. And so the app that I will see is different than the one that Shadi sees and the one that Khaled sees. And also our multi-vertical strategy. We want to make sure we intercept the customers at the right moment for them to try new products and new services and become more sticky and more loyal to the platform over the years. Since we launched this new app over the last couple of months, we saw very, very good results already.
Our tPro acquisitions improved by more than 24% compared to the previous app, and also our grocery acquisitions improved by more than 2%. We will see even better results as we move along with this new strategy, and we keep improving the app. Lastly, I think I want to say that we do tens of thousands of experience of experiments all the time to make sure that we keep increasing and improving our app experience, but also the personalization is not just for our customers, but also for our partners so that we provide a more targeted and segmented customer groups for them to improve their return on investment on the AdTech products and the vendor-funded deals, et cetera, et cetera.
On the second pillar of the strategy is our loyalty programs, and I want to talk a bit about Talabat Pro and what we've been doing on this one in Q4. I think the big focus has been to announce the customer value proposition for Talabat Pro. And Talabat Pro was born as a free delivery product where customers will get the free delivery on a lot of vendors if they were to purchase a subscription. As the program has been evolving, we've been adding more and more benefits like exclusive deals on Talabat Mart, extra boosters on collections, discounts that are available only for Pro customers, and also providing discounts on dine-out opportunities. We remain committed to make it a very cost-effective program. We see that customers that join Talabat Pro increase their frequency and order behavior by around 28%.
We also want to make sure that most of these benefits are funded by our partners as long as we provide them a very good return on their investment. In the last year, we saw an exceptional growth in adoption, and December 2024 versus December 2023, the program grew by 2.1 times. For 2025, we're very focused on continuing announcing the value proposition and accelerating the adoption of the program, and at the same time, we just launched a few days ago Talabat Pro in Egypt, and we're seeing very, very good traction there as well, so I'll hand it over to Khaled now to talk a bit more in depth about our financials.
Thank you, Tomaso. Good afternoon, everyone. So before diving into the financials, I just would like to highlight a couple of important points. What we are presenting today in terms of financial numbers are unaudited and preliminary pro forma financials. Due to the fact that our auditors are still progressing to complete the work, we would expect to publish the audited financials toward the end of March, and as a management team, we have a strong confidence that the audited financials will not be different than what we are presenting today, and if any, it will be immaterial. At the same time, the pro forma financial statements are prepared on the basis that the corporate restructuring, which took place as part of the IPO, is in effect since January 2023.
This is in line with the financial statements that we've shared as part of the IPO process and our IOM. And of course, the IOM remains the main reference point for Talabat business. And this is basically to allow us to have a like-for-like comparison for our financial performance, given the fact that the listed entity, due to incorporation date, will only report Q4 2024 numbers without any comparatives. So with that, looking at the next slide, as Tomaso mentioned, it's been a really great year and strong Q4 for Talabat. So our GMV grew by 23% on a year-over-year basis, reaching $7.4 billion. And this is mainly driven by strong demand across all countries that we are operating in. We've seen an increase in the monthly active users by 25%, reaching almost 6.5 million monthly active customers.
And at the same time, we've seen an increase in order frequency by 8% from December 2023 to December 2024. Looking at Q4, as expected, we've seen an accelerated growth at 26% on a year-over-year basis. And this is mainly driven by the movement of boycotting certain brands during Q4 2023, which was related to the geopolitical situation and development in our region. So despite the fact that the impact with this was limited due to the reason that our customers gradually proceeded to substitute those brands into other local brands that were available on Talabat, hence the impact was not tangible. Looking at revenues, for the full year revenue, we reached almost $3 billion with a 32% growth on a year-over-year basis, outpacing the GMV growth rate. And this is driven by better monetization of the revenue line items.
So for example, our AdTech product reached 3.3% of the full year GMV compared to 3.1% in the previous year, contributing to almost $250 million of the revenue for the full year 2024. Also, we've seen higher delivery and service fee, reaching to 9.4% of the full year GMV, up from 8.9% compared to the previous year. And lastly, we continue to see higher contribution of our own grocery business, tMart. And now tMart revenue represents almost 28% of the overall revenue for the year compared to 26% of the previous year. Hence, if we look at our GMV conversion to revenue, we remain strong at 40%, up from 37% in the previous year. If we look at the next slide, we break down our GMV by two categories.
