Allegro.eu S.A.

Ladies and gentlemen, thank you for standing by. I am Jota Yokoro's call operator. Welcome and thank you for joining Allegro Group Earnings Call and Live webcast to present and discuss the second quarter 2025 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 all participants of our call. Let me introduce the presenters of today. Marcin Kuczmir is the CEO of Allegro Group, who will provide you with the highlights of Allegro performance in Q2 and summarize the key takeaways. And Mr. John Istik, our CFO, who will guide you through the financials for Q2 and update of the outlook for the full year 2025. As usual, our results presentation is available for download from our investors webpage at Allegro.eu. You may also download the 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. 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 areco.in. And with this, I would like to hand over to our CEO. Marcin, the floor is yours.

Good morning. This is Marcin Kuszmierz, CEO of the company. Thank you for introducing and welcoming the participants of today's conference call. At the beginning of our meeting, I would like to share the key financial and operating results achieved in the second quarter of 2025. Detailed information will be presented by John Istik, our CFO, in the second part of the presentation. GNV on Allegro in Poland was close to 10% and more than twice as high than nominal growth in retail sales. We showed rapid growth compared to our competitors in the e-commerce industry as well as traditional retail chains. We exceeded 15 million active buyers and also passed 4,000 Polish Zloty GMV per active buyer. Good results in GMV and increase in the number of buyers resulted in strong revenue growth over 18% year-on-year. Almost every part of our business developed well, but our advertising business line deserves special mention with over 30% growth year-over-year. It is also worth mentioning the take rate, which exceeded 13% in Poland and improved by nearly 5 percentage points. We see that we still have very good potential for further growth in Poland. For customers in Poland, Allegra is the first choice and we are consistently building our position in the Central Eastern Europe. At the group level, GNV increased by 9%, which was influenced by continued optimization of the mall group. At the level of international marketplaces in CE, we achieved excellent GNV growth and demonstrated Allegro's consistency in building a strong position as a regional leader. The number of active buyers in the group exceeded 21 million, with GNV per active buyer increasing by over 4%. At the group level, our revenues grew by over 10%, again with a good outlook for the future. Strong GNV growth and excellent revenue growth had a positive impact on adjusted EBITDA, which increased by 14% in Poland and by over 20% at the group level. Thanks to that, we are upgrading revenues and adjusted EBITDA outlook towards the top end of the range. We are constantly continuing our investments related to the development of the marketplace's functionality and making it even more attractive. We are also investing in the development of logistics infrastructure that supports the expansion of the Allegro delivery program. As a result, our CAPEX expenses increased by 67% to over 200 million Polish zloty. It is also worth mentioning the reduction in financial leverage, which was supported by strong free cash flow generation. Let me now present the four pillars of our development. These are the strategic directions which we focused last couple of years. We are constantly investing in the development of the marketplace, our core business in both Poland and the CEE region. In consumers, the widest choice of products is your purchase and range of added services. We are also developing new growth drivers, which on the one hand strengthened our core business and on the other hand built a long-term competitive advantage. They have a positive impact on the pace of our business development and make our business more diversified. I am talking about advertising, financial services and logistics. With each quarter, we are growing stronger in the markets of Central Eastern Europe. Customers from Czechia, Slovakia and Hungary are increasingly shopping on Allegro, building relationships with us and taking advantage of our loyalty program. They increasingly treat us as one of the main places to buy products based on our wide selection and attractive prices. We want to continuously improve our value proposition for buyers and sellers in the region so that, as in Poland, we are their first choice. We are also strengthening our foundations, technological, business and human. We use a modern technological platform within the group and we are building a culture focused on innovation and development. We are a company that invests in long-term growth and strengthening our market position. For a moment, I will focus on the value proposition we offer to buyers and sellers in Poland. We invest heavily in personalization and programming products to the expectations of consumers and business customers. Allegro is a place where you can find the widest range high-quality branded products. We constantly attract new sellers to the platform. They represent almost all industries and business sizes. They are global corporations as well as local micro enterprises and have perfect understanding of customer expectations and needs. When I joined Allegro a couple months ago, we almost immediately started a discussion with the management team and the board about the possibility of accelerating our growth and strengthening our market position. Allegro has almost everything it needs to conquer new market segments and attract new customer groups. It is the leading online shopping destination in Poland and we see further prospects for strengthening our position. So we are analyzing the market and the attractiveness of investment in its individual segments. In the coming weeks or months, we will discuss and approve strategic ideas for making potential investments with the board. We have launched the process that we're calling Accelerated Evolution. Our ambition is to be the leading shopping destination for current customers and customers representing future generations. We want to be a platform that addresses customer expectations and needs and is a friendly ecosystem that supports the growth of our partners. Let's start by discussing the core marketplace and how we see opportunities for its growth in the future. We will certainly accelerate investments in the development of marketplace functionality. For 25 years Allegro has been the first choice for buyers and sellers in Poland and Central Eastern Europe. We see potential in combining the functionality and added services of the 3P and 1P models. Everything that is the best about that. The 3P model reminds our foundation and we do not plan to expand our own product range or maintain larger inventories. What inspires us in 1P and what we add to Allegro is sector expertise, consulting and even better product management. Now I will focus on the possibility of expanding our marketplace with new categories and market segments. The