ALLETE, Inc. Price & Performance (ALE)

Thank you, Jodar, and welcome to everyone on our call. Let me introduce the presenters of today Roy Peticucci, the CEO of Allegro, will provide you with the overview of the full year and fourth quarter business highlights, and John Istik, our CFO, who will guide you through financials and the management outlook. Roy will conclude the presentation with key takeaways. As usual, our results presentation is available for download from our Investor's webpage at Allegro.eu. May also download these slides from the link available on the webcast screen. As a reminder, today's presentation and discussion contains forward looking statements. Our actual results could differ materially from the expectations expressed in such statements. We Please make sure you review the full disclaimer on Slide number two. Also, please note this presentation and the Q and A session are being recorded and will be available for a replay on our website at alectro.u.u. With this, I would like to hand over to our CEO, Roy De Florezios. Thanks very much, Tomic. It's my pleasure to present to you for the third and final time as Chief Executive Allegro.eu the annual results this time for 2024. Before I kick off with the presentation as a whole, I should say that remind all of you that I'm stepping down as the CEO at the AGM in June.

And I'd like to confirm again here that the process is well advanced and every step is being taken to ensure that a new CEO will be nominated in time for a smooth transition. Now on to the annual results highlights. We crossed the SEK60 billion threshold just in time for our twenty fifth anniversary in early early December of last year and we closed the year with an overall $64,000,000,000 GMV for the group. Revenue grew GMV grew overall by nine 0.6%, revenue by 6.7% and adjusted EBITDA grew by 17.9% to around $3,000,000,000 CapEx, as we promised, would do inflected last year and increased by 31% and ended the year at $600,000,000 Overall, the EBITDA performance, I think, reflects overall the margin progress from from advertising growth and continued work. On fit to grow with some of those savings fully annualizing. The quarter on the other hand also delivered very good results versus our guidance. We hit or exceeded all the metrics with the possible exception of GMV which was just underneath our lower end of 11% we delivered 9.9%, 10.9% for the year. That said, I should remind everyone that's a full 2.5 percentage points higher growth than the year on year to the end of 2023.

So I think some of the concerns that some of you voiced about shopping frequency and conversion did not materialize in the last quarter. And I think that's reflected also at particularly in the very strong Polish performance. Overall, we outpaced the retail demand as a whole by 2.5 times. And the average annual spend per buyer in Poland exceeded around 4,000. ZOTI. So overall, quite strong growth. You see here the numbers in terms of active buyers growth plus 6% for the group plus 2.8% for Poland as a whole. Very robust improvements, 33 basis points for take rate, and the arrival of advertising into income to two percentage points of GMV. So very good. I think overall, we're reasonably pleased with some of the progress. On terms of EBITDA, I think the lower margin for the quarter at 5.61 reflects one is seasonally lower take rate for Q4 and marketing investment that rose 2.8% of GMV. That's 50 basis points up year on year, reflecting increased spend on offensive and defensive activities. I think fundamentally, ladies and gentlemen, we've developed a cash generation machine here in Poland and John will talk more about this later. By this point, you should be very familiar with our multiyear priority framework.

We tuned it, I think, at about this time last year. But overall, the priorities have been the same. And I will take you through these one by one, all of them should be to some extent familiar to you already. First of all, in terms of easy and safe to shop, simple to sell, we've had very healthy growth in our priority segments of supermarkets and health and beauty, which continue to grow at twice the overall Polish GMV rate. And I think we can be very, very pleased with our performance at Christmas. 99.9% of Christmas orders made it to customers in time for Christmas and that with a record late Christmas cut off, which was at 11:00 on the twenty third. So I think that actually contributed to some of the uplift in the quarter. And our selection [indiscernible] express selection in terms of products, it's driven to a 400% and we have a fully productized view in all our marketplaces. Customers continue with their loyalty We've reinforced the smart programs in a number of ways. The smart user base is 8,300,000 for the group and 7,000,000 in Poland. So robust growth in smart leadership also outside of Poland.

Purchase frequency that all essential measure that drives all of our GMV uplift Shopping frequency went up to twenty two days. That's up 6.5% for the year. I think one other thing that excites me personally as the Chief Executive is not only the fact that our ranks of merchants have swelled to 160 to 3,000. On the Polish marketplace, place that's up 10% year on year. But the concept of ListOnce and Sell Everywhere is being embraced not only with our experienced Polish merchants who are selling increasing numbers on our marketplaces outside of the country. But also the growing interest of merchants in our newer countries a very strong increase and particularly enthusiasm given some of the performance of merchants operating in smaller countries gaining access to Poland. We see that many of them have more than double the turnover or the GMV outside their home country as they do on their marketplace in their home country. So I think it's just showing you that as we have effectively single marketplace spending for countries that there really is some power for growth. Speaking of growth, advertising growth continued to accelerate at 31.3% year on year for the quarter, and it's clear to us that there's much more headroom to grow this income stream, which flows straight to EBITDA in the coming years and quarters.

We've done a lot of things, I think, to make our traditional products more appealing to merchants, giving merchants more transparency about what return for investment they get. And we're also moving up the funnel of advertising, sort of the mid and upper funnel is what we call it in terms of advertising that is more focused for awareness and consideration. Awareness and consideration ads are particularly attracted to brands we believe is another growth segment. And adding to that, of course, is we are using our buying power from marketing off our off our marketplace and passing that opportunity to buy at more effective rates to our own merchants you want to drive attention from customers not on our platform, to make purchases on our platform. So a trend that you've seen for quite a while now, we do expect that as revenue growth is going to continue to outpace GMV, over the medium term. Allegro.eu, we also goes strength from strength to strength We had some debate internally about whether we should actually stack rank us against banks in terms of loans origination. We decided not to share that with you. But overall, I think we are amongst the leading consumer lenders in the country.

We loan in generation over the past two years has grown and it's 31%. You see that in the middle graphic there. And that's despite the fact that our loan book on our own balance sheet has grown decidedly less than that and is now only at about [indiscernible] Of course, one of the key reasons why we wanted to do lending to begin with was its effect for GMV. We've increased the lending limit to 9,000 sorties enhancement of lending, of course, drives GMV finance which has grown by 37%. We have already launched the Visa card [indiscernible] Gives further flexibility to consumers who want to use it. And are finding various ways to apply AI to make more and more savvy lending decisions. Before I move on to the next slide, I'd like to say a few words of of introduction. I think a key thing is key thing is it has always been a topic of questioning and interest of this group about what our plans and logistics are And I think we can say at this point that we've made some really profound changes to the way we manage the mix, the way parcels are delivered to customers.