One, the two main verticals that we are operating in, food and grocery and retail, to show the progress on the multi-verticality strategy that we have. And the second one is the geographical segmentation, GCC versus non-GCC. If we look at the vertical split, we continue to grow our grocery and retail segment, which contributed to 25% of the full year GMV in 2024, up from 21% in the previous year. The grocery and retail vertical grew by 47% on a year-over-year basis and remains a strategic key focus area for us because it drives top line, and also it drives multi-verticality and converts our customers to become multi-vertical. It's also worth highlighting that both channels, the local shops and the dark stores, the tMart business, are growing at a double-digit growth at 55% and 39% on a year-over-year basis, respectively.
That said, our food vertical remains the core business of Talabat, with a healthy year-over-year growth of 16%, given the fact that it's growing from a higher base with much higher profitability at this stage. When it comes to the geographic segment, we have a similar story. We continue to grow our non-GCC segment, which is Egypt, Jordan, and Iraq, at a faster pace compared to GCC. And now the non-GCC segments contribute to 15% of the overall GMV, up from 13% in the previous year. Similar to food, the GCC segment remains the lion's share of our business, with a healthy growth of 20% on a year-over-year basis, despite also growing from a larger base with higher profitability margins, reflecting the longer presence we have been in those countries.
For example, the UAE remains our largest country, and it's growing at a higher pace compared to the average of the group. Kuwait, our oldest country, remains growing strong at double digits. Looking at Adjusted EBITDA in the next slide. For the full year, our Adjusted EBITDA grew by 55% on a year-over-year basis, reaching to almost $500 million. We've been able to expand margin by 14 percentage points, reaching to 6.7% for the full year, up from 5.3% in the previous year. This is again driven by several factors. Of course, strong development on the top lines, improvements in the delivery and service fee, and improvements in our Ad tech offering that flows directly to the bottom line.
At the same time, Talabat continues to operate a relatively lean and stable operating cost, and we've been able to further optimize our overhead and our marketing expenditures. It's very important to highlight that we've been able to expand margins by 1.4% despite the fact that there's a shift toward a lower profitability vertical at this stage, the grocery and retail, and also the non-GCC segment. When it comes to adjusted free cash flow, our free cash flow grew also by 54% on a year-over-year basis, reaching to $462 million, driven by the improvement in adjusted EBITDA margins and adjusted EBITDA in general. So Talabat remains strong when it comes to its ability to generate cash flow, and our cash flow conversion from adjusted EBITDA to free cash flow remains high at 93% for the full year 2024.
This is again due to the business model that we are operating in, which is an asset-light business model that requires relatively low CapEx requirements, and at the same time, we continue enjoying a positive impact from the change in working capital, primarily driven by the efficient cash conversion cycle we have on the grocery business tMart. Looking further in the P&L to the bottom line, you can see that Talabat adjusted net income increased by 53%, outpacing both revenue and adjusted EBITDA growth rates. This implies a net income margin of 5.3% of GMV, which is in line with expectation.
And based on this strong performance in Q4 and the cash position that the company has by the end of the year, we intend to pay a dividend of $110 million, which implies an annualized dividend yield of more than 4.5% and also represents a 90% payout ratio of Q4 adjusted net income, which is also in line with our mid-term dividend policy. Of course, dividends remain subject to the board of directors and the shareholders' approvals. Also, at the end of the year, we carried more than $400 million in terms of cash and cash equivalents on our balance sheet with zero debt, as promised during the IPO process. Now, reflecting on the overall results and the outlook for 2025. So comparing our performance for the full year versus guidance shared during the IPO, I'm really pleased to report that we have met or exceeded all metrics.
We are also ahead of analyst consensus across all metrics. Consensus here includes coverage by six international banks and one regional investment bank, so to recap, GMV grew by 23% for the full year in line with guidance, and we reiterate our guidance of 17%-18% growth for 2025. Revenue grew by 32% for the full year, outpacing GMV growth and beating guidance. We reiterate guidance of 18%-20% at constant currency. When it comes to adjusted EBITDA margin, we reached 6.7% for the full year ahead of guidance of approximately 6.5%, and we reiterate adjusted EBITDA margin guidance of 6.5%-7% for 2025. Reported net income margin reached 4.7% of GMV in line with guidance and 5.3% of GMV when we adjust for the one-offs. For 2025, we reiterate guidance of 5%-5.5% with no expectation of any significant FX impact this year.
