Bally's Corporation

Ladies and gentlemen, thank you for standing by. I am Yota Yokoro's call operator. Welcome and thank you for joining Allegro Group earnings call and live QEPTUS to present and discuss the four-quarter 2024 results. All participants will be in a listen-only mode and the conference is being recorded. The presentation will be followed by a question and answer session. Anyone who wishes to ask a question may press star followed by one on their telephone. If you wish to remove yourself from the question queue, then you may press star and two. You may also type your questions on the webcast screen. At this time, I would like to turn the conference over to Mr. Thomas Posniak, Investor Relations Director. Mr. Posniak, you may now proceed.

Thank you, Yara, and welcome to everyone on our call. Let me introduce the presenters of today. Roy Perticucci, the CEO of Allegro, will provide you with the overview of the full year and fourth quarter business highlights. And John Istik, our CFO, will guide you through financials and the management output. Roy will conclude the presentation with key takeaways. As usual, our results presentation is available for download from our investors webpage at Allegro.eu. You 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 the statements. Please make sure you review the full disclaimer on slide number two. Also, please note this presentation and the Q&A session are being recorded and will be available for a replay on our website at allegro.eu. And with this, I would like to hand over to our CEO. Roy, the floor is yours.

Thanks very much, Tomek. It's my pleasure to present to you for the third and final time as Chief Executive Allegro 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 for 2024. We crossed the $60 billion Zloty threshold just in time for our 25th anniversary in early December of last year, and we closed the year with an overall $64 billion GMV for the group. GMV grew overall by 9.6%, revenue by 6.7%, and adjusted EBITDA grew by 17.9% to around $3 billion. CAPEX, as we promised, would do, inflected last year and increased by 31% and ended the year at $600 million. Overall, the EBITDA performance, I think, reflects overall the margin progress from advertising growth and continued work on Fit2Grow 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 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 particularly in the very strong Polish performance. Overall, we outpaced the retail demand as a whole by two and a half times. And the average annual spend per buyer in Poland exceeded around 4,000 złoty. 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 income to 2 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, a seasonally lower take rate for Q4 and marketing investment that rose to 2.8% of GMV. That's 50 basis points up year and 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 multi-year priority framework. We tuned it, I think, 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 grade. 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 cutoff, which was at 11 o'clock on the 23rd. So I think that actually contributed to some of the uplift in the quarter. And our selection, now we express the products, sorry, we express selection in terms of products is driven to a full 100%, 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 8.3 million for the group and 7 million in Poland. So robust growth in smart leadership also outside of Poland. And purchase frequency, that all-essential measure that drives all of our GMV uplift. Shopping frequency went up to 22 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 163,000 on the Polish marketplace, the place that's up 10% year and year, but the concept of list once 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 where we've seen an increase, 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 doubled the turnover or the GMV outside their home country as they do on their marketplace in their home country. I think it's just showing you that as we have effectively a single marketplace spanning four 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 attractive 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 marketplace and passing that opportunity to buy at more effective rates to our own merchants who 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 Pay 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. loan generation over the past two years has grown at a steady 41%. 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 500 million Zloty. Of course, one of the key reasons why we wanted to do lending to begin with was this effect for GMV. We've increased the lending limit to 9,040. The enhancement of lending, of course, drives the GMV finance, which has grown by 37%. There are more products on the way here. We have already launched the Visa card, Allegra Pay Visa card, which 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. So before I move on to the next slide, I'd like to say a few words of introduction. I think the 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 a 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 into out-of-home, and I'll get to that in a second. The first thing I would say is already in Q4 of 2022, 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 of value from 40 Zloty 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 lockers. So that's been, I think, one of our early accomplishments. The brandless courier is the 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 want it to be delivered to a particular address with the Brandless courier, the customer simply puts in their a 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 part of the graph on the right-hand side, since we introduced it in about Q1 of 2024, 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 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 the same number of assets. And once Orlan Paczka 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 curry that offers the best combination of speed, reliability and cost. And that discussion of managing volumes flows through, of course, to our costs. If you're running decidedly higher volumes and VOLUMES HAVE INCREASED ALMOST TWO TIMES, ACTUALLY OVER TWO TIMES OVER THE LAST YEAR. IT MEANS THAT UNI COSTS DECLINE MARKETLY AND YOU SEE HOW THINGS HAVE DROPPED DECIDEDLY IN THE 22 TO 24 TIME PERIOD. WE ARE NOW PAYING OR THE COSTS THAT WE HAVE PER PARCEL TO DELIVER IN OUR OWN CAPABILITY 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 is to generate choices amongst 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 participants in both Brandless and in Allegro delivery are looking for volume. They've made sizable investments. And now it's a question about how can we actually 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. 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 delivery, We have a total of 16,000 lockers to choose from, which is roughly where InPost was in 2021. All of us are, of course, planning to invest further in the coming year. And we really invite any carrier who is interested to participate in the Allegro delivery program. So I think very heartening progress. I should answer at this point that, Our own plans for expansion are relatively modest, probably not more than 2,500 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, but particularly cost. And we're not interested in building a 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 back-end networks in terms of sortation and in delivery, particularly in areas that are maybe not best served by complementary networks. We opened two more marketplaces last year, so three in rapid succession in about 18 months. I think we did quite well during Christmas. GMV 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 being very well received there. In the quarter, we added nearly half a million active buyers in the international segment. So we now have 3.3 million overall. And as I mentioned earlier, 1 million in smart. We also have a large number of merchants. 70,000 merchants from Poland are participating on the marketplaces in Czechoslovakia and Hungary. That's up 12% for the quarter. And the number of local merchants, so the merchants active predominantly in the czech republic and slovakia has grown by exactly a third quarter and quarter and again that's i think something that i'm personally very excited about because of connecting merchants in our catchment area to customers throughout the country the catchment area we serve now a lot of your questions uh uh have been talking have been been about mall And I think mall is really taking shape as a lean merchant. 10% of a 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 CSNC legacy platform late last year, and we're scheduled to shut down the uh, the mall legacy platforms, uh, in the course of this, uh, this coming month. Uh, and, uh, I think overall that means that a couple of things have happened when we will be able to have a, 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 to be realized in the next few 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 and building conversion, really refine the model before we expand further. That doesn't detract anything from Croatia and Slovenia. What we have here is already with Mimovor, say a market leader or a segment leader in their respective countries. And so we're in no rush to further expand until we've 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'll continue from there. So as a final slide in conclusion, something I've already touched on, David Roberts, our CTO, and his team have delivered over the last two years some excellent work in 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 projects we do and the ones that we don't do. And that is also visible in the fact that 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 coding productivity, providing lower cost support, both to customers and to others, and improvements in sort of selection, sort of search and selection. So overall, I think very efficient in this area. In people and culture and ESG, this 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 the context and I expect that this will continue in the future and we are ahead of time fully compliant in our annual reports and that reflects to the fact I think also that that fully compliant report has reached 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.