Inpost Sa

Good morning. My name is Gabriela Burdach and I'm Investor Relations Director at InPost. Welcome to InPost Q2 2023 earnings call. A quick disclaimer, today's call includes forward-looking statements that are subject to risks and it is possible that actual results may differ materially. This call is being recorded and will be available at our website shortly after the call. Today's presenters are Rafał Brzoska, CEO, Michael Rouse, CEO International, and Adam Aleksandrowicz, CFO. After the slides, we will have a Q&A session. Rafał, over to you.

Thank you, Gabi, and thank you all for joining us this morning. Again, I must admit it's been another exciting quarter of outperformance for Inpost, which I look forward to taking you through. Quick reminder here, our mission is to revolutionize last-mile e-commerce deliveries and returns across Europe, boosting convenience, economic efficiencies, and, of course, the sustainability. With our parcel lockers as our key enabler, we offer structural advantage to both merchant but also to consumers. That's why we were consistently gaining market share in all our key geographies. It's truly time for a game-changing e-commerce experience, and we definitely are leading the way. Let's jump into the next page. Currently, we are operating in nine European countries with significant exposure to the largest e-commerce markets. I mean, UK, France and Spain. In France and the Benelux countries, we operate under Mondial Relay due to the existing customer base and brand recognition, really great brand recognition. Everywhere else, we are expanding under the Infos brand. And with over 30,000 automated parcel machines, our APMs, across our entire network, we are the largest automated out-of-home network in Europe already. We are the market leader in Poland by a significant margin and enjoy market leading agnostic APM status in France and the UK. Including our PUDO points, we have almost 60,000 locations across Europe, which makes us one of the leading out-of-home delivery companies in Europe as well. On the next page, I am thrilled to share with you some of our impressive Q2 2023 highlights. Last quarter, despite challenging macro, we achieved outstanding volume growth of almost 20% year-on-year and revenue of over 2.1 billion Polish zloty, which is 26% increase from Q2 2022. Growing volume, operating leverage, continuous improvements in our logistics, as well as our ability to adjust prices, helped us achieve a 35% growth in adjusted BDA despite challenging cost environments. The positive free cash flow led to a decrease in net leverage ratio to 2.7 times compared to three times at the end of last quarter and 3.2 times at the end of last year. Adam will provide further details on this later, but what I would like to highlight is that the deleveraging was a part of our guidance, and this part was already delivered, and we plan to deleverage further in the second half of the year as well. In Poland, revenues increased by 29% year-on-year and volumes by 15% year-on-year, resulting in a high PDA margin of 48%, which is almost 300 basis points year-on-year more. In international markets, volumes increased by 28% year-on-year and revenues were higher by 22% year-on-year. We continue to expand our international network, increasing the number of out-of-home points by more than 32% year-on-year. I'm also very pleased to highlight delivery of very important goal we had for this year. We have been talking about solving a logistics bottleneck in the UK for some time now, and we believe we finally did. In July, we have acquired 30% equity stake of Menzies Distribution, a UK-based logistics company. This transaction is already enabling us to accelerate massively our development in the UK market. Next page, please. As you can see in these three charts in our primary markets, we are experiencing more rapid growth in terms volumes compared to overall market. This means a very consistent expansion of our market share. Even in Poland, where we deliver half of the e-commerce passes in the market, we continue to outpace our competitors in terms of growth. And in the second quarter in Poland, we outperformed the market massively by six percentage points. In France, our lead was even more. It was nine percentage points. In the UK, our volume growth surged by impressive 92%, while the market contracted by 7%. On the next page, you may see, we believe really we have already solved our UK logistics bottlenecks with the acquisition of 30% stake in Menzies. You may ask, what Menzies is providing to our UK business? Menzies is operating a national network over 360 days a year servicing the full UK and Ireland market. No one else has got such coverage. Menzies is covering now 47,000 daily deliveries and the infrastructure to deliver that is a network of 100 depots, one central hub, and nine regional hubs, all that gives us immediate scale and ability to accelerate in the UK. Menzies, by the way, already touches a number of locations where we operate and we see potential avenues to accelerate in our network and broadening our commercial cooperation. We are now going into more detail for each of the geographies that we cover, so let's start with Poland on the next page. Our consumer-centric strategy in Poland is focused on delivering dense and convenient locker network to our customers. We strive to improve our network each year, and we are proud of being the clear leader in automated out-of-home delivery in Poland. With over 60% of the Polish population already living within a seven-minute walk to our lockers and 85% in urban areas, we ensure that our customers can easily access our services when and where they need them. Moreover, we are often asked where we are compared to our competition. We have over 63% of locations in Poland, but as our machines are much larger than those of competitors, we have more than 80% share in total number of lockers. Volume-wise, we believe the difference is even more visible. On the next page, more details about our future engines of growth in Poland. Our mobile app has almost 11 million users and a remarkable five-star rating on the App Store, the highest in our industry. We have a growing and devoted user base with already over 17 million APM users in Poland. 