Adjusted free cash flow is at 6.2% in line with guidance, and our capacity to generate free cash flow is expected to remain strong with high conversion rates. Hence, we reiterate guidance of 6%-6.5% margin of adjusted free cash flow. And it's also important to highlight that adjusted free cash flow and net income guidance takes into account an effective tax rate of 15%, following UAE and Kuwait's increase of corporate income tax to 15%. We also intend to pay a dividend of $110 million, of course, subject to board and shareholders' approval. And we reiterate our intention to pay a minimum of $400 million for 2025. Our guidance continues to exclude InstaShop at this stage, despite the fact that we have good progress when it comes to the customary closing conditions of this transaction. So with that, I think we concluded the financial section.
So back to you, Shadi.
Great. Thank you, Khaled, and thank you, Tomaso. If you wish to ask a question again, please use the Q&A feature or the raise your hand feature, and we will get those questions answered. Let's start with some of the oral questions first. Let me open the floor to Luke Morgan Stanley. Go ahead.
Can you hear me?
Yes, we can. Thank you.
Congratulations on your IPO and your first set of results. A couple of questions from my side. The first is on this new app interface that you're personalizing. Given half of your EBITDA is generated from advertising, do you think that this personalization leads to a possibility where you can charge merchants more fees for the advertising on the platform, assuming that they then get a higher return on ad spend? And then the second question I've got is on your subscription service. Is this a change in strategy in the way that before my understanding was you were being quite disciplined in who you were targeting that subscription program to? Is this a more broad-based approach in terms of signing up new customers as a result? And then the final question would just be on your guidance.
Have you assumed any change in the competition landscape within that 17%-18% year-on-year growth? Thank you.
Thank you, Luke. Maybe I'll take the first two, and I think you can take the third one. So, sorry, the second one was about tPro. The first one, sorry, I forgot.
About personalization.
Personalization. Yeah. So look, on the, that's exactly right. So we want to create better opportunities for our customers and for our merchants at the same time. And that's exactly why we are going into a path of becoming much, much more, having a much more personalized app. And we want to make sure that also when it comes to AdTech and vendor-funded deals, we find ways to showcase the relevant advertising and the relevant deals only to the people that will want it or will care about it, right? So that we don't show, for example, meat to a vegetarian or things like that, right? So I think, yes, the answer is correct. We want to go into a much more segmented and personalized approach also when it comes to AdTech and vendor-funded deals.
And of course, that should yield much higher returns for the vendors and can also push for higher pricing as long as we provide higher returns. So that's exactly the direction we're going into. On the tPro, I think what we're observing is that when we look at our customer base, we look at what we define kind of a low-frequency, medium-frequency, and high-frequency customers. And of course, when you launch the subscription product, you will see that the first ones to adopt it are the high-frequency customers, right? Because they will get a much bigger benefit from that. But what we observe over time is that also medium-frequency customers or low-frequency customers can generate a significant uplift once they become subscribers, right? And the case could be that they were ordering only a few times, but the moment it becomes much cheaper, they could order much more.
It could be customers that use different platforms and then they convert to your platform once they join tPro. Or it could be customers that find new value propositions, like for example, grocery and retail. And the moment they get benefits, they get discounts on the grocery side. On the retail side, they become multi-vertical, and then their frequency increases a lot, right? So I think the reason why we're expanding the value proposition is that by finding new use cases, more and more customers will see a benefit and will increase their stickiness and their frequency on the platform. I hope that answered your question.
On guidance for 2025 and taking into consideration competition, I think we've always said that MENA has been always competitive, right? We've always had competition in place. So we always take into consideration our strategy and our financial numbers, this factor. I think so far, if you look at 2024 results, it's in line with guidance or slightly beating up, especially on the revenue side. But I just need to remind everyone, higher revenue also comes with higher costs, and particularly when it comes to the dark stores model because of the cost of goods sold. Hence, we've seen, yes, the momentum and the growth continues in Q4, but I think it's still early for us to revise guidance. Of course, based on the results, we would expect to continue reviewing this and share if there's any changes in due course.
Thank you.
Great. Thank you.
Our second question is from Andrew. Tomaso Rodriguez. Andrew, over to you.
Hi, guys. Can you hear me okay?
Yes, we can.
