InPost S.A. (INPST) Earnings Call Transcript & Summary

Good morning. My name is Gabriela Burdach, and I'm the Investor Relations Director at InPost. Welcome to InPost's 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 Rafal Brzoska CEO; Michael Rouse, CEO International; and for the first time, Javier van Engelen Sousa, the new CFO of the InPost Group. After the site, we will have a Q&A session. I am now pleased to hand it over to our CEO, Rafal, over to you.

Good morning. Thank you, Gabby, 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 U.K. and in France, of course. Let's begin with some 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 PUDOs. 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, in post and old 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 U.K. adding the most, but all our markets delivered year-on-year growth. Revenue in nondomestic countries rose by 15%, but adjusting for foreign exchange effects, the growth rate reached 25%. Our adjusted EBITDA 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 Mondial Relay, driving profitable growth in the U.K. and Italy as well as enhancing our already market-leading position in Poland. Looking ahead, we remain confident in our full year outlook. So let's move on to the next page. We delivered 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 the leading player. Last quarter, we once again outpaced the market by a solid 8 percentage points. 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 U.K., our proven concept not only drive significant volume increases, but also enhances profitability as we scale up. In Q1, 2024, our parcel volumes 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 in the fashion segment. Door-to-door delivery shown dynamic growth of 34%, also driven mostly by marketplaces. Now turning to the next page. Here, I would like to showcase InPost 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 a very attractive levels. During the last peak, we had higher total network utilization than the previous one, and this trend continued throughout Q1 '24 as well. On the next page, you may see that we are continuously searching to improve our customers and merchant 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 launch in Q1 2024. It is more than just a payment app. It's very convenient and very efficient checkout are providing a 2-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 a 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. Q1 '24 has been a strong quarter for the international business and all the markets that operate within it. We have 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 in Mondial Relay as the leading locker solution in the U.K. and France. At a snapshot, as Rafal 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 1/3 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 1,500 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 grid 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 Q1 '24, we added almost 900 new APMs and 500 PUDOs increasing the total number of idle phone points by 20% year-over-year as we continue to build density and convenience. In France, over 30% of the population live within a 7-minute walk to APM PUDO, and we continue to invest in this convenience strategy. So let's move on to volumes. Mondial Relay is operating in a very difficult market conditions declining e-commerce market as well as healthy competition. However, despite those market challenges, we delivered 9% volume growth in Q1 '24, 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 volume in France was delivered via lockers, significantly from the 10% in Q1 '23. You also can 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 on market legacy perception. We are very excited about the Tour de France event that starts next month, and this is a significant step in stone partnership to deeply connect with an event that is at the heart and minds of differentiation. 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 road, plus over 2 billion people watching the event on TV or be streams globally. There will be 21 stages, including 3 in Italy and 17 in France, 1 hybrid stage starting in Italy and finishing in France. We'll have InPost branding in Italy and Mondial Relay brand 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 in making this a standout occasion with a company in events, pavilions, mass cuts and all other stuff to make sure we are visible on the route and starting and finishing times. We're super excited to be launching this partnership this year. Now let's turn our attention to the U.K. In the U.K., we're on a path to create a fully integrated model. In Q1 '24, we saw a continuation of trends in volume and profitability from the end of last year. We have the largest APM network in the U.K. with over 6,800 lockers. And in Q1 '24, 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 3 cities, our coverage is over 60% of the population. And for the entire country is now at a solid 33%. The number of lockers were 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, volumes 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 U.K. 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 3 core cities as we offer national 7-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 a 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 zloty compared to Quarter 1 2023. At a constant exchange rate, revenue growth was plus 26%, exceeding volume growth by mid-single digits as per our outline. Importantly, at constant FX, Mondial Relay revenue grew by plus 7% and another international market grew by plus 145%. Adjusted EBITDA, both in Polish zloty and at 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 '23. 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 23 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 PLN 213 million and a reduction in our leverage ratio from 2.2x at the end of full year 2023 to 2x at the end of Quarter 1 '24. Breaking down the financial highlights by segment, let's start with Poland on Slide 18, where adjusted EBITDA in Polish zloty 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. Adjusted EBITDA in Polish zloty increased by 27%, keeping pace with revenue growth and translating into a broadly stable adjusted EBITA 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 Europe 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 modest repricing. 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. At constant currency, adjusted EBITDA increased by plus 11% in Q1 '24 versus Q1 '23, 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 U.K. combined have more than doubled volume and revenue compared to Q1 '23. U.K. volume grew by plus 147% as we gained scale in C2C and returns. In Italy, volume reached 4.8 million parcels, up 44% versus Q1 '23 as a result of growth in B2C supported by volumes in C2C. In these 2 countries, we are also gaining market share, although on a 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 PLN 46.2 million into a positive plus PLN 147 million 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 U.K. 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 zloty 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 zloty Group operating EBITDA is broadly in line with adjusted EBITDA growth. Group EBIT is up by plus 6.1% year-over-year as higher IFRS 16 amortization behind our increasing APM and [ PLN ] 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 depth as well as some improvement in effective tax rate due to lower losses in U.K. and Italy versus last year. On Slide 22, we again explained the healthy and improving cash generation dynamics of the InPost business. For the first quarter of 2024, Poland generated PLN 459 million in free cash flow, representing an increased free cash flow conversion rate of 68% compared to 56% at the same time last year. Free cash flow investment in international markets increased to PLN 246 million. 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 PLN 222.6 million in Q1 '23 to PLN 245.8 million in Q1 2024. The overall group CapEx intensity decreased from 11.2% to 10.1% over the same period. At about 2/3 of total capital expenditure, network expansion remains our single most important focus area. However, in Q1 '24, 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 fall decrease in its CapEx spending only to be more than offset by increased investments in Mondial Relay, the U.K. and Italy. To close the financial highlights 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 PHP 6.6 billion, with small changes mainly being the result of FX movements. Net debt decreased by PLN 159 million 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 2.2x at the end of Q4 '23 to 2.0x at the end of Q1 '24. I will happily remind you that at the end of Q1 '23, our leverage ratio still stood at 3.0x 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 does 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.

