Inpost Sa

Good morning, my name is Gabriela Burdach and I'm the Investor Relations Director at InPost. Welcome to InPost first quarter 2024 earnings call. As always, a quick disclaimer, today's call includes forward-looking statements that are subject to risks and it is possible that the actual results may differ materially. The call is being recorded and it will be available on our IR website shortly after the call. Today's presenters are Rafał Brzoska, CEO, Michael Routh, CEO International, And for the first time, Javier Van Engelen, the new CFO of the InPost Group. After the slides, we will have a Q&A session. I am now pleased to hand it over to our CEO. Rafał, over to you.

Good morning. Thank you, Gabi, and thank you all for joining us today. We had an encouraging start to 2024, which was in line with our ambitions and expectations. We remain very much on track in implementing our strategic priorities, and these include continuing to expand our pan-European locker network with a particular focus on APM deployment levels in the UK and in France, of course. Let's begin with an overview of our European presence. We are the leading out-of-home network in Europe with over 70,000 points, including 38,000 APMs and 32,000 PUDO points. In just the first quarter of this year, we expanded our network by over 3,000 locations. It's also worth mentioning that 62% of our out-of-home points are now located outside of the domestic market. Next page, please. Let's look at our Q1 highlights. In Q1, at the group level, INPOS handled 243 million parcels, representing a 22% increase compared to previous year, with revenue growing at a similar pace. Our adjusted EBITDA for Q1 was 36% higher than last year, accompanied by a robust positive free cash flow at the group level and a further reduction in our net leverage ratio. In Poland, our parcel volume once again outperformed the e-commerce market. Revenue grew by an impressive 26% and our adjusted EBITDA margin reached 45%, which is a similar level to the same time last year. Turning now to international markets, our parcel volume increased by 26%, with the UK adding the most, but all our markets delivered year-on-year growth. Revenue in non-domestic countries rose by 15%, but adjusting for foreign exchange effects, the growth rate reached 25%. Our adjusted BDA margin for combined international markets achieved a record 9% compared to just 3% in the same quarter a year ago. To wrap up, We are making a very good progress in building our B2C business in Montréal, driving profitable growth in the UK and Italy, as well as enhancing our already market leading position in Poland. Looking ahead, we remain confident in our full year outlook. Let's move on to the next page. We deliver double digit growth in volume, significantly outpacing the market across all our geographies. And in Poland, we continue to expand our market share while already being a leading player. Last quarter, we once again outpaced the market by a solid eight percentage points. In Mondial Relay countries, despite facing a challenging environment and declining market, we are surpassing e-commerce parcel growth. We are very encouraged by the fact that, especially in a strategically important B2C sector, our volumes grew by an impressive 28% year-on-year. In the UK, Our proven concept not only drives significant volume increases, but also enhances profitability as we scale up. In Q1 2024, our parcel volume surged by 147% in a stagnant market. And our current focus is on expanding capacity to support our further growth. Moving on to the business update Poland. Here you may see that in Poland, we have continued to expand our network reaching a total of 22,600 APMs with nearly 700 machines added in the last quarter alone. This solidifies our undisputed leading position in Poland in terms of network coverage. And our parcel volumes in Poland increased again by 20%, with APM volumes growing by 18% year over year, which was driven by marketplaces and the fashion segment. Door-to-door deliveries showed dynamic growth of 34%, also driven mostly by marketplaces. Now turning to the next page, here I would like to showcase Input's robust utilization levels across our network. Our data confirms that when we deploy new APMs, they follow the same trend in utilization versus our older machines. We already have 22,000 APMs in Poland and the most dense APM network, and yet the newly added APMs still have high and improving utilization rates. For the total network, regarding what you can see on the right-hand side, we were able to improve utilization year-on-year despite the fact that we are already at the very attractive levels. During the last peak, we had higher total network utilization than the previous one. And this trend continued throughout Q124 as well. On the next page, you may see that we are continuously searching to improve our customers' and merchants' experience. I've already mentioned several times that InPost Pay will be our company's most important innovation since the creation of the first APM. Launching Q1 2024, it is more than just a payment app. It's very convenient and very efficient checkout app providing a two-click payment and the easy delivery. We have just started and we have 1.6 million registered users already. We are receiving high ratings from them. Our NPS is already at the level of 61 points. We also see a very positive feedback from merchants who observe a boost in conversion at the checkout, and that's essential for them. I will now hand it over to Michael for a short update on our international business. Thank you.