We now manage just under one quarter of total volume that we originate via our marketplace under our own ship methods. We have two major ship methods, one for two door delivery out of home and I'll get to that in a second. The first thing say is already in Q4 of twenty twenty two, we started playing with a key lever to shift volume from higher expensed two door or home delivery to less expensive out of home delivery by shifting the minimum order value from 40 Zolte for both to 65 and 45 for home delivery and out of home respectively. And you can see this in this slide in the overall mix between two door and out of home, the green line shows how we've made steady progress of convincing more and more customers to use Kudos and Muckers. That's been, I think, one of our early accomplishments. [indiscernible] [indiscernible] a simplification both for merchants and for consumers. We take away all the complexity All of our merchants in Poland are signed up for brandless and consumers now have a very simple choice of do I want it to be delivered to home or do I want it delivered out of home.

If I wanted to be delivered to a particular address with brandless courier, customer simply puts in [indiscernible] delivery address and we take care of everything else. This gives us an opportunity then to optimize the flow of parcels via whichever courier offers the best combination of speed, reliability and choice. And you see that in the top of the graph on the right hand side since we introduced it in about Q1 of twenty twenty four, that an ever increasing chunk of two home deliveries are now being moved via Allegro excuse me, by Brandless. We have a similar product for for out of home. We call this Allegro delivery Again, this is a simplification both for merchants and for consumers Merchant signs up for the ship method and consumers simply select whatever participating locker is most convenient for her. And these are currently is a service that we first started with our own delivery network That is the green portion of the slide. You see over time we have steadily increased the amount of volume flowing over effectively same number of assets. And once Orlin Patchka joins, we could also shift some volume to them. We expect both of these shares to slowly grow over future quarters.

We're very pleased and we've already announced that DHL has also joined Allegro delivery. So it means that we have more and more choice at least for the volume that flows via our ship method to arbitrate between the best at courier that offers the best combination of speed, reliability and cost. And that discussion of managing volumes flows through, of course, to our costs [indiscernible] volumes have increased almost two times, actually over two times [indiscernible] over the last year. It means that unit costs decline markedly and you see how things have dropped decidedly in the 'twenty two to 'twenty four time period. We are now paying or part of those costs that we have per parcel to deliver in our own capability, we are rapidly approaching what we pay for our most expensive alternative And we expect to actually get well below that in the course of this year. Again, I think the lesson here is not to over obsess in what we're investing in our own capability, the point of the exercise [indiscernible] the volumes that we manage to get to the place of the best combination of speed, reliability and cost. But you see in the lower end that actually there are now multiple options that are all cheaper particularly in APM deliveries that are below what we currently pay to our most expensive supplier.

So I think that's I think the key things in this area. I think the really attractive thing is that I think all of the [indiscernible] and in Allegro delivery are looking for volume. They've made sizable enough investments. And now it's a question about how can we actually opt optimize to maintain or improve speed while continuing to make progress on unit costs And that I think is reflected in the graph that I'm showing you right here that there are now an increasing large number of alternative or choices in terms of networks All of the major players in Poland are making investments in Poland. And frankly, almost all of them are opening much larger networks than we are.

And I think that's good for us. It reduces our own investment requirements and you can see of the three participants in Allegro.eu delivery, we have in a total of 16,000 lockers to choose from is roughly where in post was in 2021. All of us are of course, planning to to invest further in the coming year. And we really invite any carrier who is interested to participate in the Allegro.eu delivery program. So I think very heartening progress. I should end some answer at this point that our own plans for expansion are relatively modest. Probably not more than 2.5 units always on this philosophy of sweating the assets. I think you can see by focusing volume on the assets that we have, we have gotten much better progress on speed, reliability and cost, particularly cost. And we're not interested in building the network that is not being used. So I think that's pretty much the main things we do there. Of course, we are also investing in our backend networks and teams of sortation [indiscernible] and in delivery, particularly in areas that may be not best served by complementary networks. We opened two more marketplaces We opened two more marketplaces last year.

So three in rapid succession in about eighteen months. I think we did quite well during Christmas GMV up was up 68% really, so more than two thirds in the quarter. And margins also increased year on year by about 6%. And that I think is without Hungary, I'm really quite happy about because we haven't even invested much in the way of marketing yet. As we said, we were doing a soft launch only and I find that we're very well received there In the quarter, we added nearly 500,000 active buyers in the international segment, So we now have 3,300,000 overall. And as I mentioned earlier, 1,000,000 in smart.

We also have a large number of merchants, 70,000 merchants from Poland are participating on the marketplace as Czech, Slovakia and Hungary, that's up 12% for the quarter. And the number of local merchants, so merchants active predominantly in The Czech Republic and Slovakia has grown by exactly a third quarter on quarter. And again, that's something that I'm personally very excited about because it's connecting merchants in our catchment area to customers throughout the catchment area we serve. Now a lot of your questions have been talking have been about MOL I think MOL is really taking shape as a lean merchant 10% of malls as a ten percent of the marketplace volume is covered by mall as a merchant. We've shut down the physical stores. In their catchment areas. We've also retired the CZC legacy platform late last year and we're scheduled to shut down the the mall legacy platforms in the course of this this coming month. And I think overall that means that a couple of things have happened. One, we will be able to have an identical tech stack in all four countries that we're operating that is supported or run by the single organization in all four countries, which of course has all kinds of operating efficiencies and cost efficiencies be realized [indiscernible] in the next few pre quarters.

I think one last thing to say here is we're going to pause the international expansion for a while. We want to spend a bit less money We want to focus on shopping frequency, that all important metric. And also do various things that we were started to do in terms of trust [indiscernible] really refine the model before we expand further. [indiscernible] doesn't detract anything from Croatia and Slovenia. What we have here is already with Mimovorese market leader or a segment leader in the in their respective countries. And so we're in no rush to further expand until we really perfected things and we'll review this again in the second half of the year to see where else we may expand. But South is a very successful standalone and we've we'll continue from there. So as a final slide in conclusion, something I've already touched on, is Dave Roberts is David Roberts is our CTO and his team have delivered over the last two years some excellent work two, I think, quite important aspects. One is we have a full grasp of both the overview and the detail of our development portfolio we have much better clarity about what these projects are supposed to deliver.