Great. Thanks for taking the questions. I've also got three if that's okay. First one is to follow up about Luke's question on competition. Clearly, there are lots of unknowns about whether Meituan may or may not enter any of your markets. Can you just update us about what changes you've made to your proposition in advance of any entry, what impact you've seen on your business as a result of that, and kind of anything else that's relevant in terms of preparation for new competition in the markets? So first question. The second one is, can you give us a sense of how Q1 is trading kind of to date? Clearly, Q4 benefited, I think, from slightly easier comps. I'm not clear whether those are also factors in Q1.
But if you could give us a sense as to how the first six weeks are looking, that would be helpful. And then the third question is on InstaShop and anything you can tell us about, A, the timing of it closing, and B, how that business is going. You gave us some 2023 numbers in the IPO, but it would be very helpful to know what happened in 2024. Thank you.
Maybe I can quickly cover InstaShop and Q1 and then Tomaso Rodriguez the competition. I think in InstaShop, we have seen good progress so far on the closing of the transaction. If we recall, Andrew, throughout the IPO process, we mentioned that there is a customary closing condition primarily related to validating the numbers, getting the audited financial statements before closing the transaction, and then consolidating within Talabat and also doing some back-office migration of the ERPs, etc. I think on that front, we are progressing well. Hence, we would expect to close the transaction shortly in this year. In terms of numbers, grocery and retail in general has been growing very well. This is also, I would say, similar to InstaShop. At this stage, still, unfortunately, we will not be able to share numbers on InstaShop.
As you've seen, our local shops on Talabat grew on a year-over-year basis close to 60%. That's kind of like a similar business model to InstaShop. When it comes to Q1, I think also it's early to share, but I would say it's in line with strategy and it's in line with our business plan. We've seen still strong momentum in terms of growth and also in terms of customers really loving the service and using our platform.
Sure. So in terms of competition, let me say, Luke, the region has always been a very competitive region, right? So we had a lot of competitors coming and going in every single geography we operate in. But I think if you look at the overall business, we've kept growing at a higher pace in the last 10 years. We kept improving our margins, and the business has been improving year-over-year. If you see, for example, this year, like also Khaled was sharing about UAE, was probably the most competitive market we are in today, has been growing above the average of all the countries despite competition. At the same time, we discussed about the fact that we've been able to expand margins across the business, right? So I think the important point to note this year is that we have a very, very strong commercial leverage, right?
We are able to be extremely, extremely competitive also on the value proposition, the deals and discounts to the customer because we get a lot of deals funded by our vendors. And I think that's very unique to Talabat because we can provide the larger customer base and the largest reach and the best possible tech solutions for our partners to create deals for the customers to help them grow. Last year alone, as we shared previously, our partners have been investing almost $500 million in vendor-funded deals on our platform, right? And I think that's very, very unique to Talabat, and that creates a big commercial leverage.
At the same time, we have the largest assortment, and we keep going and expanding into new verticals, not just grocery and retail, but also creating an ecosystem of products with our co-branded card, our post-paid product, our tPro rewards program, etc., etc. And all of this creates more stickiness and loyalty of the customers on the platform, right? So regardless of new entrants on the market, I would say our strategy doesn't change. We want to drive for multi-vertical adoption. We want to drive for more ecosystem value proposition. We want to drive for more commercial leverage because these are all things that are unique to Talabat that no competitor can replicate.
Thank you.
Great. Thanks, Andrew. Next question is from Dan at Virgin. Please go ahead, Dan.
Hi, can you hear me?
Yes, we can.
Wonderful. First of all, congratulations on the great set of results and on the IPO. Just following up on some of the themes touched so far in the Q&A, I was wondering if you could provide a bit more color on your market share in the key markets, like mainly UAE and Kuwait. I know you talk about how much larger you are versus your nearest competitor, but what does it actually mean in percentages? And in percentages across the different categories, like food and grocery versus food versus grocery, that would be much appreciated. And the second question I had, in the presentation, you disclosed the advertising or sorry, delivery services together, but how has the take rate on delivery specifically evolved year- on- year? Thank you.
David, could you take the first point, so in terms of category position, we're not sharing numbers by countries, but what I can tell you is that in every single market we operate in, we're significantly several times bigger than our second competitor, and I think we shared some numbers from an independent third party that did the research in the second half of last year, but in markets like, for example, UAE, we consider four main players, so I think you can a bit try to extrapolate the math based on that. On the take rate.
