Allegro.eu S.A. ($ALE)

Ladies and gentlemen, thank you for standing by. and I would like to welcome you to Allegro Q1 2026 Results Conference Call. [Operator Instructions] So without further ado, I will now pass the line to Tomasz Pozniak, Director of Investor Relations.

Thank you, Russell, and welcome to all participants of our call. Let me introduce the presenters of today. Mr. Marcin Kusmierz, the CEO of Allegro Group, who will provide you with the highlights of Allegro performance in Q1 2026 and Jonathan Eastick, our CFO, who will guide you through the financials and update of the outlook for the full year 2026. As usual, our results presentation is available for download from our investor webpage Allegro.eu. You may also download these slides from the link available on the webcast. As a reminder, today's presentation and discussion contains forward-looking statements. Our actual results could differ materially from expectations expressed in our state. Please make sure you review the full disclaimer on Slide #2. Also please note that this presentation, the Q&A session are being recorded and will be available for a replay on our website at elected. And with this, I would like to hand over to our CEO, Marcin, the floor is yours.

Thank you, Tomasz for the introduction. Good morning, everyone. In a single sentence, I could summarize, it was a very strong quarter for Allegro. To start, our deep dive, let's look at the 5 strategic pillars of our performance this quarter. First, our Polish operations have shown great resilience with growth rebounding to 11.6%. And this performance came in with margins that actually exceeded our internal expectations. On the international front, we are seeing a very exciting acceleration with marketplaces growing 67% year on growth -- year-on-year. Because of this momentum, we are moving to our international outlook upward. We are also aggressively expanding our addressable market by entering the services sector, specifically healthcare and travel. Everything we do remain focused on the customer and seller experience, increasingly powered by our unique AI expertise. Moving to the numbers, the Allegro Group delivered excellent results in Q1 2026. What's particularly notable is that our international segment is now actively contributing to the growth rates of both our GMV and adjusted EBITDA. In Poland, our nearly 12% GMV growth outperformed our previous outlook. Revenue grew by 18% and adjusted EBITDA surged by 18.5%, significantly beating our 7% to 10% full year production. Internationally, we achieved a massive over 46% GMV growth. And while revenue saw a 11% percent decline. We made significant pre-progress in our in clauses to a 17% improvement in adjusted EBITDA. At the group level, GMV grew by almost 13% and adjusted EBITA grew by nearly 24%, which is well ahead of our original full goals. Our long-term strategy is built on 3 pillars to supercharge our marketplace. First, we focus on growing the core Polish marketplace by leveraging our existing assets. we are also reinventing our expansion model to replicate our success internationally, which as results show is heading in the right direction. We are working to externalize our assets logistics advertising or financial services to offer them to partners. We are also moving into everyday online shopping by adding new categories and segments. The most important shift this year is launch of services, which improves how customers buy nonphysical products on our platform. All of this is supported by strategic enablers, AI-driven productivity gains and strong focus on ESG and our people. seeing good progress in our development last quarter as I can add, we have strong and stronger appetite to explore new growth opportunities. In Q1, we focused heavily on driving loyalty and category expansion in our core market. We reached a major milestone by crossing 9 million smart users across the group. To simplify the experience we unified the smart minium or value to a bit less than PLN 50 for all delivery types. We also scaled our smart partnerships, adding names like Zaka, Multikino and Mall. For our sellers, we invest a lot to provide the best value for them and creating completely new possibilities like new categories for products or now also services and actively supporting their growth. We also introduced a lot of our outpatient to help them to more -- to be more efficient. We've also seen brand store launches accelerate, with 19 new stores this quarter, and our best price guarantee now covers 2 million products in Poland. Finally, our AI support and marketing is making campaigns preparation up to 9x faster. AI is now a live part of the Allegro experience. For buyers, our shopping assistant already offers improved results matching conversation history feature. We are also piloting and ask on Page AI component and answer specific technical questions about products before users turn to external search engines. For our selling partners, we are piloting frictionless listing. This allows Atea to simply pass product link from their own store and our AI automatically maps into our catalog. We are also using specialized ML models in categories like automotive to ensure catalog integrity and high-quality product images. To maintain our technological edge, Allegro has launched a new collaboration with OpenAI, which is designed to build the next generation of cores using front. It gives us first-mover access to leading AI models and allows our engineers to work closely with open AI experts to design and test new commerce solutions. This joint engineering effort aims to set new global standard for the industry. By strengthening our technological advantage, we can further simplify the shopping process, support our selling partners more effectively and significantly accelerate the development of new products. Our international segment cover Cacia, Slovakia and Hungary is delivering robust growth. We saw over 67% year-on-year GMV growth this quarter, reaching over PLN 800 million. This was driven by very strong price offering with our prices being on average 14% lower than local competitors. Our active base in the region grew by 32% to 4.9 million people. We are also seeing structural shift towards free traffic with app adoption driving a 7 percentage point increase in free traffic share. Most importantly, the customer trust in Czech and Slovakia has now reached the same high level as in Poland, and our adjusted EBITDA margin improved by 4.3 percentage points. We are officially entering the healthcare services market through a partnership with the Luma group. This move allows us to capture a high-growth nondiscretionary sector where private health spend in Poland is projected to reach PLN 48 billion by 2026. By partnering with Luxmet, a market miner with 2.5 million customers and over 3,000 medical centers, we gain immediate scale. Our ambition is to become the largest end-to-end online healthcare marketplace, scaling from current position in consumer health products in supplements to full service offerings. This strategy capitalizes on long-term tailwinds from an aging and increasingly affluent population in Poland. In Q2, we are launching Cara a dedicated storefront for the packaged travel market. This is a large and fast-growing segment with estimated spend on foreign package travel in Poland projected to hit PLN 27 billion. We are leveraging our e-commerce expertise and partner in Quivitaka, the leading tour operator in Poland with a 20% market share. Our right to win comes from our 15 million loyal customers and the ability to combine travel services with physical goods. We will also offer Smart corns rewards and win around 2 months of launch easy buy now pay later financing through Alegro app. Allegro pay continues to show exceptional performance. loan origination is up 37% year-on-year, reaching PLN 3.9 billion in Q1. Currently, Allegro pay finances over 16% of our total GMV. We are also successfully growing our other operating income from consumer loans, which is up 125% as we increase self-funding to nearly 60%. Beyond standard loans, our Allegro Pay card has incredible NPS of 92 and is increasingly used for everyday off-line spending. Additionally, our newest payment methods, Alegro click, reached 150,000 users in just 2 months, making it our fastest-growing payment tool to date. Finally, our logistics and delivery program is making great strides. The share of volumes managed by Allegro reached nearly 45% in Q1, up significantly from the previous year. the shift towards Allegro delivery partners to critical because it lowers our average cost per parcel. Our network is now the largest partner network in Poland with over 75,000 lockers and pickup points. Our own Allegro 1 APM network exceeded 9,500 machines this quarter, and we are firmly on track to hit our goal for over 12,000 locations by the end of 2026. As volume in the network growth, we continue to drive down unit costs. And now let's move to the financial section and our outlook.