Thanks, Rafael. Good morning, everyone. Q124 has been a strong quarter for the international business and all the markets that operate within it. We've continued to take market share from legacy incumbent players, and we've been attracting and building new users to our APMs in all markets. And we've solidified InPost and Mondial Relay as the leading locker solution in the UK and France. At a snapshot, as Raphael mentioned earlier, over 60% of the group's total out-of-home delivery points are now located outside of Poland, This percentage will only continue to grow. And in terms of volumes, over one third of the total group is generated by our international markets now. And in Q1 24, these grew by 26% faster than the Polish volumes. And we expect this to be the case on a go forward basis also. In Q1 24, we increased our international APM network by 55% year over year by adding over 1500 new APMs. The number of lockers increased even faster by 73% year over year, as we deployed larger machines and also expanded the APMs already deployed as we continue to build capacity for the increasing volume demand. We're still adding putter points to increase the density of our network, and this is not at the same pace as APMs, but they do continue to provide great support in highly populated, but potentially difficult to deploy APM locations. Now let's move on to Mondial Relay on page 13. Our key priorities here remain the same, and our strategy remains on track. One, to expand our APM network. Two, to grow the customer and merchant adoption. And three, invest in improving end-to-end operational quality. In Q124, we added almost 900 new APMs and 500 PUDOs, increasing the total number of out-of-home points by 20% year-over-year as we continue to build density and convenience. In France, over 30% of the population live within a seven minute walk to our APM in Pérou and we continue to invest in this convenience strategy. So let's move on to volumes. Mondial Relais is operating in a very difficult market condition with declining e-commerce market as well as healthy competition, however. Despite those market challenges, we've delivered 9% volume growth in Q124, significantly surpassing the e-commerce market, proving that our efforts and business model are successful. Our offer is clearly attractive and continues to gain traction with both consumers and merchants alike. This growth is driven by the B2C segment that increased year over year by 28% in the whole quarter, and now accounts for over 40% of the total Mondial relay volumes. Moreover, All of our new volume is going to our APMs. In Q1, 23% of Mondial Relay's volume in France was delivered via lockers, a significant leap from the 10% in Q1 23. You can also see it on the chart in the middle. Our new cohort follows the adoption rate of the previous ones, confirming the recognition of our expanding locker network. The whole network utilization is growing, but we still see room for further improvement as we continue to build out the density and convenience. Javier will talk about financials later, but I just want to highlight here that Mondial Relay is gaining scale while at the same time improving its profitability. So now turning to slide 14. A critical part of our journey in transforming Mondial is transforming the consumer and market legacy perception. We're very excited about the Tour de France event that starts next month, and this is a significant stepping stone partnership to deeply connect with an event that is at the heart and minds of the French nation. Mondial Relay and InPost are the official event sponsors. To give some further context, Tour de France gathers 10 million spectators every year along the roads, plus over 2 billion people watching the event on TV or via streams globally. There will be 21 stages, including three in Italy and 17 in France, and one hybrid stage starting in Italy and finishing in France. We'll have InPost branding in Italy and Mondial Relay branding in France. And we are directly installing 300 APMs in connection with the Tour de France. But the event gives us even more means to build loyalty amongst APM landlords, partners, and specifically with some of our merchants to engage our growing consumer base. Our marketing team is busy making this a standout occasion with accompanying events, pavilions, mascots, and all other stuff to make sure we are visible on the route and starting and finishing towns. We're super excited to be sort of launching this partnership this year. Now, let's turn our attention to the UK. In the UK, we're on a path to create a fully integrated model. In Q124, we saw a continuation of trends in volume and profitability from the end of last year. We have the largest APM network in the UK with over 6,800 lockers. And in Q124, we deployed over 400 lockers, increasing the APM network by 33% year over year. This expansion solidifies the coverage of our network. In the core three cities, our coverage is over 60% of the population, and for the entire country, it's now at a solid 33%. The number of lockers grew even faster than APMs by 60% year-over-year, the result of deploying larger machines and extending the existing ones, all while keeping our utilization rates at the highest levels. As illustrated on the right-hand side, our quarterly volume experienced consistent growth through 23 and 24. In the last quarter, volume has more than doubled year-over-year, and it's worth highlighting that Q1 24 volumes were at the level of the 23 peak. There is still room for growth, especially as our offering in the UK doesn't cover B2C, which is the largest part of the market that we still have to address. In the next quarters, we will continue our ambitious deployment plan and expand beyond the three core cities as we offer national seven-day-a-week coverage. We will continue to improve operations in conjunction with Menzies, and we're now piloting a B2C offer and plan to launch B2C on a larger scale towards the end of this year. Thank you, and I'll now hand over for the first time to Javier to talk about the financial highlights.