44% of the Polish population uses our lockers with nearly 3.5 million super heavy users, accounting for about 65% of our total volume. 90% of our volume in Poland is generated by heavy and super heavy users. These are loyal and sticky customers. They drive impulse growth and contribute to the outperformance of the Polish e-commerce market compared to most of Europe. On the other hand, our merchant partnerships are crucial for our growth as we provide them with a sustainable and cost-effective solution that enhances the delivery and returns experience for their customers. Our merchant base is expanding as well every single quarter, and we have now over 50,000 merchants cooperating with Infos in Poland, despite of the fact We are well-established market leaders. Still part of our growth in volume comes from the new merchants. We also continuously work on how we can improve our services and relations with merchants by adding new offers for them and also our customers. This includes new initiatives such as in-post pay, launch for friends and family test just last quarter, fulfillment services, new market segments, cross-border, economy parcel, and other. Next page, please. Lockers are... truly a more convenient solution for customers that's a fact this is confirmed not only by our consistent ability to grow volumes ahead of the market but also by third-party market research showing our apms record net promoter score of 78 points a much higher level than our two-door competitors External research confirms that Impulse is most preferable delivery form, reliable partner with timely deliveries, and that consumers really, really appreciate the green solution we offer. In Poland, every order that is delivered via one of our lockers can save up to 97% on the carbon footprint versus $2 a mile. Moreover, on the next page, you may see that in Q2 2023, we delivered 141 million passes in Poland, which is 15% more year on year. And at the same time, e-commerce market grew by 9.3%. What's even more impressive is that our APM volumes grew even faster than the number of lockers. It was 17% versus 14%. Our APMs are a cornerstone of our success. The third chart on the slide illustrates how our APM utilization rates have steadily climbed post installation and remained very high. This is a strong indication that our continuous efforts to improve convenience have resulted in growing adoption, but also utilization. This also proves that our APM network in Poland can still expand at attractive utilization and ROI levels. And finally, on the next page, you may see our customers are very, very loyal to InPost, as demonstrated in this chart. Every single quarter, we show you that competing machines installed nearby have little to no impact on our machine performance, confirming our customers' unwavering trust in our brand. This confirms that in the absence of a significant difference in price or quality, our customers remain loyal to our services, given our much larger footprint and access to all major merchants in the country. Moreover, some of the competitors are trying to be unbelievably cheaper than us and steal without any remarkable impact on our levels of utilization. I'll now hand over to Michael for the international part. Thank you very much.

Thanks, Raphael. So let's go through our international business updates, starting with Mondial Relay, turning to page 16. We're building up the Mondial Relay market position. The out-of-home network has expanded to 23.8 thousand points, a 22% year-over-year increase, including 4,000 APMs, which is four times more versus Q2 last year. Our merchant base is also growing, and we now cooperate with over 46,000 partners, 14% more versus the same time last year. We're signing new contracts, for example, Mano Mano, Sud Express, and Rituals to name some of the new logos added to the portfolio, as you can see on the right-hand side. And extending cooperation with existing merchants provide them with the best possible experience. On page 17, APMs are gaining traction in Mondial Relay markets, enabling us to take the market share gains. Q2 23 witnessed a robust growth in the Mondial Relay markets with volumes rising to almost 60 million, up by an impressive 15% year over year. This growth is even more impressive considering the market research data backdrop of declining growth index to about minus 2% across the Mondial markets. So critical to our market share gains in particular in France has been the locker expansion strategy, coupled with the continued investment in the logistics network to increase last mile coverage. In Q2-23, APMs represented an impressive 12% of total parcel volumes in Mondial relay markets, 13% specifically for France, a significant increase from the 3% we saw at the same time last year. In the last weeks of Q2-23 already, 15% of our parcel volumes have been going through APMs, so continued acceleration and growth. The total volume growth year-over-year was specifically driven by both C2C and B2C. However, B2C was demonstrating faster year-on-year growth, which is super encouraging, linked to our strategy. A further key enabler of