I think if you look at the revenue growth, Dan, it's primarily driven by AdTech, right, and delivery and service fee and the tMart, right, so if you look at average commission rate on our platform, that's what we charge for both restaurants and local shops, it's today ranged between 14%-15%. There's, of course, usually a positive development on the commission front because of the new sign-ups. The more we sign new restaurants, we sign them usually at a higher floor. And also when we renew agreements, we renew them at the higher floor, but the strategy is really to drive revenue through AdTech, drive revenue through tMart rather than just increase the commission rates on the restaurant partners. I hope I'm answering your question then.
Sorry, I meant the delivery take rate specifically because I understand the advertising is the one that should be growing commission rates where you're strong. I was wondering if you've seen any pressure on the delivery take rate.
Not really. Not really. So as I mentioned earlier, the delivery and service fee, which what consumer pays, sits at 9.4% of GMV as of for the full year, up from 8.9%. So if you look at the purchasing power in the markets that we're operating in, roughly 10% of the average order value seems very reasonable. In fact, we believe that it's still relatively low compared to other developed markets. For example, if we compare to the US, the US delivery fee as a percentage of the average order value is much larger than 10%. So we don't see any pressure on the delivery fee margins for the consumer front.
I think it was about the take rate.
Take rate, I answered that.
Okay. Great. Thank you, Dan. I am conscious that we do have some Q&As in writing. So let me take some before they really pile up. This one's a bit more technical. So Delivery Hero has restated the free cash flow definition. Does the same apply to Talabat? That's one part of the question. And the other is the effective take rate to GMV comes in at 40%. Can you help us decompose this across? I think you've kind of addressed that. But I think on the free cash flow definition, and this is from Danish at Franklin Templeton.
Yeah, we are aware of the free cash flow definition that DH published today on the trading updates. And if we apply the same definition, most likely we will do probably in the coming period, will not materially change what we've reported. So if you look at 2024 numbers and we apply the new definition, which is basically the operating cash flow from an IFRS perspective, taking out CapEx and leases, we would remain within guidance that we shared for the full year 2024. So there's no material difference on both definitions for Talabat.
Okay. Thank you, Khaled. Just one other, I guess, in writing. The full year 2025 guidance on GMV of 17%-18% assumes a meaningful slowdown from the run rate in Q4 2024, which is around 24% or maybe even 26%. Could you please elaborate what is driving this deceleration? Is this conservative guidance, or does it reflect the company's expectation of rising competition in its core markets? This is from Dorian at Schonfeld.
No, if we look at the growth rate on 17%-18%, I would say we are conservative on the average order value because we are not baking in any potential increase in prices due to inflation, hence an increase in average order value. But I would say between brackets, the deceleration comes from mainly shift in the geographical mix. The non-GCC markets is growing at a higher pace compared to GCC. And that's primarily what is driving the growth rate. And also, lastly, we always grew year-over-year on a larger base. So I think that is also something is expected.
Great. Thank you, Khaled. Okay. Another one orally. Nishay, over to you from J.P. Morgan, I think.
Yes. Hello. It's Alexis Philippou from J.P. Morgan. Thank you very much for the opportunity. A few questions. Can you discuss the seasonality around Ramadan that you expect in first quarter? How shall we expect deceleration in GMV growth and drop in profitability during Ramadan? I'm not asking about specific trading. Just can you explain how Ramadan works this year for you? That's my first question.
Yeah, maybe I can cover this quickly. In general, you'll see probably there's two or three seasonality factors that impact the business. One is definitely Ramadan. So what we've seen in terms of trend in Ramadan is in the first, let's say, week, you would see a drop in the orders volume and then gradually increase toward the end of the month. But at the same time, you would see a spike in the grocery and retail vertical at the same time. Of course, at the aggregate level, you would expect a drop in orders and relatively stable cost base. Hence, our margin slightly dropped in Ramadan. The second seasonality in general is in summer, where we need to deploy certain additional measures that slightly increase our delivery cost because of all the initiatives we provide to the riders' community.
Lastly, toward Q4, always you have the seasonality impact of back to schools because we also provide grocery and retail and also the Christmas holiday. This is the three seasonality factors. In general, it does not materially impact the unit economics if you look at the trend on a quarterly basis or a year-over-year basis.
Yeah, that's super helpful. Thank you. Another question on advertising. Why penetration of Ad tech wasn't growing the last couple of quarters? Because there was a good spike in first half 2024, but in third quarter and in fourth quarter, it seems like its percentage of GMV advertising revenue is pretty much stable.
