Delivery Hero upgraded to ’B’ by S&P on improved EBITDA outlook

S&P Global Ratings upgraded Delivery Hero SE to 'B' from 'B-' with a stable outlook, citing the company's achievement of its first positive S&P-adjusted EBITDA in 2024 and projections for significant growth, targeting €1 billion adjusted EBITDA by 2026 and free operating cash flow breakeven in 2025. This upgrade reflects improved profitability and a robust liquidity position, despite substantial antitrust and social security settlements, with future rating movements contingent on sustained EBITDA growth, deleveraging, and maintaining strong liquidity.

Analysis

S&P Global Ratings has upgraded Delivery Hero SE to 'B' from 'B-' with a stable outlook, a direct result of the company achieving its first positive S&P-adjusted EBITDA in 2024. The upgrade is further supported by a strong forward guidance, with projections for adjusted EBITDA to approach €1 billion by 2026 and for free operating cash flow (FOCF) to break even in 2025 before reaching approximately €250 million in 2026. This improved profitability stems from the successful integration of Glovo and operational enhancements across its portfolio, with all segments expected to be profitable by 2026. However, significant headwinds remain. The company faces substantial one-off cash outflows, including a €329 million antitrust settlement and about €450 million in payments for Spanish social security claims. Furthermore, specific regional challenges persist, such as GMV declines in South Korea due to intense competition and projected 2025 EBITDA losses in Europe from a shift to an employment-based courier model. Despite these pressures, the company's liquidity is deemed ample, with cash sources expected to cover needs by more than 1.5x over the next 24 months, reinforced by an upsized revolving credit facility of €840 million.

Key Decisions for Investors

• Investors should view the credit upgrade as a key validation of Delivery Hero's path to profitability, but must monitor the company's execution against its 2025 FOCF breakeven and 2026 EBITDA targets as crucial proof points for the long-term investment case.
• It is critical to discount the exceptional cash outflows of nearly €780 million from legal and regulatory settlements when evaluating underlying cash generation, and to watch the company's liquidity buffer closely, as S&P flagged its potential weakening as a primary risk for a future downgrade.
• Portfolio managers should scrutinize segment-level performance, specifically tracking for a stabilization of GMV in the competitive South Korean market and the magnitude of losses in Europe, as these are the main operational drags on the otherwise positive outlook.
• An upgrade to the rating is contingent on achieving leverage below 5.0x, so investors should track progress on deleveraging as a key indicator of further positive re-rating potential and improved credit quality.