the international strategy has been unlocking cross-border for key B2C merchants, such as Shein, Vinted, AliExpress, VP, and Inditex, to name some of the significant brands now using that service, which in turn is driving local market share gains, which we're starting to see in the volumes. Cross-border itself is now growing at 35% in Q2 with this segment accounting for 19% of total volume for all our markets in Western Europe. The investment in the total customer centricity powered by the convenience of lockers is cementing our competitive position in France as we can see now in page 18. Mondial Relay market share in France is increasing and we continue to capitalize on the growing demand for our approved offering. We're already number two in France just after pickup, which is a combination of the La Posse brands. However, we're starting to see a significant gap between the next following players as we continue to invest in our proposition. This is encouraging as we're super still early in this marathon and we're clearly betting on the longer term games. As of Q2 23, 32% of the French population had an APM within a seven-minute walking distance. And finally, a critical part of our flywheel is the consumer mobile app, as we changed the entire customer journey of Mondial Relay in France and moved towards a successful Polish market flywheel model. Mobile app downloads have now reached over 600,000, with high ratings on both the App Store and Google Play. Our Mondial Relay app rating increased to 4.4 from 2.9 a year ago, as a relentless focus on all parts of the consumer experience now begin to pay off. Moving on to the UK market on page 20. For the UK, the most important event last quarter was what Raphael has mentioned earlier, starting the cooperation with the new logistics partner. Logistics in the UK has long been our gross main bottleneck. The new partnership now unlocks in-post potential in this market, and you will see in the slides ahead and in Adam's section that the effect of new logistics is already visible in our volume and financials. We have closed Q2 23 with 5.4 thousand APMs in the UK, a 37% increase from the previous year, while the number of lockers grew faster by 52% due to an increased focus on extensions and deployment of larger machines as we capitalise on the consumer demand. We've also started to add PUDO points to our network in dense urban locations that have high footfall in order to increase density and optimise logistics, as well as capitalise on this growing consumer demand. Overall, our total network in Q2 in terms of number of points increased by 55%. In the UK, we are the leading agnostic APM provider, and we're pleased to say that in the 12 of the UK's major cities, 48% of residents are now within a seven-minute walk of in-post APM. The chart on the right side of the slide shows deployment of our APMs in the UK compared to our closest APM competitors. We're now the largest agnostic APM network, and by the end of the year, with the current pace of deployment, we should be number one APM network in this market. Moving on to the next slide, with the unlocked statistics, we see customer and merchant adoption accelerating. Our customer base in the UK is growing and the frequency of orders is also improving as the UK consumer are adopting lockers. In Q2 23, over 1.6 million unique customers used our services with almost over 900,000 using instant returns and over 800,000 using locker to locker. Both the number of returns per customer as well as the number of locker to locker parcels per customer is increasing every quarter, which further reinforces that convenience and user traction of lockers in the UK market that we knew would exist. What we also want to highlight is the high four and a half out of five trust pilot rating, something we track closely really to give us an early feeling for customer feedback, but also the imperative focus we have on building a high quality service and product in the UK market. We've now over 225 merchants integrated, a 38% growth in logos versus this time last year, as we continue to expand across the fashion segment as our current focus with returns, and new brands can be seen on the right-hand side, with notable names now such as Matches Fashion, Fanatics, and Fatface joining the stable in the last quarter. The new logistics solution is immediately allowing us to activate the potential of our network. So on this slide, on the left-hand side, you can see the utilization of our APMs is improving as we've unlocked our growth potential by entering into commercial cooperation with Menzies. And on the right-hand side, you can see the immediate jump in volumes we can see as a consequence. This has given a strong conviction of the cooperation investment that we've made into Menzies, as well as strong confidence in our guided break-even by Q4 this year. On the final slide, the positive results of our actions with adoption of APMs and improving product mix, you can see on the left-hand chart consumer adoption increasing across our APMs, and it's constantly on the rise. Our focus on deploying APMs in high-quality locations as well as new logistics continues to pay off as we deliver an ever-increasing convenient solution for the UK consumer. The right-hand chart, we can see UK volumes increasing by nearly 92% year-over-year, an impressive 29% quarter-over-quarter, resulting in improved adjusted EBITDA per parcel economics as we're now able to create the operating leverage with unlocked logistics. Adjusted EBITDA per parcel is consistently improving every quarter in the UK, and that was also the case in Q2-23. And I'll now hand over to Adam to discuss these financials in more detail.