Thank you very much, Marcin, and good morning, everyone. It's really a pleasure to be with you today to talk you through the Q1 2026 results. It's been an excellent start to the year for the Allegro Group. We're going to do things a little bit differently, and I'm going to start off with the group perspective this time. And turning to first to the top line metrics. As you already heard, it's really a story about acceleration this quarter. Q1 GMV for the Polish operations has accelerated to 11.6% year-on-year which compares to 8.9% in Q1 last year and to 8.6% in the fourth quarter of '25. International is up 46.3%, which is 24.8 percentage points higher than it was in the fourth quarter. So tremendous sequential growth. And together, that boosts our GMV growth for the group to 12.8%. And this is about the best level we've seen since 2022 when we purchase mall. . Why is it going so well? Well, the first aspect is that the mold transformation, as you know, is well behind us now. And the more legacy GMV is fading away from the baseline in 2025 removing that growth headwind. But even more importantly, the whole management team is now able to fully focus on our core strategy, which is to grow our marketplaces across the 4 countries where we're operating. and you see this across the results. Looking at some of the metrics, the active buyers group level is now 20.4 million customers but they're all marketplace customers. There's no legacy left in these numbers. The GMV per active buyer at the group level is at PLN 3,500 and it's up 10.4% year-on-year. The take rate for this quarter for Poland is at 12.65%, essentially flat, and that's because we've made a management decision to forgo significant monetization moves for 2026. I will talk about that a little bit more later. Advertising has done very well, as usual, 24.8% revenue growth. It's at 2.24% of GMV. And we've also had strong contributions from delivery and from fintech, as you've heard, which means that the Polish business is growing revenue at 18%, and the group grew revenue at 16.5% year-on-year. One technical note on -- also before we move on from this slide. because we sold the Mall South business in February, obviously, that's a discontinued operation, so it doesn't appear in these numbers. And it's also been taken out of the prior year numbers. So the prior year is restated ex small cells. So let's move on. And it's really great to see that, that growth has dropped through into our adjusted EBITDA performance. Q1 adjusted EBITDA for the group is up an excellent 23.6% year-on-year. Poland is up 18.5%, and our international losses narrowed by 18% versus last year. That means that the group EBITDA in managed returns is PLN 932 million for Q1. And looking at Poland, the growth in revenues, partly coming from the high-margin ads and fintech contributions, lower cost per parcel due to the impact of our Allegro delivery expansion. slower G&A growth as we tightly control our expenditures were all contributing to the margin being strong and the EBITDA growth being as fast as the revenue growth. Capital investment is up 16.4% on the group level to 239 million. Most of the incremental spend is into our delivery investments. our cash conversion remains in the top tier of e-commerce businesses at 74.3%, actually up on the prior year by 1.6 percentage points. Our investments in growth, whether that be the Polish CapEx or our international expansion are both well within our guardrails that we set out for you back in March. And when it comes to leverage, I'll look at that on the next slide. And as you can see, the leverage is slightly higher than it was at the end of the fourth quarter. It's at 0.93x versus 0.81x a quarter ago. but it's right around our policy target of running with a 1x leverage level. This tick up is coming from the seasonal Q1 working capital outflows, and that's slightly higher year-on-year capital investment, offset by the higher EBITDA that we have over the last 12 months. The main reason for the tick-up though or the main reason for the increase is that the cash is down by 520 million compared to December, and that's mainly due to 3 one-off items, the increased investment in the consumer loan book. the disposal of MuleSoft and also move from straightforward cash into money market funds, which technically does not go into the cash balance. When it comes to the next 3 quarters, you should expect it being back to business as usual with a strong downward trend in leverage. Our group liquidity position is tremendous. We have 2.3 billion of cash and 2 billion in undrawn RCFs at the end of March. And this means we have absolutely no hesitation in recommending a PLN 1.6 billion buyback to the shareholders to vote on at the June AGM. So now let's zero in on the Polish business. And as usual, starting with the key growth KPIs -- it was -- our active bias is up 400,000 year-on-year at 15.51 million active buyers. That's 2.6% up over the 12-month period and a 1% improvement versus December. Active buyer -- or spend per active buyer is up by 7.2% year-on-year. So that continues to be the key lever for growing our GMV. It's reached now almost PLN 4,400 per active buyer per annual period. So those 2 KPIs combined to deliver that 11.6% year-on-year growth, which is 3 percentage points higher sequentially than we achieved in Q4. And you probably noted that retail sales in March were extremely strong in the Polish economy. Allegro fully participated in that. And as a result, compared to the current trading that we shared with you when we last met to discuss Q4 are high single -- very high single-digit growth rate that we were seeing at that moment in time got boosted to this 11.6% level. Where does that extra growth come from in March. There was a couple of reasons for it. One was that February was extremely cold. And as a result, the seasonal shopping didn't kick off the spring season shopping really didn't kick off until March, so it was not in the February numbers. And secondly, the move of Easter right to the beginning of April meant that the typical pre-Easter increase in shopping in the categories where we're strong, slipped into March and into the Q1 quarter. That obviously then reverses in Q2 as we'll see later. So as a result, we had PLN 16.5 billion of GMV in Poland. Other highlights that are worth pointing out are that the average selling price has also been 1 of the strongest