[Operator Instructions]. Our first question comes from the line of Sathish Sivakumar from Citi.

I've got 3 questions. First one is around IPOs. If you could actually like share some color around like the adoption rate, how does it evolve during the quarter, you say that 1.6 million of registered users and how does it actually progressed? And do you have any sense around the average basket size of customers using the InPost Pay at the checkout. That's on InPost Pay. And then a couple of questions on the international segment. Firstly, on Mondial Relay. If I look at the volume growth quarter on versus last year, C2C seems broadly stable and the growth is mainly driven by B2C. so first on like do you see the market is maturing on the returns? Or is it mainly driven by increased focus on B2C and that's what is shifting that growth into B2C and where is that growth is actually coming from on the B2C segment, i.e., like what is the customer base or the verticals are driving it? And the third one was around the U.K. On the volumes that's going through in the U.K., is it all now handled completely by Menzies or you still have exposure to the other partners? If so, what does that split would look like?

Maybe I will answer the first question, and then I will hand over to Michael to model U.K. question. So in terms of InPost Pay, as you saw the adoption among the end users is impressive. Literally 6 weeks ago, we said we have 1 million registered users within 4 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 certain metrics on that part of the business yet as this is early stage. The things I can definitely confirm and we've shown in the presentation is we are massively improving basket conversion, which is essential for the merchants. We improved the NPS of the end users using our solution on those websites. And also in terms of average basket size as a average on the Polish e-commerce market published accordingly by, for instance, the base linger index or some of the enablement platforms publicly listed on the Warsaw Stock Exchange. So it's is literally very close 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 merchant website. And that's another strong convincing statement that in both it's not a supplier, it's not the logistics provider. We are enabler for the top line growth of the merchants collaborating closely with InPost. Handing over to Michael for the questions.

Thank you, Rafa. Just on your 2 questions. the first on B2C growth is Mondial Relay. The growth is coming from 2 client segments. Firstly, our international client segment, which is a mixture of companies like Amazon, Zalando, Temu, Shein and others. So there's actually a good balance of growth from that. 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 have 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 on Pacific. You asked the 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 U.K., 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 in toil meal for that last mile. But I would say the majority of the business today is very much about our locker business and out of [indiscernible] business with the role covering those areas where we don't have coverage yet.

Okay. Just a couple of follow-ups, one for a follow-on on for Michael or yourself. On the InPost Pay, Rafal, do you thing foresee this being rolled out outside of Poland. I want to take it actually to say that it's something probably a good disrupter in the other market as well. And then, Michael, just on the so Menzies, moving everything all the volumes on to Menzies. Is that been 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 and scale. What does like contribution from Menzies on the cost side?

I think very much it's about the operating leverage. So clearly, we built the scale [ tech ], 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.

Yes. On the InPost Pay piece, of course, everything was rolled out in Poland. It's becoming successful, is then rolled out in the other market product plan. Of course, the maturity of the market is critical here and the adoption among the end users of our mobile app. So those 2 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 something we would love to roll out on the other market as well.

Your next question comes from the line of David Kerstens from Jefferies.

I also have 3 questions. First of all, can you please comment on 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 and then a PLN 1.3 billion guidance for the year. So 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 comparative? 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 a final question for Javier. Welcome. What are your priorities as the new CFO is 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 we are 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?