Yeah. Maybe I can quickly comment on this and then maybe to Tomaso on the offering itself. But in general, yes, we've seen an improvement of 0.1%, but this is also on a larger GMV. So if you look at absolute value, the AdTech grew by almost $50 million from $194 million to $246 million in the full year. So that's also something to be taken into consideration.
Yeah. No, so I would say the same answer, right? It's an acceleration of GMV. Yes, AdTech has been growing a little bit as a percentage as well, but it's mostly due to what Khaled just shared.
All right. And thank you. And final on competition, can you comment whether you do anything specific in terms of discount or delivery strategy in Abu Dhabi where you have new competition from Careem? And in general, do you feel pressure on GMV growth in Abu Dhabi specifically?
No, I think nothing specific to Abu Dhabi. I would say our strategy is the same. Our playbook is the same across the countries and the cities we operate in, and it's been a successful strategy. So whatever applies to Dubai applies to Abu Dhabi and applies to Doha or to Kuwait City. And again, we keep expanding, making sure we have the best offer in terms of vendors that we offer to the customers, that we have the best deals and discounts, and we have the best fleet, the largest fleet with the best operations, and we create an ecosystem value proposition on top of the core food and grocery and retail offering, right? So there's no shortcuts in building this business.
It's just a compounding effect that you have to build over the years and over time, and you build it block by block, one on top of another, right? So I think we just focus on our strategy, and we're very, very determined with that.
Thank you very much. Very clear.
Thank you, Shadi. Maybe another question in writing. Ahmed Anan from CI Capital. I think we've given an update on the InstaShop acquisition. On Q4 free cash flow margin, he's asking why it expanded less than the EBITDA margin. Was there any reason for that? And then he has a follow-up question on the current penetration of Talabat Pro. And does it drive gross margin increases?
No, I mean, if you look at the margins, 5.9% in Q4 last year, 5.8% in Q4 this year, so I would say there's nothing abnormal in terms of free cash flow margin as a percentage of GMV on quarter basis.
On the tPro value proposition, absolutely remains GPU and GPO accretive. And we also shared in this presentation that the uplift of the customers once they become tPro customers is around 28% as of now. So we remain extremely confident in this program as a massive long-term lever for growth. Great. Thanks, Tomas.
Usman Siddiqui from SICO. Over to you to ask your question.
Hi. Thank you very much for the opportunity. Can you please clarify on the guidance? So during the IPO, guidance was around 5%-5.5% net margin. At that time, I think the tax assumption was around 11%. And you mentioned that the effective tax rate would go to 15%. Yet the EBITDA and net margin guidance remains the same. So what is happening between EBITDA and net where you are increasing your tax effective tax rate, yet the net margin guidance remains the same?
Yeah, very good question, Uthman. So what we've shared, we've shared that the effective tax rate is 11% for 2024, given the fact that UAE for 2024 remains at 9%, and we were not certain about Kuwait moving to 15%. However, to be conservative during the guidance, we've taken into consideration that both Kuwait and UAE would move to 15% from 2025 onward. So I think that was probably just a technicality, is that when you look at the guidance slide on the CMD deck, the 11% was intended for the full year 2024. And then on the midterm, we were expecting 15% as part of the free cash flow calculation. So nothing really changes.
All right. Yeah, that's what my question. Thank you.
Thank you, Uthman. Maybe another question that was submitted in writing. This one from Yacoub. We're excited about the growth in AdTech. Oh, I think we might have answered that question. Yeah, sorry, that wasn't answered already. Okay. Another question from Marc at ING. Yeah. So 4Q has been towards the higher end of guidance. Can you discuss the underlying drivers of increasing active customers and order frequency? I assume the frequency is predominantly supported by the easier comparative, but also interested in active customer trends. That's one. He asked about the take rate, but I think we've answered that. And then the third part of that question, use of cash. And the fourth quarter, you had better free cash flow and thus increased your dividends to 110. Is that a normal dynamic going forward?
As in, will higher free cash flow be directed to higher dividends in the absence of M&A?
Yeah. So I can quickly cover this. So the dividend payout policy takes into consideration a 90% of net income. And we revised the dividends for this year based on that direction. We have a stronger Q4, and that's why we're iterating 2025 based on what we've shared before, which is a minimum of $400 million. Whether this would be revised upward or downward, I think it's something we would notice in 2025, but most likely we will be able to achieve guidance. So I wouldn't expect any downward revision. If not, it will be probably upward.