And in fact, are much more able to prioritize the project suite do and the ones that we don't do and that is also visible in the fact after two years of hard yards, we have moved to a shared tech stack for the bulk of our catchment area. So very good progress indeed. I feel I should also mention that we're using AI in all kinds of areas, starting with improvements on coding productivity, providing lower cost support, both to customers and to others. And improvements in sort of selection sort of search search and selection. So overall, I think very efficient in this area. In people and culture and ESG, is an area that Barry, our Chairman and actually a number of the subcommittee heads have underlined we maintain our full commitment to ESG and in fact also in the principles of DEI despite the changing aspects of of the context. And I expect that this will continue in the future. And we are ahead of time fully compliant in our annual reports in that. Reflects to the fact I think also that that fully compliant report has reached no less than I think 500 pages. So very good overall.

And at this point, I shall hand over to John who will take you through the financial results you very much, Roy, and hello, everyone. It's a pleasure to be with you today to take you through the financials, particularly focused on Q4. I'm also going to take you through an extended out management outlook And I'll also be covering the new capital allocation policy that the Board approved earlier this week. So let's start from the Polish operations. The usual KPIs for the full year and the fourth quarter are laid out on the slide in front of you at the moment. Now let's start detailed comments with the two key KPIs that drive our GMV for the Polish market. And as Roy has been underlining, the key focus is around driving loyalty and frequency of our customers. Which means that the the spend per active buyer you see on the right hand side of this slide has been the key growth driver for GMV. For this year and all the preceding years in the recent past. We did 7.8% year on year growth in the fourth quarter. 2.1% progress Q on Q. And we landed on O4000 Zloty for the first time in terms of spend per average buyer, which is really an amazing result.

We're really happy. When it comes to active buyers, also had a good quarter, up 0.8% Q on Q, so 15,100,000 active buyers on the Polish market, 2.8% on a year on year basis. So putting those two KPIs together, that underpins the 10.9% GMV growth that Roy mentioned earlier. That's ZIL17.4 billion of GMV in the Polish market in the fourth quarter alone.

As Roy said, this was 2.3 percentage points faster than we achieved a year ago. And it's been achieved against the backdrop of a second successive fourth quarter where retail sales growth has actually been very mediocre. Nominal retail sales growth was around about 3% for the fourth quarter. A year ago, it was around 2.6%. We've managed to grow 2.3 percentage points quicker than a year earlier. We spent a lot more on marketing, as you've heard. We also invest a lot in [indiscernible] In particular during an extended Black Week in November. We also helped ourselves with very, very late cut off for the Christmas period. So all of those factors contributing to the faster growth. When it comes to category mix, same as in previous quarters, our Health and Beauty and supermarket categories continue to over index in terms of [indiscernible] The average selling price when mix adjusted is up about 1.14 percentage points for the fourth quarter. So showing very moderate progress Q on Q. Whereas the overall is obviously obviously down because of the over indexing of the lower frequency categories.

So then moving on to revenue. We delivered 16% revenue growth as usual, fast than our GMV growth. And this has been driven by the usual SUS of our key growth generators, advertising, our logistics services, and our FinTech business. All growing well ahead of the marketplace. The marketplace grew revenue 14.1% year on year on year. 10.9% of that obviously coming from the GMV growth. The rest coming from the increase in take rates. Which you see on the right hand side here. Take rate was up on a year on year basis 0.33 percentage points It landed at 12.01 for the fourth quarter down from 12.51 in Q3 and that's really reflecting two reasons. One is the usual seasonality that whereby merchants tend to exploit the fact that demand is highest do less promotion of their offers. And secondly, because as I mentioned before, we've reinvested quite a lot of take rate into having really excellent offers during Black Week period in November. Let's move on then to when you look on a full year basis, we've delivered ZAR3.6 billion and that's up 21.3% year on year. So phenomenal adjusted EBITDA for this business. When we look only at the fourth quarter, it's it's an 8% growth rate.

And the reason for the lower rate is essentially because earlier in the year, as we mentioned to you, we first of all started to lap most of the increase that we got from the Fit to Grow program. Which either improved margins or reduce costs. And we've also, as of Q3, lap all of the take rate increases that we implemented a year ago. Which means there's essentially not much take rate difference, only 33 base point difference in take rate as I just described. On the previous slide. So that means that the growth rates on adjusted EBITDA drift down towards the levels we're seeing in terms of GMV growth for the fourth quarter. But it was still $975,000,000 loss, 7.7% growth rate.

And our adjusted EBITDA margin to GMV is at 5.6% well within the medium term guidelines that we published originally back in March. Of last year. When it comes to the bridge itself, I think the key point to look at is the cost of delivery. You've heard Roy talking about the that we've been running around delivery during the course of 2024. $113,000,000 increase in cost is very low for a fourth quarter. It only represents a 0.23 percentage point increase when expressed as a share of GMV. Going into cost of delivery. And the volume growth that we've seen, which is obviously reflecting the growth in our smart base, and our GMV growth. Has been more than offset here by a fall in the unit cost of per parcel, 7.7% down year on year. It's coming from many sources First of all, the volume discount agreement that we had with Impost for 2024 in terms of accounting recognition of the discounts that we received were back end loaded into Q4. And secondly, the indexation of the long term agreement with Impost under that deal was also deferred and indexation effect in the fourth quarter. But other factors that have also helped continued mix mix shift away from Korea, as Roy was describing earlier, and also nearly five times more Allegro managed deliveries as we were discussing, is also helping on unit cost.

So very important and very strong performance on cost of delivery. [indiscernible] Moving on then to investment. And as you've already heard, we're starting to spend more at a typical level again after the year of Fit to grow in 2023. CapEx is up 62.5% for the fourth quarter at ZAR161 million, but I hasten to add that's still only 83.5% or as much as 83.5% when it comes to cash conversion. So a very strong cash conversion in this business. Most of the increase is coming on other CapEx so physical asset CapEx, particularly lockers and other delivery related investments. Also some spending on IT as we consume capacity surplus that we had back in the times of fit to grow. The development expenditure or capitalized development expenditure is up 30%, almost Zloty. We're still investing in the tech team, expanding our capabilities to run projects in parallel to improve the platform.