Thank you, Michael, and good morning, everyone. As this is my first time taking you through the financial highlights, I would like to briefly pause and thank Adam for his dedication over the years in shaping InPost into its current success story. Stepping into his shoes, I plan on building upon his legacy, and I'm looking forward to continuing a close collaboration with all stakeholders. On that note, let's start with the summary of our first quarter financial performance on slide 17. As already mentioned by Rafal and Michael, Q1 shows a strong start to the year, with overall parcel volume up by 22%. All markets are growing well above market rates, resulting in broad-based market share gains. Revenues in Polish Zloty are up by plus 21.5%, However, this includes a significant negative FX translation impact as the euro weakened by about 8% against the Polish Lotte compared to Q1 2023. At a constant exchange rate, revenue growth was plus 26%, exceeding volume growth by mid-single digits as per our outlook. Importantly, at constant FX, mondial relay revenue grew by plus 7%, and another international market grew by plus 145%. Adjusted EBITDA, both in Polish Lotte and at current constant exchange rate, increased by plus 36%, with Mondial Relay increasing EBITDA in Euro terms by plus 11%. The group adjusted EBITDA margin increased by 340 basis points, from 27.9% to 31.3%. Poland's adjusted EBITDA margin remained roughly stable at 45.4% compared to Q1 2023. Mondial Relay increased its margin by 30 basis points while growing market share and investing in future growth. Our international businesses consolidated their turn to profitability that was achieved in the second half of 2023. CapEx intensity decreased from 11.2% in Q1 2023 to 10.1% in Q1 this year, as the highest pace of expansion outside of Poland was more than offset by the lower pace of expansion in Poland due to domestic infrastructure requiring lower investments. Together with the higher absolute EBITDA, this results in a Q1 free cash flow of 213 million Polish zloty, and a reduction in our leverage ratio from 2.2 times at the end of full year 2023 to two times at the end of quarter one 24. Breaking down the financial highlights by segment, let's start with Poland on slide 18, where adjusted EBITDA in Polish Lottie grew at the same pace as a significant revenue growth. As aforementioned, volume increased by 20%, significantly outpacing the market, and revenue grew by 26%, outpacing volume, mainly as a result of our repricing efforts. Bertrand de La Chapelle, Adjusted EBITDA in Polish lot increase by 27% keeping pace with revenue growth and translating into a broadly stable adjusted EBITDA margin of 45.4% as cost inflation was fully offset by efficiencies in first and middle mile costs, as well as overhead expenses. Over to Mondial Relay on page 19, where the key highlight is that we are slightly improving our profit margin while at the same time growing market share and investing in future growth. Year-on-year parcel volume is up by plus 9% in a market that we estimate to be down by 4%. Revenue in Euro came in at plus 7% versus quarter 1.23, which is slightly below volume growth, as we still saw the different product mix effect offset by modesty pricing. Importantly, top-line growth and market share gain was delivered in line with our strategic priorities, growing in the B2C segment and increasing the share of APM volumes. Bertrand de La Chapelle, At constant currency adjusted EBITDA increased by plus 11% in Q124 versus Q123, translating into an adjusted EBITDA margin increase of 30 basis points, reflecting the improved operating leverage and gross margin being partially reinvested in building up a growth enabling organization. On slide 20, you can see that Italy and UK combined have more than double volume and revenue compared to Q123. UK volume grew by plus 147% as we gained scale in C2C and returns. In Italy, volume reached 4.8 million parcels, up 44% versus Q123 as a result of growth in B2C supported by volumes in C2C. In these two countries, we are also gaining market share, although on the low base. In both markets, revenue growth adds to volume growth as a result of the product mix impact. adjusted EBITDA improved from a negative minus 46.2 million Polish zloty into a positive plus 14.7 million Polish zloty in Q1 2024. This is in line with our outlook statement, whereby the profit margin in Italy continues to be positive and the profit margin in the UK remains broadly in line with the Q4 2023 results. On slide 21, we provide you with the usual bridge between adjusted EBITDA and net profit. Year-on-year adjusted EBITDA in Polish Lotte is up by plus 36%, translating into a profit margin improvement by 340 basis points from 27.9% to 31.3%. Net profit from continuing operations in absolute terms is up by plus 121%, or by 480 bps, from 5.8% to 10.6% of sales. At plus 35.6%, our Q1 increase in Polish Lotte Group operating EBITDA is broadly in line with adjusted EBITDA growth. Group EBIT is up by plus 60.1% year over year, as higher IFRS 16 amortization behind our increasing APM and DIPON footprint was partially offset by FX and the longer useful life of our APMs. Between EBIT and net profit, you can see the usual interest expenses connected to debt as well as some improvement in effective tax rate due to lower losses in UK and Italy versus last year. On slide 22, we again explained the healthy and improving cash generation dynamics of the imposed business. For the first quarter of 2024, Poland generated 459 million Polish zloty in free cash flow, representing an increased free cash flow conversion rate of 68% compared to 56% the same time last year. Free cash flow investment in international markets increased to 246 million Polish zloty. Altogether, the group's adjusted EBITDA to free cash flow conversion improved from 21% in Q1 2023 to 28% in Q1 2024. Page 23 shows our continued investment for profitable growth while reducing the capex to revenue ratio. While total CAPEX spending increased by 10% from 222.6 million Polish zloty in Q1 2023 to 245.8 million Polish zloty in Q1 2024, the overall group CAPEX intensity decreased from 11.2% to 10.1% over the same period. At about two thirds of total capital expenditure, network expansion remains our single most important focus area. However, in Q124, we have accelerated spending in operations and IT in order to keep up with our growing European footprint and with the additional services we are offering to consumers and merchants alike. The acceleration of the international business is also evidenced by the CapEx split by segment with Poland decreasing its CapEx spending only to be more than offset by increased investments in Mondial Relay, the UK and Italy. To close the financial highlight section, let me still say a word on net debt and leverage as shown on slide 24. Compared to end 2023, gross debt at the end of Q1 remained virtually unchanged at 6.6 billion Polish zloty, with small changes mainly being the result of FX movements. Net debt decreased by 159 million Polish zloty on the back of a higher cash generation. The slightly lower debt combined with a 7% increase in last 12 months adjusted EBITDA resulted in a decrease of our leverage ratio from 2.2 times at the end of Q423 to 2.0 times at the end of Q124. I will happily remind you that at the end of Q123, our leverage ratio still stood at 3.0 times last 12 months adjusted EBITDA. With that, let me close the financial highlights and still show you the outlook on page 26. In short, we are off to a strong start in Q1 24. The results were broadly in line with our internal projections, and as such, this gives us increased confidence to reiterate our full year outlook in what we believe will still be a volatile economic environment. As we keep our full year outlook unchanged, I will not take more of your time to walk through the details. In closing, let me give you an update on Q2 volumes. So far in Q2, we are running at volume growth of about 20% at the group level, with volume in Poland growing mid-teens and total international volume growing at a faster rate than Q1. With this, I thank you all, and now over to the operator for the Q&A session. Thank you.

If you would like to ask a question, please press star 1 on your telephone keypad. Please ensure your line is unmuted locally, as you will be advised when to ask your question. So once again, that's star 1 if you would like to ask a question. And our fifth question comes from the line of Satish Sivakumar from Citi. Please go ahead.

Thanks. Thanks for the presentation. I got three questions. First one is around in-post pay. If you could actually share some color around the adoption rate, how does it evolve during the quarter? If you say that 1.6 million of registered users and how does it actually progress And do you have any sense like around the average basket size of customers using the in-post pay at the checkout? That's on in-post pay. And then a couple of questions around the international segment. Firstly, on Mondial Relay, if I look at the volume growth quote-unquote like this is last year, C2C seems broadly stable and the growth is mainly driven by B2C here. Do you see the market as kind of maturing on the returns or is it mainly driven by increased focus on B2C and that's what is kind of shifting that growth into B2C and where is that growth is actually coming from on the B2C segment, i.e. what is the customer base or the verticals that are driving it? And the third one is around the UK. On the volumes that's going through in the UK, is it all now handled completely by Menzies or you still have exposure to the other partners? If so, what does that split look like? Thank you.

Good morning. Maybe I will answer the first question and then I will hand over to Michael from Monday Reliant UK question. So in terms of impulse pay, as you saw, the adoption among the end users is impressive. Literally six weeks ago, we said we have one million registered users. within four weeks it jumped to 1.6 and it's of course a very early stage in terms of the adoption among the merchants although there are a few hundreds of them already live more to come we don't disclose the the certain metrics on that part of the business yet as this is early stage the the things i can definitely confirm and we we've shown in the presentation is we are massively improving basket conversion which is essential for the for the merchants we improve the nps of the end users using our solution on those websites and also in terms of average basket size uh as a kind of average uh on the polish e-commerce market published uh um accordingly by for instance the baselinger uh index or some of the uh of the enablement platforms publicly listed on the warsaw stock exchange so it's it's it's literally you know very close to the to the market average but the most important topic of course is the loyalization of end users improvement of the basket conversion which drives literally much better top line conversion on the merchants websites and that's another strong convincing statement that in post it's not the supplier it's not the logistics provider we are enabler for the top line growth of the merchants collaborating closely with in post handing over to michael for the two other questions thank you