In terms of top-line growth, I think when you look at where the growth is coming from, I think it's a very, very healthy growth because we're seeing both acceleration in acquisitions on a year-over-year basis, but also in frequency of existing customers and existing cohorts, and lastly, we see acceleration in multi-verticality, right? I think all the three components, these are the three main pillars of where the growth is coming from, and they're all trending very, very healthy. There's no one dominating over the others. Like we see acceleration in all the three pillars. It's a very healthy growth driven by the foundations of the business.
Great. Thank you, Tomaso. Got to do some more. Shariq now is in writing, asks, any acquisitions planned in 2025, I guess, beyond InstaShop? And what was the evolution in terms of restaurant partners and riders?
Yeah.
So in terms of acquisitions, I think as of now, there is no decided acquisition for the year, but of course, we remain always open to opportunities. And if anything, we will then relate to the board and evaluate any opportunity that may be presented. And the second one, sorry?
Partners and riders.
Partners and riders. I think 2024, we definitely saw acceleration in acquisitions. I think the last number reported was around 65,000 partners and more than 120,000 riders, and we see those acquisitions keep evolving at a very healthy rate and accelerating.
Great. Thank you, Tomaso. Yeah, Uthman, you still have your hand up. Let me put it over back to you if you want to ask any further questions. Or maybe that was just an error. Okay. Sergey Vernov, if you can announce your firm and then go ahead and ask your question, please.
Good afternoon. Am I audible?
Yes.
Yes. Good afternoon once again. First of all, congratulations on your set of results or your first results since IPO. I would say it's a relief and even pleasure to see the management sticking to the announcements and promises given pre-placement prior to the placement. So that's a very good point. My question is very simple, and it regards the grocery and retail segment of your GMV. We have noticed that it's growing at an even faster pace than the previous year. On year-over-year growth, it was plus 47%, comparable to plus 46% last year. And it has reached around 25% of your GMV. We also know that this segment is four times more marginal than the pure food segment of GMV. So what is your strategic take on that side of your business? How much of GMV do you want this segment to encompass in percentage of GMV?
And what kind of improvements or maybe announcements are we likely to see also in this grocery and retail segment? Thank you.
Maybe I can take the growth. You can take the margins. I can explain a bit about those, so I think, look, grocery and retail is a fantastic opportunity for us because we do believe it's an extremely, as you pointed out, extremely fast-growing business. When you look at our GMV penetration on the overall grocery market, we are about 1% of the overall offline grocery market, and this is growing, as you pointed out, 46%, 47% on a year-over-year basis, and I think the grocery business is split mainly in two areas for us. One is our dark store operating business, and the other, which is our tMart business, and the other one is our marketplace grocery business, both growing at a very, very fast pace, and in general, we believe it's a great opportunity. Also, much less competitive space across the board.
We're pushing it extremely, extremely fast in all the countries we operate in. I think maybe Khaled can explain a bit about how the margins work there.
No, I mean, in general, the margins on grocery, as a percentage of the average order value, might tend to be lower because we charge lower commission to the marketplace grocery vendors on the platform. But I think what matters the most for us is how much we would generate dollar value per order. And usually, we've seen a much higher average order value when it comes to the grocery orders on the platform. Hence, as a dollar value, we generate potentially a similar amount. And this is what does really matter for us.
I think the other point is there's a much larger opportunity on the AdTech side of things, also on groceries, especially when you think about CPG, FMCG companies. They have a very big retail media budget to spend. And we believe we're in a unique position to capture that and make it much more targeted and segmented than the traditional offline retailer. I think on the, I think another thing, maybe just to clarify on the revenue front, the tMart business will pass-through of the GMV into revenues. And that's why it may look a bit skewed in the revenue side. But in terms of long-term marginality of the business, we believe that it could be even more lucrative than food.
Great. Hope that answers your questions, Sergey. We're almost out of time. So I know there are some questions still remaining in the Q&A, but we'll have to take those offline just given we've run out of time. So again, this brings us to the end of our presentation. Thank you very much for dialing in. You can always reach us at our email address, ir@talabat.com, and we'll endeavor to answer your questions there. So thank you very much for attending, and until next time, goodbye.
Thank you very much.
Thank you.