And obviously, tech engineers very sought after cost more on a year on year basis. It's very important to remember that we're going to stay really focused on return on investment even as the absolute spend increases going forward. And we stay committed to sweating the assets as Roy said earlier. So that's the Polish operation. Let me move on now and talk about the international segment and starting with the marketplaces. So as you've heard, we have three operational Czech Republic, Slovakia, and Hungary.

And here we actually had a much better fourth quarter than we were our own outlook fairly handily. Great progress on active buyers up by 500,000.0 to 3,300,000.0 A lot of the seasonal shoppers that hadn't really been seen on the marketplace The Czech Republic since a year ago. Return to us. We're also seeing increasingly a core group of enthusiasts who are starting to shop more and more frequently. And as you've heard, that is really the key focus over the next few quarters is to drive that frequency and thereby drive GMV. [indiscernible] Traffic is up year on year for Q4 seventy five percent, 137,000,000 visits across three marketplaces. Active buyers is 110% up at £3,300,000 The spend per buyer is up twenty two percent fourth quarter to fourth quarter. At $500,000 Lotte in comparison to the $4,000 Lotte we have in Poland, not bad for only eighteen months. Versus twenty five years. Moving on to GMV on the next slide. 68% progress year on year on GMVs, $689,000,000 for the fourth quarter. Revenue growing even faster, 79.5% to €66,000,000 and we still have a lot of headroom in terms of take rates, which are roughly not much more than half the level that we see in the Polish market at this point in time.

And adjusted EBITDA in terms of margin also showing really good progress down six percentage points from a loss of 26.6% down to 20.5%. For the fourth quarter of twenty twenty four. We're starting to see good progress in terms of cost per click on the purchase the purchase traffic. Reflecting improving conversion, reflecting brand recognition for the consumers. So very good performance for Q4. In the international marketplaces. Now let me move on talk about the the Mole segment. And as you heard from Roy, we're gradually or rather now very quickly finishing the transformation to operate Moll as a lean merchant that only sells on the the Allegro marketplace. To do that, we've been first of all turning off the CZSC owned shop and the malls mall store is in the final stages of being closed down. So during Q4, there was a lot of sellout activity for the mole inventory. We've also been pruning the selection very aggressively to try and focus in on higher margin. Items. And as we said in previous quarters, it's important to note that most of the 1P legacy retail sales of the Mole segment where aftermarketing expenses and delivery costs etcetera, etcetera not really profitable.

So the end result of that is that although we deliberately managed down the GMV really to it by 54% in the fourth quarter. Down to Zloty. We still only had a similar loss of 41,000,000 lots of as we had a year earlier. So that really underlines lack of underlying profitability in that legacy business. The savings that we've implemented on marketing expenses and SG and A have really helped. And as Roy has been saying, there's a lot more to come. Over the next couple of quarters. So that's the International business. You have related summaries on the next two slides and then we get to the group performance. And as usual, I'll limit my comments here to the situation. With leverage, we had a very, very strongly cash generative fourth quarter. Which resulted in our leverage dipping down even further ending the year at 0.77 times our adjusted EBITDA. And this is affording for us tremendous financial flexibility now going forward for investing in the business and also applying our new capital allocation policy which I'll talk about in a few moments. Also worth noting that we ended the year with over £4,000,000,000 of cash on the balance sheet.

So with that, let me move on from the financials to the management outlook. And this starts basically with confirmation that the the medium term business objectives set in March and that Roy has been taking you through earlier in the presentation, is rolling forward into 2025. It stays fully applicable. There are no changes to this page. And we'll be reporting progress against these against these different priorities from quarter to quarter. Where there are some differences are in medium term aspirations. Whereas the objectives say what it is we're focusing on. The medium term aspirations try to give you a feeling for how the financials are likely to look over a five year perspective, so out towards 2029. And we split these we first published these aspirations back in March of last year. And we've made quite a few updates following the recent planning round. The These aspirations are split into two categories, Kraut growth and profitability on the one hand and then investment guardrails for how we're using the Polish adjusted EBITDA is obviously the key source of cash generation for the whole group. So starting with growth and profitability, the key changes are first of all around Polish adjusted EBITDA margin.

We're very happy and confident in the progress that we're having in our growth engines in all three of them advertising, fintech, and delivery. And this gives us confidence that we can deliver the GMV growth that we're looking for at a higher margin than we had previously indicated. So we've lifted the range from 5.3 to 5.7 to 5.5 to 5.9 in this version of the aspirations. 5.9% was what we delivered in 2024. So we still have plenty of leeway here going forward. Moving on then to our international marketplace rollouts. As you've heard from Roy, we've taken a strategic decision that we're going to focus on it accelerating the shopper frequency and engagement in the three existing marketplaces as a top [indiscernible] And we won't consider doing any new launches until we crack this topic and we start to see really accelerating GMV growth because our existing active buyers are shopping more and more frequently from one quarter. To another. When it comes to the MOLs segment, as we've described, we're expecting to complete the transformation into a lean merchant in the first part of this year That should result in year on year losses dropping significantly in the second half of the year.

And open the way for a fully cash positive contribution to the group from the remaining assets in 2026. The marketplace we expect to breakeven within within four years from launch. Each location separately. So that means Czech Republic by 2027, the others by 2028. Overall last year we were we were projecting to spend 40% of the Polish adjusted EBITDA, 20% on CapEx, 20 on the international business. The update calls for now an acceleration of spend particularly on accelerated logistics projects on the Polish CapEx. So we're lifting the guardrail to 25%. And this is because we have all the foundations in place now to drive mix. To drive down cost. [indiscernible] Allegro.eu. And when it comes to the international marketplaces, we're over the peak in terms of requirement 15% we need for 2025. And as we roll out this plan, we should over time the cash requirements should drop towards zero by 2028. So when you put this together, the Polish adjusted EBITDA should be rising consistently over the outlook period five years. Should be dropping from 40% to about 25%. Over that time. And that obviously translates into massive free growth in free cash flow. Which then brings us to the new capital allocation policy which deals with how we intend to manage that free cash flow.