results that we've had for a while, 3.1% year-on-year increase and mix adjusted, it was 3.4%. So a little bit of inflation creeping into the numbers, which is great for GMV. and it's also worth noting part of that improvement was because our relatively high ASP categories, particularly electronics and automotive also had strong quarters. So moving on and looking at revenue. As usual, much faster than the GMV growth. Revenue growth for Poland was 18%, supported by the usual growth engines. It landed at PLN 2.8 billion for the quarter. Advertising contributed 25% growth; Dex, a massive 110% growth delivery experience. And within the other category, you have the fintech improvements, which and other grew by 80%. When it comes to the take rates, you see the seasonal improvement from Q4 level up to this 12.65% for Q1. As I mentioned before, we decided that this year we'll run with essentially constant take rate compared to 2025. And we did make small tweaks to cofinancing, around about a 3% increase in the rates per parcel for cofinancing. But other than that, we basically left the whole structure unchanged. So adjusted EBITDA, as I mentioned earlier, came in at 18.5% to land at PLN 1.018 billion for the quarter. The faster growth is coming from our ads and fintech, and it's coming also from the lower SG&A growth compared to the levels we were seeing a year ago. And the real highlight here has been our delivery performance, where the multiple -- sorry, the growth rate came down to 19.6%, so quite a bit better than we saw in the fourth quarter. And the real star of the show here was our average cost per parcel, which is down by 4.2 percentage points compared to Q1 last year. Now that's coming from the investment in our rollout of Allegro delivery and the change in the mix from 29% managed this time last year to 45% of deliveries being managed by Alegro delivery in Q1. And that was worth 6.8 percentage points of mix shift and that more than offset price increases that have kicked in from index on delivery partners at the beginning of Q1. So the strategy is really working. The parcel prices are coming down, which is really excellent news. The margin is at 6.2% of GMV, which is a bit above our full year outlook, and I'll come back to that as well later in the presentation. Moving on to capital investment and 24.8% increase in CapEx to 235 million for the Polish business. The absolute growth is roughly evenly split between the other CapEx, the physical CapEx, which is mainly due to the increasing speed of our investments in the delivery network both APMs and the core network for the middle mile. And also our capital development -- capitalized development costs. The team size is roughly unchanged. We have obviously higher salaries to pay. But the main difference here is that we're getting increasingly efficient on the maintenance side and more of the time of our tech team is being spent on functional improvements and developments to help drive growth. So that's Poland. Now let's look at Allegro International. As you've already heard, it's been doing extremely well. Let's start with a look at the pro forma data for the marketplaces only, so without any impact of the legacy mall activity, which will come to later. And we're really excited to report that the momentum that we were talking about in Q4 and how the flywheel is starting to accelerate in the marketplaces is really continuing to build. The GMV growth has accelerated by 19 percentage points quarter-on-quarter to 67% year-on-year for Q1 and it's worth to remember that as in Q4 of '25, geographically speaking, these are comparable like-for-like numbers. All 3 of the markets were open already in the fourth quarter of 2024. So this is like-for-like growth and like-for-like acceleration. You already heard from Marcin, some of the reasons for this improvement in terms of the customer-facing metrics, there's a few more here that are worth touching on. Traffic growth is up 25% but the GMV growth is 67%, which, of course, means that the conversion rates are massively better than a year earlier, which means more engaged customers. The actual number of active buyers is up to -- is up 33.4% to 4.9 million. That's roughly 25% of e-commerce shoppers across those 3 countries which is really a good result after 3 years of activity. The spend per active buyer is starting to pick up quickly now at 17.8% up on a year earlier. and is it PLN 613 for a 12-month period. And that means that the GMV itself adds up to PLN 804 million. So then now looking at the whole of the Allegro International segment, which means we need to take into account the more legacy effects as well. Here, we have the key KPIs of active buyers and spend. And when it comes to active buyers, you can see, first of all, in Q1 of 2026, there's those 4.9 million marketplace buyers. So these customers only shop on the marketplace. Mall North legacy front ends were closed right at the end of Q1 last year in March. And at that point in time, there were 1.6 million customers who only had been shopping in the previous 12 months. on that legacy platform. So they've gradually faded out of the numbers, as you can see there, over the following 4 quarters and they're completely gone from the figures going forward. similar thing is going on in the spend, where all you have as of Q1 2026 is the marketplace spend and on this basis, we're growing by 22.8%, again as the legacy impact drops out of the numbers. So for Q2 going forward, in essence, we're only going to be looking at the marketplace versus the marketplace a year ago. Putting that together at the level of the GMV, you can see that Allegro International segment grew by 46.3%, which is up by that 24.8 percentage points sequentially because this was the very last quarter where we had some significant GMV coming off of the legacy business. You can see that in gray there on the right-hand chart in Q1 of 2025, PLN 70 million of headwind which combines to reduce the growth rate from the 67% on the marketplace only to that 46% for the segment. 