Thank you, Rafael. Good morning, Satish. How are you? Just on your two questions. The first on B2C growth with Mondial Relay. The growth is coming from two client segments. Firstly, our international client segment, which is a mixture of companies like Amazon, Zalando, Timu, Sheen and others. So there's actually a good balance of growth. And then the other encouraging part is actually local French enterprise clients at this point where we're seeing increased share of checkout and increased share of presence predominantly as we've grown our APM network and really adoption of APMs with that local client group. So it's really a good balance of customers and not one specific. You asked a question about returns and effectively outbound or B2C. I think this time last year, it was predominantly returns that we were seeing quite a good traction on. Now we're seeing still growth on returns, but we're also seeing growth on outbound and that would be the faster growth area within that B2C component. On the UK, all of the business is being managed by Menzies in terms of first mile and last mile to our out of home network and also all the middle mile components that are linked to that. We do have a partnership with the Royal Mail, but that is predominantly for delivery to door where we don't today have mainly locker coverage and then we offer to door where we basically can inject directly into Royal Mail. for that last mile. But I would say the majority of the business today is very much about our locker business and out-of-home business with the Royal Mail covering those areas where we don't have coverage yet.

Okay, thank you. I just got a couple of follow-up, one for Rafal and one for Michael, for yourself. On the in-post pay, again, Rafal, do you foresee this is being rolled out outside of Poland? What do you get, actually, to say that it's something would probably a good disruptor than the other market as well. And then Michael, just on the, so Menzies moving everything, all the volumes onto Menzies, is that being a key driver in terms of profitability improvement here? Basically you bring down your first and middle mile cost because of this partnership or it's actually driven by volume growth on the scale. what is the contribution from Mendes on the cost side? Thank you.

Should I take the last one? Or do you take it?

Yeah, go on, Michael. Go on.

I think very much it's about the operating leverage, Satish. So clearly, as we built the scale, clearly the Menzies partnership has unlocked the volume. And clearly, the benefit that we're seeing is really the scale and the volume and the operating leverage that we're really getting. But really, what Menzies has brought is the consistency and coverage that we needed in order to really deliver on that volume and operating leverage.

Yeah, on the input pay piece, of course, everything what's rolled out in Poland, it's becoming successful, is then rolled out in the other markets. So that's the plan. Of course, the maturity of the market is critical here and the adoption among the end users of our mobile app. So those two drivers are like giving us clear sign when and where to launch the service. But looking at the current results of that very early stage, but already exceptional results we're achieving, it's definitely, you know, something we would love to roll out on the other markets as well.

Yeah, thanks so far. Thank you. Thanks everyone.

next question comes from the line of david kirsten from jeffries please go ahead good morning gentlemen um i also have three questions um first of all can you please comment on the the apm rollout plans for this year i think you added 2 000 new apms in the first quarter so annualized that is around 8 000. i think your plan was for around 10 000. your capex also seems somewhat lower than in q1 than the 1.3 billion guidance for the year Maybe some comments on that, please. Then the second question on the EBITDA margin in Poland was stable in Q1, clearly better than expected, but maybe helped by an easy comparatives. How should we think about this going forward? Will you see the lower margins coming in Q2 where you had a much tougher comp than in Q1? And is that what's driving the softer profitability in Poland for the remainder of the year? And then final question for Javier, welcome. What are your priorities as the new CFO? Is it a continuation of Adam's work or are you looking at also different things? And can you also please comment on the cash taxes in the first quarter, which seem only half of the P&L tax and paying less taxes, of course, is a good thing, or is there a phasing effect and will that reverse in the remainder of the year? Thanks very much.

Thank you, David. Let me answer the first question and then I will hand over to Javier. So yeah, definitely, you know, it's not about slowing down or revising down the number of the machines. It's all about, you know, the phasing. Jan was very challenging in terms of the weather conditions in some of our markets. So that naturally impacted the rollout pace. But looking at the pipeline of the locations ready for deployment, We definitely want to deploy as many as possible, especially on the markets where we are currently lacking of capacity. And that's one of the top points on our operational agenda for all the markets. Handing over to Javier.

hi david good to get to meet you virtually so thanks for the questions um first question on poland uh you're right it's a phasing question if you look basically at the profile of last year you saw a significant jumping q2 as we basically saw the pricing effect really coming in uh if you look at it sequentially versus q4 we ran we remain about this 45.5 so when you look at the guide for the year, the jump we see in Q1 in the rest of the year, you would typically not see that because it was a low base of 41.3% in Q1 2022. So this is more a phase in question and absolutely right. I think our guidance remains the same that we expect margins to be around that 45, 45.5% as we go throughout the year. So that's indeed mainly a phase in question. on the second question um look on on my plans i'm uh i'm six weeks in the role so i'll not be too uh too ambitious about that but as i said in my introduction the adam has done i think a phenomenal job on making sure that the business has been able to grow with a very positive financial profile And as we grow and expand internationally, that is something we want to keep on securing. So I think it's finding the balance between being able to go with speed, expanding and becoming even bigger and more important at the European level, while at the same time maintaining the financial discipline that we take the right investments, that we keep the entrepreneurial spirit of investing, learning fast, failing fast if we need to, but succeeding even faster where we can. So I think that's going to be the first priorities. And in a couple of more weeks, I'll probably have a bit more insights, but that's at least a starting point. And then on the last question that you had on cash taxes, also here mainly phasing, if you look at that effective tax rate, it's likely that because of lower losses in the international business, from a cash tax point of view, there was a delayed payment in Poland, I think it was mainly there, which was moved just into April. So we should see a regularization of that cash tax in Q2, Q3 coming forward.

Okay, great. Thank you very much for the answers and good luck. Thanks.

The next question comes from the line of Marco Limite from Barclays. Please go ahead.