So this policy, which we the Board just approved earlier this week, First of all, starts with the key principles of how we're going to spend. That free cash flow. And the first priority is clearly investing in the business within the medium term business objectives that we described earlier. To find new projects that will actually enhance our organic growth or increase our margins will provide both at the same at the same time. Money is obviously available. We've got massive flexibility and that's the first priority. We want to run the business at a modest leverage level. And maintain significant liquidity to have operational flexibility In numbers, that means running at one times leverage.

For net debt and two times leverage for gross debt. Liquidity roughly 30% of revenue. When it comes to M and A, we're limiting our aspirations and ambitions to considering bolt on acquisitions around the existing [indiscernible] And particularly also capability focused M and A, a good example being the FinEye deal that we did couple of years ago that created the Allegro.eu engine. So having applied those three sets of conditions, there's very likely to be a surplus of capital in any given year. And if if that's the case as it is this year, we'll be returning that money in the form of share buybacks to our shareholders. We'll make the decision year to year When it comes to 2025, we've assessed this the surface capital at 1,400,000,000.0 zloty. And the Board are taking steps to have resolutions ready for the shareholders to vote through a buyback. At the AGM. So the final slide from me is expectations for the full year 2025. We're modifying our outlook policy and going back to annual guidance. After two years of providing quarterly guidance, The backdrop to this is firstly the increased visibility and timing around the MOL transformation and the growth of the international operations [indiscernible] mean it's now easier to project over a full year period once more.

And secondly, in our conversations with we know that many of you would appreciate having annual guidance. And so we're trying to meet that expectation. So let me start with the Polish operations. We're expecting at least nine and low double digit growth up around 11%. For 2025. That's between $66,200,000,000 and 67,400,000,000.0 zloty of GMV. As usual, that will feed through into far revenue growth. We're anticipating between 1417% growth. Driven by those growth engines. And take rate increase. Adjusted EBITDA we're targeting to be around flat margin around that 5.9% level. So depending on how it goes higher up the P and L, that equates to between £3,900,000,000 and €4,000,000,000 of adjusted EBITDA for the Polish business for 2025. [indiscernible] The CapEx increase is between $60,000,000 and 90%, most of it going into the acceleration of the logistics projects. Between €850,000,000 and 1,000,000,000 Zloty of CapEx in the Polish business. When it comes to international operations, for the first time, we're splitting the guidance or the outlook between marketplaces and the Mole segment. So I'll start with the marketplace. 40% to 50% year on year growth $2,400,000,000 to 2,500,000,000.0 of GMV. We expect that the efforts around frequency mean that this growth rate will accelerate over the course of the year.

Averaging the 40% to 50%. Revenue to grow faster, 55% to 65% growth, as I've said, there's plenty of headroom in take rate. And for adjusted EBITDA, a similar size loss on a much higher GMV and a higher incremental GMV year on year. With between a $350,000,000,000 and 40,000,000,000 and €400,000,000 investment in scaling the businesses. The marketplaces. When it comes to the Mole segment, the reduction in the scale of the business going to translate into another 55% to 65% decline in this legacy GMV. As the business moves to be a purely a merchant on Allegro. Revenue falls just as much as GMV because GMV and revenue being almost the same number. But the adjusted EBITDA loss will be reduced probably between 2030% And as I said, the second half of the year should be much better in terms of year on year. Loss progress.

Final thing here to mention is the adjusted EBITDA for the group. Because of the progress in international, it it means we can look forward to higher growth in adjusted EBITDA at the group level between 1017% than we're targeting for the Polish business. And this is the first time we've been able to say this since we embarked on our international expansion with the Mo acquisition back in 2022. So that's the final comments from my side. I'm going to hand it over to Roy for a quick summary of key takeaways. Before we get on to Q and A. Super. I think this is a fairly weighty and lengthy presentation. I think in a number of areas, we've gone through more detail than is usual. And so we thought it was a good idea maybe to do a brief summary of what our we think are some of the key takeaways. I think number one is having a single tech stack in four countries really does have advantages. We can extract the lessons we have in each one of these countries' marketplaces and apply them everywhere. So overall, continually improve this at a rate that's is a little bit easier than if you're operating only in a single country.

It's the foundation for international growth. And for speedily updating the customer experience. I think the second thing is there is one absolutely vital driver for growth. It's a key leading metric for us. And that is what we call buyer loyalty or shopping frequency. And we know that as we continue to boost this, not only in Poland, but even more importantly in our international markets or non Polish markets we know that growth will come and it will come at a decreasing cost because typically loyal customers don't need to be reminded to come shop with us. So there's a lot of virtuous progress here. Probably the thing that I've been asked the most frequently about is what our plans and logistics and what kind of progress we're making. And I think you see now we've made some systemic changes means is the more we disperse and reallocate volume, the lower our cost will be, be it with our own network or with our partners. But all of these make sense in the mix. To drive drive for the best combination of speed, reliability and cost. Finally, we've really created a cash generating machine. That's particularly true for Poland, but I think you see early indications that that cannot possibly true be put through also for our new three marketplaces.

And we're going to do everything, every effort to continue to make that cash flow strong and reliable. That growth we're going to sorry, that flow we're going to invest in growth We promised you two point five years ago profitable growth and I think we are rapidly approaching that goal outside of Poland as well as within. We want to keep financial leverage modest and John has explained to you what the guidelines are there. And we'd like to also give returns back to shareholders where we can. With judicious and cautious use of buybacks based on what is available after we've covered the previous things that I've just talked about. So please keep in mind, of all the many, many things we talked about today that I think really these are the key ones. Of course, I'm sure in a few places, tonight someone will be sipping a beer rejoicing that we've returned to annual guidance and we thank you all for your patience. So at this point, I'm going to hand over back to Tomic, who will guide us through Q and A. Thank you, Roy. Thank you, John. So Yata, we are ready to start the question and answers.

Session.

Ladies and gentlemen, at this time, we will be The first question comes from the line of Tyrone Cesar with Bank of America. Please go ahead.

Yes. Hi, everyone. Thanks for the call and the opportunity to ask questions.