804 million of marketplace GMV on the Q1 2026 slide. So going forward is blue skies. There's no legacy. There's only marketplace growth to look at in the numbers for Q2 onwards. On revenue, because of the fact that the more legacy business was predominantly a 1P business. So the revenue numbers relative to GMV are over-indexed. mean that we still see some revenue shrinkage in Q1 because of that mall legacy activity in the prior year. Q2 going forward, you're only going to be looking at the marketplace which grew 80% year-on-year in Q1 and the advertising in the marketplace, which was growing 30%. When it comes to profitability, the adjusted EBITDA loss was down by 17.7% or PLN 19 million for Q1. You can see on the left-hand side there, the main improvement has come on that legacy business, which has now been transformed into a leaner merchant business, which only operates on the marketplace. That losses reduced from 43.6 million a year ago to just under PLN 19 million for Q1, and that includes the we do delivery business as well as the merchant. When it comes to the marketplace part of these numbers, the loss is slightly bigger, 60 million went up to 67 million because we've invested more money into marketing. We're seeing a better return on marketing expenditure because of better conversion rates and the better engagement. So we're leaning into that and spending a bit more. You can see it's 10 million in the bridge. And that results in us pushing that flywheel even faster and growing the GMV even quicker. When it comes to our adjusted EBITDA margin to GMV, here is where you can see the real progress in our journey towards breakeven. As you remember, we're targeting breakeven by 2029 for these international markets. And there, you can see an improvement from minus 19% a year ago to minus 10.7% for Q1, 8. 3 percentage point improvement. It's nearly approaching 50% better than a year ago. So that's international going really well. We're very happy with it. So let's now move to the outlook to finish up my part of the presentation. And we'll start with current trading comments for Q2, which obviously relate primarily to GMV. So starting with Poland, the first 6 weeks have seen high single-digit growth, and that is because there are some significant headwinds from the March effect I was just talking about earlier. First of all, the Easter trading that shifted into Q1 is not in Q2 as a result of the calendar. And secondly, and just as importantly, our annual Smart Week events started this year a week later in the calendar and it only kicked off this past Monday, which means, essentially, it's not in that first 6-week period. It's actually started extremely well. We're 3 days in of about a 10-day shopping festival. So if you look through all of that and look at 4.5 months on a year-to-date basis, we're actually right around the midpoint of our GMV guidance, the guidance to remind you for the full 2026 is between 9% and 11%. Moving on to international. And again, for the first 6 weeks, this flywheel continues to accelerate, and we're seeing year-on-year marketplace growth moving now above 70% year-on-year. And as I've been mentioning ad nauseam in the earlier part of the presentation, the more legacy effect is now basically completely disappeared from the numbers for Q2, almost completely disappeared. And as a result, the Allegro International segment growth has moved up from that 46% in Q1 to nearly 70% growth for this point in Q2. And on a year-to-date basis, we're up now to 50% growth. What does that mean for the group? For the group, it means that quarter-to-date, we're very nearly 10% year-on-year GMV growth and the group level -- sorry, on the year-to-date level, is at nearly 12%. So just below the 12.8% we've reported today for Q1. So what does that mean for our outlook? We've made a slight upgrade of the top line expectations for International, slightly in the sense that obviously, it's a much smaller segment than the Polish business, but it's a very important improvement for international itself. And we're holding the Polish outlook unchanged at this point in time. So let's go through our thinking on this, and let's start with Poland. As you just said, we're right on track for the midpoint of our guidance when it comes to GMV. And we're ahead of plan or we're delivering on our plan and our key objective to grow the GMV faster than we did in 2025, which would be a major change of trend that we've seen over the last few years. At the same time, we do have obviously, like everybody else, an eye on the geopolitical situation, and we have an eye on consumer sentiment. But so far, we're not seeing any signs of ecerioation in performance. But we're obviously aware of the risk and we have an eye on that. When it comes to that really great EBITDA performance, the 18% growth that we saw in Q1, we don't expect that to continue at that level for the whole of the 2026. And the reason for that is, obviously, we haven't put up the take rates we will need, therefore, to absorb the cost increases, operating expenses and obviously, salaries will be higher over the course of the year. We have factors offset some of that, like our growth engines. But nonetheless, we should expect the growth rate to be a bit lower in the subsequent quarters. So we're not making any adjustments at this stage to the EBITDA guidance. For international, we have increased the guidance by PLN 100 million of GMV, which translates to 5% faster growth than in the original outlook. That's adding 30 million to the revenue -- commission-based revenue from the marketplaces, which is also a 5% improvement in revenue growth. There's clearly potential that it could be stronger than this, and we do have an appetite for more. At the same time, we have that same geopolitical concern about the consumer. The business is more discretionary dependent, especially in the fourth quarter than our Polish business, and we need to bear that in mind. We're also enjoying an FX tailwind right now, which can always reverse, so we to be cautious on that front. So we do have an appetite for all, but this is enough of an increase for now being prudent. No change to the EBITDA guidance for international because any additional gross margin we're getting from the faster growth, we're happy to reinvest into marketing at better ROIs than we've been receiving a year earlier.to grow that flywheel even faster. So the group metrics don't really change very much, but I really want to underline that the international business is now accretive across all the group metrics on top of the Polish business and helps drive our full year growth. And the faster growth of the Allegro Group. So with that final comment, I'm going to hand it back to Marcin to wrap it up before Q&A.