Hi, good morning. Thanks for taking my question. I've got three questions. One is on the two door volumes in Poland, which grew by quite a lot in Q1. So just wondering what's driving that. Second question is on pricing. So you had the Allegro pricing in November, but I think the majority of the remaining volumes have been repriced around March. So yeah, any comments you can give us on pricing for those volumes. And the third question is on the mondial relay margins. Clearly, you are guiding 400 to 200 bits of margin expansion for the full year. But I guess Q1 was a soft start of the year if we think about margin expansion. So yeah, what's your thinking around the margins in France for the remaining quarters of this year? Thank you.

Thank you, Marco. Good morning. Happy to answer the first two questions, then heading over to Javier. So in terms of Tudor volume in Poland, what's driving it, I think this is all about the whole flywheel we have created. This is continuously the same topic. Sometimes people think that deploying machines, it's all about the recipe for the success to copycat info success, which is clearly, I think, visibly in the recent three years, not the case. We have more than 60 different projects across Europe on locker businesses. and hard to find single one, big one being successful in terms of profitability like InPost. So with Tudor is pretty the same, as you know, by creating the whole ecosystem for the merchant, creating best in class quality, which InPost still keeps in Poland in terms of next day deliveries, having incredibly good peak We were the only company promised that parcel delivered in the 23rd of December will be guaranteed and delivered on 24th of December. This gave a very strong conviction to our partners that we are not only excellent in out-of-home delivery to our APMs, but also we are an incredibly reliable partner to do all deliveries. So we saw a big shift from other vendors, from other players existing in Poland to InPost in the first months of the new year. We'll see how it evolves for the future, but definitely we are not losing attention around bringing more and more value and value-added services for our merchants, which typically translates into much higher volume than we had a year ago. On the repricing, yeah, the repricing strategy is very clear. It's based effect, so some of it was already realized and visibly impacted our Q1 results. uh partially we expect something in q2 as well just bear in mind that also you know the phasing of the minimum wage um um increase is also phased and we expect that you know uh in q2 q3 we will see as well higher cost, which may offset partially our gain on the repricing. And by the way, it impacts all the players across Polish economy. So it's not only specifically impacting inputs. That's why, you know, we want to keep the healthy balance, helping our merchants not to squeeze them, not to make their life harder with aggressive repricing, rather giving them a helping hand relief because this minimum wage inflation is heavily impacting as well all the merchants so uh that's you know all about keeping the right balance and and being really a good partner for our um for our merchants and also end users Javier

um mondial relay margin uh yes 30 basis points only in q1 but we maintain our full year outlook this is because we expect operational efficiencies to come from two sides number one importantly plus nine percent volume on the market of minus four percent will still give us operational efficiencies but secondly we have uh a couple of projects for instance running on procurement where we clearly see savings opportunities that should hit the p l as we advanced throughout the year. And that's where you see some phasing coming in. Importantly, when you look at the phasing, last year in Q2, we had 13.3% margin. So it was the highest margin in the year. And then we went down to 9% in Q3. So we'll see the effect of the increased margin mainly coming in the second half of the year because the comparison base of Q2 will still be very high, but that will be compensated in the second half. So improved efficiencies and being able to drive some procurement savings to the bottom line are going to be the key elements.

Thank you. And a very quick follow up. When Rafal mentioned that the minimum wage increase is also phased in Q2,

again just remind us when when the minimum wage increase kicks in please thank you yeah it's uh the the the first wave of minimum wage was uh beginning of the year and the second one is as i uh remember correctly is first of july very helpful thank you

The next question comes from the line of Rowan Shreve from Goldman Sachs. Please go ahead.

Hello, thanks for the call. A couple of questions. On the outlook in France, you keep guiding mid-single-digit market volume growth this year, while the e-commerce market decreased 4% in the first quarter. What are the key reasons for weak underlying market performance, and what makes you confident that it will significantly accelerate going forward? And second, Uh, could you provide the latest update on and performance in particular? Uh, what do you see on the site of their market share progression and contribution to your audience? Thank you.

Michael, would you. I'll take both actually, I'm quite comfortable. Um, I think just on outlook, I think, uh. Firstly, sort of the benchmarks that we're using to measure the market clearly are a multitude of different sources to give us a really good read. So we're confident on the minus 4% and clearly at 9% we're outpacing the market. The real opportunity really here is still our market share remains relatively low to single digit to probably somewhere between 8% to 10% market share estimate. So clearly the headroom for potential growth is quite a lot, in particular within the B2C segment. And so clearly we see the current opportunity with our B2C client base and the trends that we're seeing in terms of both existing clients that are coming on board that have come on board in the last 12 months and two new clients that will be onboarding. And so we continue to have that outlook for the balance of years. So we have a high degree of confidence that even with the underlying weaker market conditions, Relative to Timu, Sheen and others, it's not of our position to comment on Pacific clients relative to this discussion. I would say just overall, clearly their performance, as you can read in the market, is strong. And really our platform today is really one where we have a multi-market approach with those clients. So it's not just about what we're doing in France, it's what we're doing right across all of our impulse markets. And so that really gives us an opportunity to have a framework approach to these clients that really allows us to connect and really look at the opportunity, not just in one market, but in a multi-market approach and support them for growth in all of those markets. in the same way I would approach any client, but their performance is strong, but obviously we're looking at more than one client and I don't want to specifically comment on their individual market performance.

Okay, thank you very much.

The next question comes from the line of Hank Slotboom from The Idea. Please go ahead.

Good morning. Thanks for the presentation and thanks for taking my, uh, my questions. Um, continuing on the, on the, um, 4% contraction of the market in the first quarter. Um, if I look at the outlook statement for the market as a whole in France, you expect a mid single digit e-commerce parcel market growth. Given the delta between the minus four and the plus nine you showed in the first quarter, isn't the margin guidance a bit conservative? Or should I see it that if you have a windfall on the back of the operational gearing that you're trying to accelerate the rollout of your infrastructure in France so that you will be even better capable of handling the B2C volumes. The second question is related to that. What share of your business now is B2C in France? Or should I rephrase it? What part of France can you serve now with your B2C offering? And I'm referring to the D plus one method. My final question is a bit of a chauvinistic question. When I look at the PUDOs and APMs and I look at the Benelux countries, if I compare that with the year end 22 situation, then you had 2300 plus PUDOs in the Netherlands and Belgium. Now it's less than 1900, so that's almost 20% lower. You always said I want to have a presence there, but on a capital light basis. What exactly is happening here and where is the biggest contraction in PUDOs? Is it in Belgium or is it in the Netherlands? Perhaps you can shed some light on it. Those were my questions.