Have three, but I think they're easy. The first one, is really to understand better explained some of it, but to understand better what drives you comfort in increasing the long term target for the Polish EBITDA margin? And if it has anything to do with the higher CapEx investment and the returns associated with better better delivery costs that this will translate into? And also how you factored in competition into that guidance? The second one would be on the long term guidance for [indiscernible] And there what I would like to ask is how fast do you think the I mean, so you've obviously guided for 2028 where you said, look, the international is going to be breakeven. But I think now we're roughly run rating at 17% negative of of Polish EBITDA as an investment. Should I assume that it gradually goes to zero Maybe it's percent or 12% next year and etcetera, etcetera. I mean, 2026 and 2027? Or is it is it basically going to be continuing at this high level of spend for the next two years and maybe just as it just decreasing in 2027? And then I think the third question obviously, you move to the year end guidance, which is extremely helpful.

Is it possible to ask you to make a comment on current trading in Q1? More on the revenue side? Thank you so much.

Okay.

Thank you, Cesar. Thank you for the questions. Think these are all more my area, so I'll try and help you. When it comes to the margin, I think there's two key data points to take into consideration. The first one is managed to run 2024 let's say, hotter in terms of margin. Than the outlook that that we shared in March of last year. So the aspirations that we have for last year were talking 5.3% to 5.7%, but we came in at 5.9%. That's the first thing. So for similar GMV growth, as we had last year's aspirations. So low double digit growth in the Polish business. When we look at the progress across advertising, across FinTech, and in particular across delivery where we've introduced these new brandless and Allegro delivery capabilities in the last twelve months. We're more and more confident that we're able to run the business at a higher margin for a given level of growth. And that's why we've been able to move up the margin.

The question, I think part of the question was relating to the CapEx. You saw in the slide that Roy presented that because of the way that we're concentrating in dense areas, and very judiciously sweating the assets that we've already invested in, We're reaching the point now where our Allegro.eu operations are getting down in cost to the prices that we're paying some of the alternative suppliers. Which means we're about to move into territory where it's actually going to be accretive to EBITDA moving forward. It therefore makes sense to double down and invest faster and keep pushing our capability in that direction. But always being very careful in terms of making sure there's a return on investment on the assets. Second part of your question was around the long term guidance for international. It's really I think you need to look at it in two steps. I mean the 15% is a guideline for 2025. By the end of twenty twenty five, [indiscernible] the mole cash flow consumption should essentially be finished. So by 2026, that part starts to drop away. And for the international marketplaces, they're basically those margins should be gradually improving towards zero, towards breakeven from the minus 20% level that we have at the moment.

Over the four year period.

So gradually, after a big improvement in 2026, it should be fairly gradual through to 2027, 2028. And the final question was about the current trading. There is such a comment in the management report We've been seeing in the first couple of months very high single digit for the Polish market.

And much, much stronger growth obviously in the international marketplaces. And mall continuing to contract at roughly the same rate as in the fourth quarter. Obviously, the most important is the Polish. This 9% growth rate is something that will probably will get a kicker right at the end of the first quarter because of the timing of Easter. So we should land pretty comfortably within the guidance. The guidance is 9% to 11% for the full year. Later in the year, we've got a few initiatives around loyalty that we're planning to add to our functionalities. That may help with the growth. We also listen to and take into account macroeconomic commentators and analysts. Who are calling for a stronger consumer in the second part of the year. So those two things together should lead us comfortably towards the objective, which is double digit growth. Hopefully, that answers your questions.

Thank you so much. That was very helpful. Thank you.

The next question is from the line of Holbrook Luk with Morgan Stanley. Please go ahead.

Yes, good morning, everyone, and thank you for providing both annual guidance and more color on your logistics network today. I think that's really helpful. I've got three questions. My first is just in November, you decided to accelerate marketing spend and designate more towards social media campaigns. And I think at the time you were saying it was gaining more mind share against those like Timu. But given the beat in Q4, your campaigns just more effective during the course of Q4? And my second question is just on you've just mentioned that you were pausing international expansion. Just to clarify, does that mean just not going into Croatia and Slovenia from the marketplace perspective? And focus on existing actives in those geographies that you already got a marketplace established in? And then my final question is, I know Roy said not to obsess over your in housing of logistics capabilities. But just on Slide 15, you do have a significant step down in your unit cost or your cost per delivery versus your highest price supplier. I just want to what's the confidence behind the improved economics within that? That would be very helpful to understand. Thank you.

Thank you very much for the questions. I'm going to take the first one on marketing and ROI will take the two logistics related or the international and the logistics. Yes, when it comes to the marketing spend, as Roy said, it's both it was both defensive and also offensive in nature. In the in the fourth quarter. Did come in very marginally below the guidance. It remains a competitive market. With a consumer that's fairly reluctant to spend. And I wouldn't say that we over delivered because if we had them, we would have had probably a stronger GMV than the one that we came in on. But everything that we were doing certainly was working. But as I said, the retail environment was fairly weak.

Okay. So the pause of international expansion, I think there was just can you repeat the question? I just want to make you say are we really just pausing for the the two other markets? Was that the question why or was felt like there was a second half to that question?

Is this just a pause not going into Croatia or Slovenia with the marketplace Or does it also include basically focusing primarily on your existing actors that you've already acquired and otherwise far more disciplined approach in the existing markets that you're already in?

Okay. I thought there was something else behind it, but now I got it.

Look, this is retail. We call it tech driven retail. Sometimes we masquerade as a tech company. But really, the best we are is a tech driven retailer and in retail, whether it's online or offline, the key thing is flawless execution. You really have to be really, really good at serving the customer. Working really, really well with both your suppliers or in our case merchant partners. And we've had an established way of working in Poland And we've brought most ingredients of that way of working into new markets. What we've learned going into new markets and also because of new entrants in Poland that there's some tuning that needs to be done. One of those tuning was introducing the product product base to view the productized view on the Polish marketplace And there are a whole series of other things that we know that we just need to get better at. Refreshing the SMART program and rewarding customers for the loyalty, making it really clear to customers what the benefits say of Smart are and shopping with us And that is really where we were and we actually promised that we would do something like this, that we wouldn't go into new markets until we were confident that we were really, really executing well in the existing ones.