Thank you, John. Great summary of the great results we achieved in Q1. So key takeaways for today. Allegro delivered robust Q1 results with growth in Poland rebounding to almost 12% year-on-year and margins coming in ahead of our previous expectations. We are seeing a continued strong acceleration in our international marketplaces, which grew by 67% in the first quarter and as a result of this momentum, we have officially upgraded of our full year outlook for the International segment. Then our strategic evolution is progressing very well, and we are successfully expanding into our first raise categories. At the same time, our key growth engines like fintech delivery and advertising all delivered more than solid performances this quarter. In terms of operations, we continue to increase the share of volume managed directly by Allegro, which improves both efficiency and the customer experience. And finally, we are committed to shareholder returns with PLN 1.6 billion share buyback proposal set for a vote this June. Tomasz, it's time to open the Q&A session.

Thank you much, and John for the presentation. We are now ready for the Q&A session. [Operator Instructions] Our first question comes from Andrew Ross from Barclays. .

Question. I've got 2 out okay. My first 1 was to ask about the new travel platform that you've launched in partnership with take. Can you give us a sense as to how the unit economics work, kind of you fine economics as I make transactions on the Allegro platform? And then any learnings you're having in terms of how your cohorts behave as you're adding in additional services in the Allegro platform. My second question is pretty much exactly the same 1 in terms of the partnership with Loxmed in terms of health. And maybe you can give us any color in terms of how the economics and the learnings from that call. And I guess, as part of the answer, it would be great if you could give us some perspective as to what we should be expecting next and perhaps some kind of vision as to how adjacent services on Allegro might look kind of 1, 2, 3 years down the road in terms of what you're trying to build.

This is a great question. And of course, as we announced, we just started to explore both segments, starting from healthcare and then travel having or seeing quite promising economics behind both corporations and both segments because of, firstly, rising value of the market in both segments and quite promising signs we see on the market. What we can share right now is take rate is relatively high. We can say something about double-digit take rate and some kind of competition between some potential partners or vendors we see or we will see on the marketplace because as you probably said, we started cooperating with Luxmet and Itaka but of course, we are marketplaces so we invite all major players to join us and to develop these both segments together. The great thing is that we see this appetite from our customers to purchase services on Allegro. And combining physical products with services with value-added services, this is something creating very unique value proposition on our side. because you can imagine that even purchasing some healthcare services or travel packages, you can use potentially our financing products like Allegro pay. So this is really something very unique on the market. Of course, we should remember that we do some tests, and this is kind of exploration for us because this is the very first time we or we promote services to our customers as a standalone. But again, of course, we do this development with our customers, and of course, with our merchants. So we did many analysis in the past. We we are close to both segments of the market, and this is something looking for us very promising.

If I could just follow up on that. So double-digit percent take rate on each incremental transaction, but that's to you guys and then any of the costs that you incur as part of that? Or is the incremental margin on this transaction is pretty high.

So looking at investments on our side, we can say that we are very, very efficient. And there is let's say, no risk on our side. Again, we are a marketplace. So we do not provide those services. We do it with partners. So quite limited investment on our side and again, very promising market.

Maybe just to add, Andrew, the way we're approaching getting into these services is to partner up with a key player in both cases, a very strong player. And it's a win-win opportunity because they see the opportunity to reach customers amongst our 15 million active buyers, which maybe they've not reached so far, and they think it gives them an edge. And obviously, for us, it's a high take rate, 3P business model, so if we get traction, it's going to be a value -- EBITDA, sorry, accretive very quickly. And as Marcin said, it's about testing and seeing how well it goes. Over time, we'd expand it into more of a marketplace with multiple players, but we try to start with a strong player in each case.

The next question comes from Cesar Tiron from Bank of America.

Yes. Congratulations on the results. I have 3, but I think they're very easy. The first 1 is on the OpenAI partnership. I wanted to check what are the economics there? Are you paying them that's going to help you to generate in your opinion, incremental revenue, et cetera, et cetera, or potentially lower traffic acquisition cost. So that's on the OpenAI partnership. Then on the new services that you've discussed, I wanted to understand, without asking for formal guidance, just as an aspiration. If I look at Allegro in the next 3 to 5 years, these new services and probably others that you launch might be, in your view, a material contribution of the revenue of the marketplace revenue. Is that the case? Or do you think it could be just low to mid-single digits. And then I think the third question, looking at Allegro1 -- the share of Allegro 1 in deliveries as keeps on increasing. So we're done on that how significant do you think it will be in the next, again, couple of years.

So great questions. I will start with describing our cooperation with OpenAI because this is something really big and I guess, 1 of the first initiatives in Europe between technology vendors specialized in AI and marketplaces. So thanks to this cooperation, we have early access to the newest technology. And you know that OpenAI is the owner of ChatGPT, the world #1 AI application, having access to hundreds of millions of customers or potential customers and for us, opening the new possibilities to be closer to some attractive new group of customers like young generation, for example. So of course, thanks to this partnership, firstly, we think we will be able to increase conversion in some products or product categories because of giving our customers better advice in some -- related to some specific products. Thanks to that, as you probably mentioned, we also believe that traffic can be based on different stores, quite attractive 1 because again, we see that millions of users or customers in Poland, they use ChatGPT.So we will have our position secured by this -- in this application and potentially having access to some new attractive group of customers. And of course, you know we have a clear strategy how to leverage AI both externally and internally, of course, internally to use this great technology to just be more efficient and to increase our productivity. and externally to reach some new group of customers and, of course, to be much more diversified than in the past when it comes to traffic. So great cooperation and something very promising to us. But of course, we do cooperate with all major players specialized in AI development. So OpenAI, this is 1 of the key players, but not the only one.