Yeah, I can take those and if you want to add any further comments, feel free. I think firstly, I think really it's the latter part of your first question, Hank, which is if you take Q1 this year, we've already opened two new locations in Q1 as part of our last mile coverage in depots. And we've done one transfer of locations as an example. So as we continue to see our market share gains, as we've done throughout this journey since the acquisition of Mondial, We really see market share growth and building up to consumer proposition as a as a critical factor of the long term game. Clearly, we've seen some margin enhancement in Q1, but clearly we will continue to invest, you know, to really gain the market share as we're seeing it. And clearly investing in the last and middle mile continues to be the priority as we see the volume demand and growth come from the business, as we're seeing in the market right now and continue to see it for the balance of this year. uh regard to b2c share uh i think as i commented in the presentation b2c now roughly is about 40 of our business in mondial so really we've continued to over the last three quarters seen really strong growth and the mix is clearly continuing to evolve When you still look at Pacific coverage within France, I would still say, you know, there's improved coverage now. One of our weaker spots was the southwest region. When you look at that, I've talked about that historically. Some of the openings in the first quarter this year will improve that. But there's still further work to do, probably in the south to southwest region. as we continue to close what I call the coverage gap, not just about lockers and puddles, but actually the last mile component of depots and servicing that as well as hub coverage to serve that part of France. But all is part of our plan and clearly we work to build and improve that connected with the quality that we're trying to drive. When it comes to Benelux, I wouldn't say it's specific to Netherlands or Belgium. I would say more we're optimizing actually the sort of PUDO network while we started to really start to plan deployment of our first APMs. So what we also started to do is now improve coverage there. And there's further increased plans for accelerating coverage, both in the Netherlands and in Belgium, to really support what was effectively a legacy PUDO business. And really now, as we've optimized the last mile and middle mile, we're able to optimize that part of the network as well.

Perhaps, if I may follow up, Michael, what exactly is the focus in the balance countries? Should I compare that with what you're doing in the UK? Focus primarily first on C2C and then try to get an entrance in B2C with international clients or?

The strategy is twofold. Firstly, we have existing clients that we're basically serving and then opening up that part of the market to them. Historically, for whatever reason, Netherlands and Belgium has not necessarily been a cross-border opportunity for some of our French clients, as an example. And that now is sort of priority number one. Priority number two is international clients. which will include C2C as well. And then really locally then as we build a network, consider Salesforce on the ground to think about what we do with local merchants, but very much cross-border and international clients as the primary focus for the next 12 to 18 months.

Okay. Okay. Thank you very much. And we'll see some of you next week. Looking forward to it. Thank you. Thank you.

The next question comes from the line of Michael Potura from UBS. Please go ahead.

Good morning, everyone. Thank you for taking my questions. I have three questions, please. The first one is a follow-up on Mondial Relay Margin Guidance. I just want to make sure it includes the additional spending related to marketing and sponsorships, please. The second question is on capacity utilization in Poland. It keeps on growing very nicely. So I'd like to understand what is the level you feel comfortable with and should we expect that to grow further or would you consider to add more APMs over time? And the third question is around the current trading. You indicated around 20% volume growth. So far, I'm just wondering, is it fair to assume that April was a little bit softer than that, given the impact of Easter? Or is it kind of stable over the last six, eight weeks? Thank you.

So maybe let me answer all those questions. So in terms of the modular margin guidance, it does include all the committed spendings, including the two different sponsorship here. In terms of the capacity utilization in Poland, as you may notice, in recent quarters, the capacity, the newly deployed capacity, newly deployed machines, were on a level of XYZ and utilization and the volume was growing faster. That means that our operating leverage, but also excellence in the whole process, operational process is improving quarter by quarter. We're using very advanced data and tools to improve our forecasting, to find where we need to add locations or we need to add extensions to existing locations for seeing our capacity needed, let's say, quarter or two quarters um in advance that means we are becoming better and better in utilizing our assets providing better and better return on every single euro spent on our complex and that's another uh huge uh asset on on the know-how side which really um differs us from the other players uh who mostly are randomly deploying machines here and there or deploying them you know close to us hoping that that will help to utilize their assets so we are deploying more machines as you saw we deployed around 700 something in q1 we will deploy in every single quarter more and more but selectively properly a kind of tactically addressing the volume we expect or the new end users gain we expect to get in terms of the on the current trading this is literally you know first six weeks of the Q2 hard to say if that will maintain That's why we literally are not changing our guidance for the full year because in the past, you may remember two years ago, we were too optimistic after Q1 trading. We increased our guidance for the full year and then we've been punished massively by the market and investors. because simply the market was often than it was visibly much stronger in Q1. So let's see how it goes. April is a little bit above our expectations, answering straightforward to the questions you ask.

All clear. Thanks very much.

Before we take our next question, as a reminder, if you would like to ask a question, please press star one. Our next question comes from the line of Osman Brisha from Bank of America. Please go ahead.

Hello, good morning. Thanks for taking my questions. First, on cost inflation in Poland, can you quantify the impact of cost inflation in 2024? Then in the UK and France, can you talk about any challenges that you find in the short term in installing the APMs, such as real estate space and any other challenges? And third question is, now with UK plus Italy segments being profitable, how are you thinking about growth in other European markets, specifically, for example, Spain and Italy?

uh where do you see the big potential now and has anything changed now thank you thank you maybe i will answer the first question and then i will hand over to michael um you know in terms of concentration we uh we continuously gain new clients we see that new verticals but also new asian players are um uh better and better in terms of uh gaining uh both end users but also market share so uh we are agnostic and and that's you know our main pro on on that side we we would love to help every player to be successful on polish market and looking at the different market dynamics literally that drives as well much better performance of the Polish e-commerce market versus the others. So we are continuously working on the acquisition of new merchants. Also very important point, upcoming cross-border solution, which should even increase the attractiveness of in-post versus old-fashioned big players typically chosen by the merchants for the cross border parcel. So once cross border is launched, I think this will become pretty soon additional engine for our volume growth, especially, you know, across the markets we operate.