And this is just I think a natural pause. It enables us to realize a whole bunch of synergies in terms of the cost side, And now we have a a great space in this next two quarters really to introduce a whole bunch of further innovations in terms of how the marketplace works. So it's a pause as opposed to a stop. And then I think as we as the year progresses and certainly I think would say with some confidence into next year, we we'll be looking at what is a place that makes next sense to go to. But let's get it right. Let's get profitability right in these new markets because again, the further you move, the more commitments you have and you need to be sure that you have the scale and power behind behind you to successfully go into new markets. There's nothing worse than dipping your toe into some place and you have to go with conviction. So, the other question was about logistics. And I mean, look, logistics is really simple. Volume is king. [indiscernible] It is the all determining factor whatever assets you have, [indiscernible] more volume we run over them the cheaper your unit cost needs to be.

And normally volume also teach And that is what's really driven that. We started in 2022. That is frankly not that long ago. And we've boosted volume considerably. We already told you the the growth, I think it's over 100%, 115%, I think it was. In the course of the year and been very judicious in where we've expanded put in new infrastructure. And that will continue. And then again, it's it's I don't think any of us are really wedded to our own capability. I do think we're probably a little bit faster at executing than maybe some of our other highly talented and capable partners. And it's just an arbitrage. About redirect the volume to whoever is performing best and that is also true for ourselves. Did I answer your question on logistics sufficiently?

Yes. Thank you very much. The next question is from the line of Resetna Roman with Goldman Sachs. Please go ahead.

Yes.

Hello. Thanks for the call and congratulations on the strong results.

The first question on international. I appreciate the comment that you have managed to improve order frequency, but could you please elaborate to what extent it was driven by increased marketing spend and other initiatives and how sustainable this improvement going forward into account the market structure and the different customer shopping habits compared to Poland? Which you've liked previously. And in general, how would you evaluate market across international markets over the past few months. As you appeared to go more like head to head with them And do you see any impact from these marketplaces on your pricing power seller acquisition, customer retention? And the second one is just just on the new sea water process. If you could provide an update on that and should we expect any impact on the company's current direction once the new CEO is appointed? Thank you.

Yes. Thank you for the questions. The first question around the marketing efficiency, wasn't quite clear whether you were asking about the international or the Polish business.

International.

Okay.

Yes, so I'll take that. Do this one. Yes, what we're actually seeing is that the first the first signs of really improving flywheel are starting to emerge, especially in the Check business, which has been running the longest. Because the brand recognition is improving, gradually as well the frequency is going up The end of that is reflected also in a better conversion rate Increasingly, we're able to buy traffic which is always the fundamental starting point when you enter a new market, We're able to buy the traffic at falling cost per click. Which means that the the margin that we're or the loss relative to the GMV that we're generating in the Czech market is improving quite quickly. You only see a six point improvement overall because we had two new launched markets, Slovakia and Hungary Hungary, we're not really advertising, but in Slovakia, we had our first Christmas where there was a lot of ATL relative to the GMV being being generated, right, to help build the brand. So yes, overall, the marketing spending is getting more more efficient. In those markets.

When it comes to Temu, they're very aggressive everywhere. We're defending our position very strongly especially in Poland. Which is one of the reasons for the higher the step up in marketing spend compared to last year. Then I'll move over to Roy. I think, for the CEO.

Was the second question. Okay. Sorry, I covered that.

Sorry for that.

You deal with the CEO?

So regarding the CEO search, there's really not a huge amount more than we can reveal at this point. There are a number of candidates that have been in the process. Process is being led by our Chairman, Gary McGann and our Renunco Head, Nancy Crookshank, And we're targeting to have this [indiscernible] the future CEO to be at least nominated And I think there's a very, very high confidence level that we'll achieve that. Who knows? So I can't even comment about when when a potential candidate could join. But I think you should have every confidence that there will be a fairly smooth transition between me and whoever succeeds me.

Okay. Thank you very much.

The next question is from Ross Sandry with Barclays. Please go ahead.

Great. Good morning, everyone. Three from me, if that's okay. The first one is to I guess, just to come back to the logistics costs. I mean, if you can give us a bit more view in terms of what your medium term ambition here is and what kind of gain we're playing? Because you had this volume based agreement within Post in 2024, the bank to an indexation in 2025 and you're diversifying on your network. Obviously, the contract with them expires, I think, in 2027. Can you just give us the puts and takes kind of into that renegotiation? And kind of what you're hoping to achieve as we think in the mid to long term around managing your logistics costs? That's the first one. Second one is when I look at the margin guidance for Poland of kind of broadly stable in 2025. And then the medium term guidance is is a bit lower than that. Why would the margins go down the medium term? Just give us a sense in terms of what kind of downside scenarios you built into that or any flex that may exist? Mean, the third one, I guess, is to ask you about M and A, which is one of your capital allocation priorities.

Is there anything in the pipeline now in theory what kind of thing would you be interested in Okay.

I'm going to do that. I'm going to do the huge passion of mine. And that is I think there's a general consensus that we don't do very large acquisitions well. And quite frankly, I don't see a lot of large opportunities that are truly opportunities. What is really useful and I think with ThinAI and with OpenNet and with a few other smaller acquisitions that we over time, I think John likes to call these bolt ons, which are basically fundamental competency, both acquisitions where you're actually buying what the founders what the founders have between their ears they have been very successful indeed. Most of the lockers in Poland, for example, run on open net software. That includes Impulse. And And the competency that we acquired with that I think was really has been essential to some of our success. Similarly, Finai AI brought together a group brought to us a group of individuals who lived and breathe FinTech were think, quite good with with on the product side as well as sort of developing the software. And those sorts of smaller acquisitions where we're actually acquiring know how as much as anything else are things that are interesting, but they're also comparatively speaking cheap because they're small.

And that I think is by and large what we go for. In terms of logistics costs, I think, again, it's I don't think we're really interested in going for volume based deals anywhere at this point because what we also see is a lot of the new participants in Allegro delivery and brand list are coming at it with assets that need to be utilized and therefore they can [indiscernible] we'd like to be able to move between the various ones to do that. What I would say though is that to some extent, our success from impulse willingness to invest in assets ahead of demand. In times actually when perhaps no one else in the market was willing to do that. And so with always with these things is we also need to track who is investing to support our volume what kind of unit costs they can provide for the same or better delivery reliability and click to delivery price. It's click to delivery times. So it's a mix We know that the returns that we're getting in our own rather small investments in the past year in particular has been really quite high and we want to stick to that.