natural direction for the development of marketplace is expansion of product offering. We currently have over 80 million products, but we still see opportunities to add some new product categories, accelerate GMV growth and increase the frequency of purchases. We also exploring possibility of cooperating with brands that they are not currently present in Poland and see to become a gateway for their market expansion. Services are a new area of interest for us. We are analyzing and looking with curiosity at the rapidly growing services segment in recent years. We are carefully looking at the segments with the largest market share and the greatest potential, both those that support the sales of products, financial services or insurance, as well as those that are independent. Customers trust Allegro. They have great relationships with us and they want to grow with us. So we believe that we will be able to create for them some new special unique value. The next point is potential externalization of services produced at Allegro as another area that could potentially support our growth. We're considering selling some services outside the marketplace. We create world-class products and following the example of global players, we're thinking about selling them in other parts of the market. Our Allegro Pay is the best buy-now-pay-later solution on the market. Our logistics infrastructure is the engine for the highest quality services. This is a potential opportunity to build relationships with the new groups of customers and sellers. we see a lot of interest and demand from merchants. We're talking with them about joint opportunities for growth, business development, and new directions for expansion. Finally, our goal is to update our value proposition so that customers continue to see its uniqueness and fully appreciate its value. For clarity, I want to underline that presented directions of development are fully consistent with the current strategy and are still the subject of our analysis and consultations with the board. We're constantly investing in improving our value proposition for buyers and sellers. In the first half of the year, we developed a shop-in-shop service combining the shopping experience known from 3P and 1P models. The solution has been recognized by regional and international brands such as Finnish, HP, Inglot, Cashier or Pampers. The number of authorized sellers representing well-known brands has also increased significantly. Now we have over 3,000 of them on Allegro. Thanks to better management of AML and KYC processes by Allegro Finance, we have improved the merchant verification process. As a result, new merchants can start selling on Allegro much faster. As part of the partner channel, we are working with merchants to further simplify processes. Our ambition is to have the most merchant-friendly ecosystem among European marketplaces. Over 1.5 million products in Poland and nearly half million in Czechia are covered by the best price guarantee. This is further confirmation for customers that Allegro is the best shopping destination. With us, they can save some money and time. And it is also worth mentioning the prestigious awards we receive in the second quarter. Grand of the Year, Best Marketplace and the Best Shopping Experience. Smart is one of the leading loyalty programs in Europe. We have added new benefits to it and to activate and reward its users. The program now has many new additional features, fun and gamification, unique deals and benefits to be used on Allegro, but also outside the platform. Smart is extremely popular and attracts hundreds of thousands of new users every year. They also have access to unique events and promotional campaigns. In Poland alone, they are already over 6 million subscribers. We are happy to announce that Allegro Delivery has become the program serving the largest number of parcel lockers in Poland. Thanks to their new agreement with DPD announced in recent days, their number within Allegro Delivery has exceeded 33,000 and the number of pick-up points has exceeded 37,000. Thanks to the close cooperation with DHL, DPD, Olenpaczka, and of course Allegro, buyers and sellers have even more choice in both delivery methods and locations. It is worth remembering that consumers always decide how they want their parcels to be delivered, and they use Allegro app to track their shipments. Buyers on Allegro also have access to logistics services provided by other companies. By developing the Allegro delivery program and our infrastructure, we are increasing the efficiency of our logistics services and are independent from selected service providers. By the end of the year, we want to have over 8,000 of our own parcel lockers, over 1,000 more than we originally planned. It is worth mentioning that thanks to successful negotiations with manufacturers, the installation of a larger number of parcel lockers will take place within the approved CAPEX. We have also decided to invest in new depots and completely new sorting facility. This is associated with rapid increase in managed volume, which exceeded 34% at the end of Q2 and increased by nearly 5 percentage points compared to the previous quarter. We also are achieving one of the highest NPS results in the industry, which amounted to 82 points in the second quarter. We are already seeing the positive impact of the cooperation with DHL, which began a couple months ago, and we expect at least the same effect from the new cooperation with DPD. Let's move on to my favorite slide, because it's related to AI technology. Our company is certainly one of the leaders in AI-based technological transformation. We do massive implementation in the company, which will cover almost all parts of the organization. We're talking about areas related to purchasing, such as intelligent search engines or recommendations, increasing productivity in software development, and equipping our employees with new skills to improve their work efficiency. We believe in this technology. We have already implemented it commercially based on an agentic approach in marketing or customer experience or customer service. And we are convinced that AI is an investment with a high rate of return. We are constantly increasing the use of AI technology in our current and planned projects. We expect the next year around 40% of the software we produce will contain some components prepared or produced by AI. At Allegro International, we achieved excellent GNV growth in the second quarter, 61%. We also increased the number of smart users to over 1 million, and the GNV generated in the application grew by over 100% year over year. Allegro international sales are mainly based on Polish sellers, but we are also consistently increasing the number of local partners. We have launched a new program and are significantly increasing the number of local sellers and supporting them in their sales. We are also completing the transformation of some of our international assets. In the case of Mall North, the process has been already completed. In our international development we focus on the 3P model and group synergies. The growth dynamics show that we are doing this better and better.