Thank you, Rafa. Just coming back on the two questions. Firstly, do we see any challenges regarding location acquisition in markets like UK and France? I think the first comment here is, you know, we're still very early in the market with, you know, nearly 7000 in the UK and over 5000 in France. Clearly, we're still very early in that development. So there is a lot of green field, as I would call it, or white spaces, as we frame it internally for growth. I think the Pacific challenges may be more around inner cities and some like Paris or London, where space is a premium and really getting larger lockers is probably more challenging than maybe we had seen other markets. But we're really adapting our model. We've actually been testing new concepts. One new concept we've been testing both in Paris and London is the opening of locker shops, which actually the early data is very encouraging. I don't see that being a big solution for those cities, more a method to really compensate where we may find a space of premium. But those types of shops are really where we're putting in like four to eight meters of lockers, not just putting two to four. So really trying to compensate in that way. When we think about new markets outside of the UK and France, actually, we started deploying our first machines in Spain and Italy, and we've continued to ramp that up in sort of the end of last year in the first part of this year. So we see great opportunity in both Spain and Italy in particular. I think there's some encouraging data coming through in Italy and specifically in a recent study where actually out of home penetration has gone from single digits to double digits for the first time, of which clearly it looks like our business is really helping support that change in consumer behavior. Those markets are still very early in their development, not as advanced in terms of location development as somewhere like the UK and France. But clearly we see opportunity and e-commerce scale and size is quite considerable. So we will continue to focus predominantly on UK and France in the near term, but we will now start to explore developing those markets for the longer term. Thank you.

Thank you. I think my first question got misunderstood, so I would repeat that, please. My question was, can you quantify labor cost inflation, the impact of PNL in Poland this year?

OK, sorry, handing over to Javier Dan.

Jan-Willem Wasmann, Yes, sir on the thing look Labor costing relation we expected around to be mid single digit. Jan-Willem Wasmann, that's going to impact, but it's going with the offset by efficiencies so in the end that's also why, from a guidance point of view. Jan-Willem Wasmann, We set much of domain stable that between inflation pricing and efficiency is we can offset that and that's what we expect to see for this year.

Thank you.

The next question comes from the line of Marco Limite from Barclays. Please go ahead.

Hi there. I've got one more question, please. So over the last few months, there's been some news around Allegro partnering up with Orson about their local delivery or delivery to their local, sorry. So, yeah, I'm just curious about what is your thinking about competition in Poland and if this new agreement is a threat to your relationship with Allegro. Thank you.

Happy to answer that question, Marco. I think it's nothing new as Olin and all the other players already were collaborating very closely with our friends from Allegro and that's properly and well understood looking at our exposure on the on the share of checkout on on allegro website means we try still to build new venues for a joint win-win um collaboration and win-win scenarios which the best uh the best proof of that is how we successfully developed cross-border from poland to czech republic um for our colleagues from allegro And I understand as well that all the other players try to find their own way on the Polish market. The real comment, I think, comes straight forward from the numbers. You see the market growth. You see the volume growth, overall volume growth on the market. You may translate that to the volume growth of key marketplaces in Poland. And then you see the numbers of inputs, which gives you a very clear indication, you know, where the consumers are keeping their preferences and why. Because, you know, again, it has nothing to do with deploying machines. And the last three years, properly, I think already have proven that this is much more complex business than many people thought. So we are not commenting, you know. A company that starts looking at the competitors' moves, typically loses the ability to push you at speed and innovate. And that's definitely our DNA. So trying not to comment specific moves, trying to focus on building value at impulse, not on other dimensions.

That makes sense. And if I may ask maybe one question that hasn't been asked for quite a while, actually, do you feel like you're share on Allegro volumes has been stable over time, over the last, let's say, couple of years?

It's absolutely stable in recent quarters. It has increased in the last two years.

Amazing. Thank you.

The next question comes from the line of Stefano Tofano from ABN AMRO. Please go ahead.

Yes, good morning. Apologies if some of these questions have already been asked, but I had some IT issues. So just for clarification, three questions. The first one is, do I understand correctly that you're now seeing the possibility of stable year-on-year margin development in Poland? Because the guidance still implies adjusted EBITDA margin in Poland slightly softening. So maybe a little bit of clarification on that one. The second question is just a reminder of the timing of the ramp of the cross-border deliveries. What can we expect over the next few quarters? And the last one was M&A. You repeatedly mentioned to be open and looking for strategic non-organic options to accelerate the growth. Maybe if you can be a little bit more specific, do you have something, do you have a short list? Do you have something already in the pipeline? Are you maybe in discussions? I don't know if you can say something more on that. Thank you.

Jan-Willem Wasmann, If I know i'll take i'll take the first question on the on the margin development, we talked to slightly before so in Q1 we of course have very strong improvement, but that's on the low base. Jan-Willem Wasmann, We have a comparables in the rest of which are much more challenging and therefore we're not changing the outlook, which is what we've said before, so we will, whereas we had a strong start of the year, we will have more challenging a comparables as we go on, so no change there.

Yeah, in terms of M&A question, we always try to look at every single option that's strategically additive to the business. So if there is something what may make us stronger, what may accelerate our growth, what may give us more volume, more opportunities, and simply accelerate our growth trajectory, We will definitely look at it.

Do you want to comment on the cross-border question, Rafael? There was a question on cross-border.

Yes, please, please.

Yeah, I think first and foremost, actually we have a healthy cross-border business today. Really the launch of cross-border was really connecting actually our business in Poland to our business in Western Europe. And really that process is now complete. So actually we started actively selling that to our existing customer base. So we would expect to see continued growth and expansion of that business sort of for the second half of the year. The specifics obviously we're not commenting on, but effectively the technical work and the customer work has been deployed. So really that's the exciting part for the second half of the year.

Thank you very much, guys.