Thank you for the questions. I'll take the other 2. On the new services, as Marcin said, we initially is testing how the consumers respond to these offers and whether it works for both us and for the part and assuming that it will do, then we'll obviously build it from there. And the -- as I said in the previous -- to the previous question, it should be accretive in an EBITDA sense, very quickly if it catches hold. As you saw in the presentation, both of those categories are multibillion opportunities. So we can potentially take a reasonably large share, but we've not tried to make any projections at this point in time. I think more important is we're not finished with just these 2 sectors. There are other sectors that we can address. and what we've got in mind will become clear over time. We've got within the marketplace, something like 10 different categories, we're covering a really wide range and that's -- and we're not overly dependent on any particular category. And we'd probably like to get to a similar situation on the services side. Regarding Allegro 1, there's every reason why we'll continue to build the Allegro delivery share and the managed share. quarter-to-quarter over time. I mean it clearly works. Proximity of the lockers is very important, and we have enough lockers out there in the market that proximity is doing its work and the quality of the service is also very strong, and customers are happy. So they're happy to use the nearest lower. Back in March, we gave you quite a bit of additional information about where we would need to increase our geographic coverage. We think we need maybe another 15,000 lockers deployed in underserved areas by Allegro delivery in order to really have the coverage that we need. But the middle mile capacity is there. Remember, there's 4 different players within the consortia, all with middle mile capacity. So we have potential to do a lot more than we're able to do at the moment. But that isn't the target objective. The target is to keep the impose lockers also within the offering for the consumers to make sure that everyone's nearest locker is going to be available to them on the Allegro, that's the preferred outcome.

Thank you, gentlemen. The next question comes from Roman Resene from Goldman Sachs.

Considerations on strong results. I have 3 questions. The first 1 will be just a follow-up on Allegro delivery and your expansion into lower density areas. Would you expect some impact on cost per parcel? And are you sure you would still have a cost advantage versus what you pay to impost as you go further into the lower density areas. The second question on the international, what technically has structurally changed in the business that gives you confidence on the GMV acceleration, would you say that you have reached some sort of real inflection in any of the flywheel drivers such as order frequency seller and to traction and customer acquisition? And the last 1 on the LLM if you can please quantify the current share of traffic and GMV coming from LLM driven discovery versus traditional channels, how has it trended over the last few quarters and how does the LLM driven traffic compare in quality versus traditional channels.

Roman, thank you for the questions. I'll take the first 2 and then hand it over to Marcin for the LLM. Allegro delivery in low-density areas. It's a very fair question. And the answer is pretty obvious. Obviously, the lower density areas will have a higher unit cost than the bigger cities. So it is something of a headwind on the average unit cost for sure, going into those areas. But for the time being, given where we are with negotiations, et cetera, it's absolutely necessary to do that. And we need to be present everywhere. And I think that's also true of the partners. It isn't such a strong headwind, though, that it would stop us on the average unit cost seeing improvement over time as we continue to build the volume. So yes, there is a headwind from it, but it doesn't overwhelm all the good stuff that we've been seeing over the previous quarters. International, you were asking what's giving us confidence in this flywheel. Maybe starting from -- the answer is quite a long one. I think there's many things that are starting to move positively and reinforce each other. If we start from the instrument, remember that these consumers 3 years ago have never really met a marketplace with massive selection superiority that we're selling mostly branded goods and mostly Central Europe specific selection. But it took -- and it takes them a while to get used to it, right? And -- but the metrics that Marcin was going through should give you some confidence that they're warming up to it. They're starting to trust it. And as a result, the frequency is going up. The frequency -- when we look at the older cohorts, we can see that they're getting up to levels which are above 10 transactions a year. We have an average in Poland of above 20%, right? So it's going in the right direction because it's only been for 3 years. And at the same time, we've got new customers coming in, we'll obviously start with low frequency, right? So that's keeping a cap on the overall average. So the frequency is going up, it means that the conversion rates when they come to shop, there's much higher purchase intent, which is why the conversion rates are going up. And that then feeds into the cost of marketing. You can buy the traffic more cheaply when the conversion rates are better when Google has confidence that sending customers to this particular site is something that the customers are going to be happy with, you end up being able to buy the traffic more cheaply. So the cost per click is moving in the right direction. The conversion rate is also moving in the right direction. So the marketing spend is more and more efficient in terms of driving growth. And at the same time, the frequency in itself because it's going up, some start to get used to coming direct, either via the app or director in their browser. And you don't need to buy as much of the traffic because they start their searches always on Google or on other platforms. So all of these things start to work together and turn that flywheel better and better. The other aspect, which is very important, is obviously the merchant side. And again, we've got some really good initiatives running around bringing in local merchants and also additional Polish merchants and widening selection even further. And all of that is helping as well. So it's really very exciting the way that it's going. We've been very patient with it, and we've done a awful lot of work over the last 2 years to address initial suspicions or concerns that consumers had about working with the marketplace and it's paying off.

The question about rare and traffic and impact is super interesting. Unfortunately, we don't share any specific data related to traffic structure, but we can say that this is something we perceive as promising source. Today, I can say this is not material in the whole big picture. But of course, we do invest because -- you know that the paid traffic is mainly based on sales changing from Google or some social media platforms from meta, so every single player trying to change or to help us to diversify sources of traffic is -- this is something really helpful for us. The second thing is that people use AI assistance applications today mainly to explore, to be inspired or to comparison products or to get some additional specific information. And I guess I believe that the traffic from AI assistance will be growing next year, but we should be quite patient because this is something all about changing habits and some scenarios to help people use e-commerce and how they want to purchase some goods or now services as well. And as you see, we do invest in corporations like with OpenAI just to have access to the absolutely U.S. technology and thanks to that to create some advantage in comparison to other platforms and, of course, use this cooperation or cooperations to also create some additional or new sources of traffic. So this is something very promising. Right now, this is not material in the whole big picture. But we strongly believe in that technology that this is something like tailwind to our marketplace to speed up our development and having access to attractive group of customers. So that's the answer.