Ideally [indiscernible] number one thing in logistics is Christmas is king, and you want to invest in what assets you need to get through the Christmas peak and no more. Ideally, actually run-in 105% to 110% capacity.

So that speaks to actually rather judicious view in terms of our own capabilities based on what's available from our other suppliers. So are they able to ramp ramp their capacity in line with our needs.

And the second question from Andrew was about why would the margins potentially drop from the 5.9% level that we had in 2024. I think the starting point is to look at cost of inputs, in particular cost of [indiscernible] Real wages have been rising fairly steadily. Not only in Poland. Similarly, software is also especially software as a service Sometimes you have suppliers who are very deeply embedded and prices can go up quite quickly. So the first issue that we need to take into account is cost pressure. We've been offsetting cost pressure with take rate increases, which frankly the merchants have absorbed with little negative impact over the last couple of years. But we are acutely aware there's a limit to that and we really don't want to bake into our plan constantly increasing the prices that we're asking the merchants to pay. So therefore, there's an element of conservatism in here in terms of what may happen. Terms of the operating margins. When it comes to the three growth engines, which are basically their to help us on the one hand with revenue, but also even more so with margin. As I've said a couple of times in the presentation, they're all performing really well and all have a potential to provide support to our margins, yes, and counteract this ever increasing pressure on people cost and and software.

And then the final question, that was that's covered all of it, right?

Mr. Roch, are you done with your questions?

Yes. Thank you.

The next question comes from the line of Strauss Meer with BNP Paribas. Please go ahead.

Hi, good morning and thanks for taking my questions. A couple of them have already been answered, but maybe just some clarification on some of them. Just starting on Timu, you said that they're quite aggressive everywhere. But is the just in terms of buying traffic? Are you seeing this impacting volumes as well? And then maybe just on international shopping frequency, where you've seen in Cheech here, the seasonal customers coming back in Q4 twenty twenty four versus a year ago. Is there a risk that Q4 becomes quite heavily profit weighted? Or have you seen that the shoppers have been quite stable between Q4 and into Q1 this year? And then just a last question on the free smart customers in international. What has there been any improvement of these converting into paid customers? Thanks.

So look, as the online segment continues to grow and take an increasingly large share of consumer spending it attracts more and more players, particularly in our region where customers every year or almost everywhere every year are doing better than the previous year, even though may not always feel that way. And Temu in terms of traffic, has addressed, I think, shopping style that's relatively new, which is shopping for entertainment. And they've done all sorts of things that make make make it fun to buy things you hadn't even considered buying. And that is reflected in where some of the the traffic is actually going. So we do see their share of overall traffic increasing We saw that they came a little bit off the boil over Christmas, which is not surprising because their click to delivery times are not really competitive for Christmas shopping. And it certainly affects also what we have to spend on marketing that was particularly true when they first came into into marketplaces where we trade. And I think that will continue. I think though overall some of these new entrants have had different view to sort of not only trading conventions, but trading regulation.

You might even say they bid testing the levels of enforcement and I think that is going to affect them quite severely in the future end use. I think you see this in all markets, at least the Western markets in which where Temu and Shane and some of the others trade. So I wouldn't be surprised if they top out at some point.

Either that or they're going to have to invest substantial amounts in local positioning inventory positioning and the rest. In terms of I think it was shopping frequency, I can't first of all, I don't think we say anything about paid versus nonpaid memberships yet in international, right? [indiscernible] So obviously, when you're building loyalty program in a new country where the shopping frequency is not as high as it is in your home country, then it's going to take a while to build. I mean, you do not get to where we are after twenty five years in the space of eighteen months.

So So I would say it's fair to say in general terms that frequency is both lower and paid membership with Smart is also lower, but these are mechanisms to to boost frequency. To that, I would add, simplifying the online shopping experience, We made, I think, some great improvements in delisting certain types of merchants from the marketplaces outside of Poland. I think had a rapid effect [indiscernible] quick effect in in the perceptions of consumers and whole bunch of things lined up Again, replicating all sorts of things across all of the markets that will not only increase trust, but also ease the shopping experience, which again drives loyalty.

So I think really at the moment on sort of international frequency, those are the sort of the general things that we'll cover.

Sorry, if I could just maybe clarify on the international shoppers. On the point where you said that you see the Tichechiha customers coming back a year later for over Christmas, Is that a risk that it will happen again this year, meaning that Q1, Q2 and Q3 are potentially a bit lighter and then we expect a bit bigger volume in Q4.

One thing, and I think John wants to add on it. Look, it's like it's retail and Christmas, there's clear seasonality typically in Western markets right about now around the Eastern time, is a typical low point in terms of shopping frequency and intensity. Christmas is a high one. So it is almost always the case that you acquire more customers in that period of the year because that may be the only time of the year that many of them shop online. But what we also see is that the customers that we acquire during the Christmas period are the ones that typically with some attrition progress through with us each year in through the years. So incremental gains in Christmas translate [indiscernible] customers in in the subsequent quarters. So I think that's true in most markets. I think it is true that The Czech Republic, we're not in Czechia yet, but certainly in Czechia, We're is I think probably a little bit more seasonal than some of the other markets. John, do you want to say something? [indiscernible] No, I think Royce covered it pretty well, but the the business that we have with occasional shoppers as a starting point, tends to be very peaky in the in the fourth quarter because that's the main shopping season.

Happens over time is people get more loyal and increase their engagement is it starts to migrate to be more of an everyday habit to come and shop on Allegro, which is what we see in Poland where people are spending eight times 8x more than in in the international markets. And you don't see nearly the same seasonality in the Polish business as we see at this point in time. In international. So year on year things should start to level out as the international businesses start to resemble more and more what we're offering in Poland.

Thank you for that color. Super helpful. Ladies and gentlemen, this concludes our audio question session. I will now give the floor to Mr. Bozniak.

Thank you, Jora. We have run out of time. I promise that all the questions I'll ask online will be responded to. [indiscernible] And if you have any follow-up questions, please address them at ir. Allegro.eu. Eu. We'll be happy to help. And thank you very much for participating in this presentation and speak to you after Q1.