There are no further questions on the line. So I will now hand over to Julian for some webcast questions.

Okay, thank you, Jess. So we've had a few questions come in on the webcast. Some have already been covered by the conference call questions and a couple are covering similar topics. So we'll aggregate a couple of those. But the first one from Tarek Ismail at Kirkus World. How do you see online consumer spending in Poland going by the end of 24?

I can answer that. There are a lot of opinions, very mixed ones. Some of the analysts saying that we see first positive effect of the minimum wage salary increase. So people are more than happy to spend more, especially that should impact positively the retail business. The others are saying that because of 1st of July, the government simply will stop subsidizing the cost of energy for the individuals that may impact negatively their spendings. First six weeks of second quarter, pretty positive, but I think it's early and too risky to be to have a fair view on the consumer sentiment and spendings uh for the year that's why we we guys

Thank you. We do have a follow-up question on the topic of cross-border and whether or not you're going to be considering recognising cross-border segment as part of your reporting. Just, I guess, wondering if that could be broken out at all.

I think we're not considering at this stage creating the additional segment on the cross-border. As I said, cross border, we want to be live across our markets this year. The impact on the total level is unknown, although bear in mind that already we have a live cross-border between Mondial Relay markets, so that's already a live service. The complexity of linking together all the markets, including different systems we have built within InPost and the systems that we took over during the transaction with Mondial Relay, That's, you know, the very complex solution. So currently you can't send parcel from Spain to Poland, but you can send parcel from Spain to France, which is, of course, suboptimal. And it's not giving us competitive advantage against big cross-border services offered by the big international courier companies.

Okay, and we've got a question from Conrad Muziel at BM Pecal. Over the last few quarters, EBITDA in the UK and Italy grew nominally by about 50 million year-on-year each quarter. Is this something that can also be expected in the coming quarters?

I'll take that one. Thanks for the question. Look, it's always a bit dangerous to get drunken with some of the successes you have. So we've given a clear guidance on how to look at profitability of the UK and Italy. And we said that UK will maintain the margin, the profit margin roughly in line with Q4, whereas Italy would remain profitable. Please remember that in the last year, we've seen a significant increase from a negative business to a positive business also because of the change of indices and the operational efficiencies that that has brought and that of course has turned the business from loss making to positive on EBITDA the focus going forward and that's the guidance that we say we maintain margin is top line growth so it's really going to depend on the acceleration of top line growth at a stable margin that will drive the profit improvement going forward So I think now you have to look at the different dynamic instead of margin improvement that basically goes from losses to positive, it's going to be expansion at top line, investing in growth at a stable profit margin.

Thank you. And we have a couple of questions from John Hyde and Samuel Lorenz at BIT Capital, focusing in on the status and rollout of the B2C trials in the UK and also looking at the international dimension there. I wonder if you could cover those topics collectively.

Yeah, I will do. Thank you. I think really we are really live with three clients on B2C within the UK today. I think it's best to frame those as beta clients as we're testing. I do want to contextualize really the challenge in rolling out B2C is really driven by the key element in the UK is how do we present out of home in the checkout with the retailer and how do we do that in a way that drives the highest share of basket and share of checkout. Successfully, we learned a lot from Poland in the past in what the team have done there. And we saw the success of our returns business when we launched it in taking a similar approach. And we see today in our returns business, we're getting, you know, share of basket around 30 to 40% now in a lot of our top clients because of really the work we do in the checkout as much as we do on the logistics work. I think the further challenge then in really making sure we have a successful B2C product in the UK is really working with Menzies. Legacy-wise, this time last year, Menzies was a news trade business with a very, very, very small parcel business. Today, obviously, that parcel business has grown heavily, and Menzies have done a tremendous job in adjusting and growing with that growth with us. And clearly we're really deploying our tools and techniques with them to really help and make our business more agile from a parcel business point of view. But still, it's still quite a heavy newspaper business. Why that's quite critical is clearly we need to map the network of the logistics coverage to really where the merchants sit and making sure that that balances similar to what we're doing in france so clearly we need to really structure the hub network with the depot network in a way that can be optimized best to deliver a high quality product to the market coupled with really ensuring the checkout component is really driven the beta test is encouraging uh that we're working with those clients we are seeing You know, double digit share basket with the B2C offering, which is super encouraging, but clearly we need to be able to have a product that can scale and go across. So getting that couple of the logistics, which is why we're targeting the second part of this year. The way we think about targeting the launch is really continue to work with the partners we know and trust, and the partners that have really adapted in post well. So clearly we have a heavy portfolio of clients today that are using our returns product, and clearly that is a good starting point as we look to the next phase of rollout and mapping that with where we inject their parcel volume with. That's really sort of the key critical enablers that we're working through. When we look at similarly in other markets in France, I think it's we're ahead in that journey. You can see the volume growth that's been coming in the last three quarters, and we see that continue to develop as we both roll out the APMs, because really all the volume is going to those APMs predominantly. And two, as we invest in the network, when I say the network, the logistics network in that capacity. So very encouraging, but clearly different challenges in the UK maybe than the other parts of Europe where out of home has been predominantly in the checkout and in post in Mondial are well presented in the checkout, hence the growth that we're seeing. So we want to make sure those elements are replicated and with the right merchant partners to deploy that. So that will conclude on that part, Julian, I think.

Okay, yeah, that's great. And we have no further webcast questions at this stage. So just hand it back for closing remarks from Rafael.

Thank you. First of all, thank you very much for participating in that call. I think you know, the key to our success lies in our unique flywheel effect, which is driven by innovation and customer centricity, which are at the core of our DNA. And we continue to offer a helping hand to merchants, empowering them to localize solutions that cater to the specific needs of end users. We are enabling them to win. And our strong technological backbone ensures the seamless operations and enhances our user experience. Well, our message remains very clear. We are very committed to fostering the growth and success for all stakeholders. And this commitment to innovation and excellence enables us to maintain a competitive edge and deliver those outstanding value to our customers and partners. So thank you for being with us and having belief that InPost is really a disruptor. and it's more and more visible, it's not only Poland specifically. Thank you very much for participating. Wishing you a great day, great week and see you soon.