Thank you, gentlemen. We're quite popular to pay. So the next question comes from Aaron Armstrong from Ashburn Group.

Congratulations on a very strong results. Firstly, on the opening actually just follow up on the recent points. Can you talk about, say, a customer that begins a product such within ChatGPT Poland for a product or a service that you offer would you then be a preferential kind of option for them? Would you be bumped up the more organic ways in the way that you would be, say, for paid Google traffic, would you be kind of like a paid ChatGPT listing. Is that kind of how that's going to work for you? That's part one. I just pack question. Other question is on the ASP growth that we saw just over 3% in Poland this quarter. Is that an explicit strategy from the management team to help drive higher ticket prices, which can help absorb delivery costs over higher ticket size with positive implications of profitability? And can that continue through the year? And then also in the slide deck under your partnerships section, Sabka mentioned. Could you talk a little bit about that and perhaps any broader comments on grocery, please.

So I will cover the first question related to again, our cooperation with OpenAI. And of course, or results, what you see asking ChatGPT, for example, for some products is currently based on organic results. And as you know, I guess, any single platforms announced yet commercial model like to present some paid traffic like we know from series like Google. So again, this cooperation is based mainly on using the newest technology. And of course, thanks to that, we can expect that we will see some improvements in visibility of product fit in many applications using AI but this is not something securing our position. So we do a lot, of course, to have perfect descriptions of products. Of course, the best offering and the best I think on the market. And as said, we do cooperate with many vendors of AI technologies on the market. So we will be even much more active in the future in this field.

Sorry, that second question, there was a bit of background noise. I didn't catch exactly what you were asking about ASP. Could you rephrase it.

So maybe I will jump to the question related to Japan our view on the grocery market. I guess, many times we shared with the market some data related to quite promising or the most promising categories we have on the marketplace and our supermarket, including grocery, which is 1 of them. So we do invest, of course, to have better selection and of course, to keep the most attractive prices on the market cooperating with hundreds or even thousands merchant partners we have on marketplace. Today, we shared that we do cooperate with Zabka mainly to accelerate growth of our loyalty program, smart. So we have great cooperation with this company. But answering your question related to grocery, we do believe in this category. We see increasing demand from our customers. We see high growth in our supermarket, so this is something giving us confidence that we should invest maybe even more to improve our presence in this part of the market because this is really exciting part of our journey investing in changing habits of our customers, and you know that grocery in is it's still quite demanding category, but promising. So we carefully invest, but we want to improve our presence in this part of the market.

Let me take another stab at the ASP question as I think my colleague understood better than I did. So the question is, is it our strategy to drive the higher ticket categories, if I understand correctly, on average selling price. The answer to that is not particularly all categories are good. We make money on all categories. And what we see in this quarterly result is that inflation is creeping back into average selling price generally across the categories. Obviously, after the very high inflation back in '22 and '23, it almost completely disappeared out of our numbers if you've been following closely quarter-by-quarter, in later 2024 and through 2025, there was very little ASP inflation, but it's starting to creep back in. Having said that, we are very focused on UX on all categories. As Marcin said previously, there are improvements across the board. In particular, automotive is just introduced a great new function where I think you just put in your registration number, if I recall, and it knows immediately what car model it is. And when you then say you need windscreen wiper or rubbers or something like this or any other component in those immediately what you're looking for. So that's made a difference. And it's only 1 of many things that contributed to automotive having a good quarter. So -- any relative faster growth in the higher ASP categories is obviously going to have a positive impact on ASP. But as I said, just about anything we sell brings us a profit and we'll take the growth wherever we're getting it, and everyone is working hard to deliver growth.

So the question comes from Michal Potyra from UBS.

Just follow-up questions really. So really, the first follow-up question is regarding the delivery unit cost. In your presentation, you mentioned a decline in unit cost. Could you just please clarify whether this refers to the full cash costs, including leases, you have to pay on your APMs or only the portion recognized at the EBITDA level? And perhaps if the latter is the case, could you perhaps elaborate on this trajectory of total costs, including leases you have to pay for your own APMs. So this is the first question. .

That's a really good opportunity to clarify. Yes, the costs that we're measuring in that metric, if you remember, it was on the EBITDA bridge. So it's the EBITDA cost that we're taking into account there, which means for the Allegro delivery partners that we have, DPD, DHL and ORLEN. It's the effectively the unit price per parcel that we're paying to them for delivering a package, right? And that's the whole cost that we have to worry about. And in the case of Allegro 1, which is the fourth partner and is responsible, not for the whole of that 48%, but for a part of it. You're absolutely right that the lease costs are not in that number because they're below EBITDA. But those lease costs grow with a number of locations. And from then on, they're just the fixed cost and the more volume we're putting through the lower the full cost of delivery. I think back in March, we were sharing the -- some information on the full cost. But certainly, the full cost now on Allegro 1 is low enough that it's competitive with what we're paying to other players, including their profit margin. Hopefully, that's clear.

Let me have 1 more, please, maybe a little bit more philosophical. You have 15 million active shoppers in Poland already, maybe you could provide your perspective on what you see as the potential ceiling for the number of active shoppers in Poland? Or perhaps you could share some penetration data on different age cohorts? How does it look like?

Yes, that's also a great question. I mean as you know, our definition of an active buyer is a unique e-mail account. And that means that, in some cases, that's 1 buyer who's representing a whole household. So there can be 2, 3, 4 Polish citizens or residents behind that single account in many cases, right? So just about everyone in Poland shops with Allegro either frequently, very frequently or there is a tail of occasional shopper. It really becomes super relevant to just about everybody once they become a household, right? It's maybe not so relevant for very, very young shoppers who don't have much wallet. And when they do have wallet, they buy beer or maybe sneakers, or bus tickets and things like that, right, the students. So once you actually set up on your own and you rent a flat or you own a flat -- just about everybody shops on the Allegro. Do you want to answer that margin?

Yes. And as John said, of course, the number of our customers actively use in our marketplace. This is 1 of the crucial things or KPS to us. But or secondly, we should think and to invest a lot how to improve frequency of shopping at that marketplace because we do invest to convince people to move some from the offline world to the marketplace because we offer them better selection, better prices, better convenience. So this is a great opportunity to us. And of course, it should be always combined with the number of active buyers. But again, the big win is also to improve frequency of shopping or average spending of our customers. So this is something we are focused on.

So I understand there is just like no material difference for kind of older cohorts like 60 plus, let's say, people who are not as used to using online tools in their youth or is there is a difference.

They are interesting questions because I remember exactly the same questions when I started 9 years ago in Allegro. We were worried about lack of young cohorts. And at that time, we're also a bit worried about the fact that some of these older cohorts were not highly representative because as you just described it, they weren't really Internet natives, right? The people who were 65, 9 years ago, are now in their 70s, right? And the consumers who were 16, 17, 9 years ago are now in their mid-20s and have probably moved out of home and they've got their first flat and stuff like that, right? So in both cases, the problem has gone away. Those very young people are now starting out in their adult lives. They start to shop more on Allegro. We've got just as many people in the mid-20s category as we add, if not more, than 10 years ago. And the same in the sort of 65 category, they are old people that are much more familiar with the Internet than the people that are in the 70-plus category and they are very active buyers. The amazing thing about Allegro is people, once they start stopping on it, they don't stop shopping on it, right? What you do see is probably the heaviest offers are the people in their mid-40s who've got the most spending power. We were like peak spending power. And then people tend to start spending less once their kids move out and stuff like that, right? So all of these type sort of typical lifetime patterns are visible, if you go look.

Thank you, gentlemen. The next question comes from Nick Baker from BNP Paribas.

I was wondering if you can talk more about how the Allegro shopping assistant has been received by buyers and what the learnings are from it in its early stages. Feel free also to talk about any of the other AI initiatives outside of the OpenAI relationship that we've obviously touched on a fair amount, how they're progressing. And then my second question is just what's behind sort of the rollout progress of the Allegro Pay Card and how can that continue going forward?

So I will take the first question. Again, we do believe in AI, and this is the second or even the third version of our AI assistant or maybe assistance because we do invest also to help not only consumers, but also our partners, our merchants to improve efficiency to be more effective selling some goods on marketplace. And comparing both versions because I think the initial version was introduced in Q4 for some limited part of our customer base. We see huge progress. This tool is much more effective and the results are almost perfectly looking for something or to be advised by AI technology or AI assistant. As said before, this is something really helping us to improve conversion in some specific products or some specific pretty advanced product categories. So -- and again, the new source for us to create some additional GMV, we see that use AI assistant to explore the catalog and to be inspired by AI. So -- even yesterday, having meetings with our customers and observing how they use our AI assistance, they were absolutely amazed how helpful this technology is and how they are advised to find some proper products. So again, to summarize, we do believe in this technology very strongly. and we want to continue our investment in cooperation with OpenAI, but also as said before, with other leading AI technology vendors.

Allegro Pay Card. I think it was the second question. This product is very well received by the consumers. We're only offering it to customers who are already having an Allegro Pay wallet shop on Allegro. And really, the sky is the limit as to how much we can continue to penetrate this space and get an upsell them a card or open a card account to go with the -- with their wallet that's dedicated to Allegro. So plenty of headroom here to keep growing that.

Thank you, gentlemen. And the last set of questions for today comes from Pito pack from PKOBP, Porch, Go ahead with your questions.

It's just one. The question is what take rate do you expect in the next quarters, especially comparing year-on-year. I know that the take rate increase was very limited in March, but it seems that in the last 2 quarters, some investments into price seem to be visible. of my leaders bet here. I mean the base for comparison in the second, third and fourth quarter last year is higher in terms of take rate. So yes, what should we expect here on the policy business?

Yes, Pat, thank you for that question. Yes, you're absolutely right. One thing that does detract from take rates are when we share take rate with the merchants to try and hit a particular price point, either as part of a campaign event like Smart week or just generally because we know that somewhere off of the Allegro there is a lower price point and we want to match it. So the amounts we're investing are getting larger, partly because we're managing to monitor more and more selection at scale. So there's more, more opportunity to spend and to fulfill our promise to be extremely price competitive. And that does take a few bps off of the take rate on a year-on-year basis. So the take rate will -- there's no reason that the take rate is going to move higher because we haven't increased the rates significantly. You will see a slight uptick probably because of the few bps that come from that co-financing change. but the effect that you just identified is working in the opposite direction.

Okay. So roughly flat take rate versus first quarter, I guess yes.

Roughly flat. Did I hear you say, I think.

Yes versus first quarter this year.

You have to wait and see how it comes out. But yes, there's no reason for it to make a significant move in either direction.

Thank you, Piet, and thank you all. This concludes our presentation for today. Thanks for joining, and we're looking forward to speaking to you again when we publish first half results in September.