Thank you, David. Let me answer the first question, and then I will hand over to Javier. So yes, definitely, it's not about slowing down or revising down the number of the machines. It's all about 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 in the markets where we are currently lacking of capacity. And that that's one of the top points on our operational agenda for all the markets. Handing over to Javier.

David, good to meet you virtually. So thanks for the questions. First question on Poland. You're right. It's a phasing question. If you look basically at the profile of last year, you saw a significant jump in Q2 as we basically saw the pricing effect really coming in. If you look at it sequentially versus Q4, we remain about this 45.5%. So when you look at the guidance 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 failing 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 deeming question. On the second question, look, on my plans, I'm 6 weeks in the role, so I'll not be too ambitious about that. But as I said in my introduction, Adam, I think, did 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 maintain financial discipline that we take the right investments that we keep entrepreneurial spirit of investing, learning fast, failing faster, 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 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 slightly 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.

Your next question comes from the line of Marco Limite from Barclays.

I've got 2 questions. One is on the 2 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 lag pricing in November, but I think the majority of the remaining volumes have been repriced around prior sorry. So yes, 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 for 100 to 200 bps 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 yes, what's your thinking around margins in front for the remaining quarters of this year?

Happy to answer the first 2 questions and handing over to Javier. So in terms of Tudor volume in Poland, what's driving it I think this is all about you know the whole file wheel 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 InPost success, which is clearly, I think, visibly in the recent 3 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 steel, tips in Poland in terms of next-day delivery 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 incredibly reliable partner for Tudor deliveries. So we saw a big shift from other vendors, from other players exited in 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, yes, the repricing strategy is very clear. It's based effect. So some of it was already realized and visibly impacted our Q1 results. Partially, we expect something in Q2 as well. Just bear in mind that also the phasing of the minimum wage increase is also phased and we expect that 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 InPost. That's why 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 that's all about keeping the right balance and being really a good partner for our merchants and also end users. Javier?

Thank you, Marco, and good to get to know your view. On Mondial Relay related, it's a good question. The 30 basis points compared to the 100 to 200 basis points on the full year. Fundamentally, it is operational efficiencies as we basically go through the year. You've seen that we have not changed our outlook for the year. So we're still confident that we can get those. There's 2 elements in there. Number one, obviously, as we said before, the important note is on Mondial Relay, we've grown volume by 9% in the market, which is minus 4%. So that's still going to give us operational efficiencies, number one. Number two, there's a couple of projects going on, including, for instance, look at procurement and opportunities to get better prices on the market in terms of logistics. And so this is also something that, throughout the year, we will come into the P&L. So operational efficiency is really coming from volume and continue working on the cost structure. Importantly, in Q1, and that's interesting to see is from a gross margin point of view, our improvement is--

Sorry to interrupt you, but I think something is going on with your microphone. [Technical Difficulty]

Okay. So let me then start again. So nice to meet, Marco. Mondial margin, yes, 30 basis points only in Q1, but we maintain our full year outlook. This is because we expect operational efficiencies to come from 2 sides. Number one, importantly, plus 9% volume on a market of minus 4% will still give us operational efficiencies. But secondly, we have a couple of projects, for instance, running on procurement, where we clearly see savings opportunities that should hit the P&L as we advance 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.

And a very quick follow-up. One Rafal mentioned that the [indiscernible] increase is also phased in Q2. Can you just remind us when the minimum wage increase kicks in, please?

Yes, it's the first wave of minimum wage was beginning of the year. And the second one is, as I remember correctly, it's 1st of July.

Your next question comes from the line of Roman Reshetnev at Goldman Sachs.

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. So what are the key reasons for weak underlying market performance and what makes you confident that it will significantly accelerate going forward? And second, could you provide the latest update on Temu and Shein performance, in particular, what do you see on the side of their market share progression and contribution to your volumes?

I'll take both, actually, Rafa, I'm quite comfortable. I think just on outlook, I think that firstly, the benchmarks that we're using to measure the market, clearly 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 2 new clients that will be onboarding. And so we continue to have that outlook for the balance of the year. So we have a high degree of confidence that even with the underlying weaker market conditions. Relative to Temu, Shein and others, it's not our position to comment on specific 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 InPost markets. And so that really gives us an opportunity to have a framework approach to these clients. It 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 we 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.

Your next question comes from the line of Henk Slotboom from the IDEA!

Continuing on the [ oil ], 4% contraction of the market in the first quarter. If I look at the outlook statement for the market as a whole in France, you expect mid-single-digit e-commerce parcel market growth. Given the delta between the minus 4 and the plus 9% 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+1 method. My final question is a bit of a shovels question. When I look at the PUDO and APMs, I look at the Benelux countries. If I compare that with a year-end '22 situation, then you had 2,300-plus PUDOs in the Netherlands and Belgium. Now it's less than 1,900. So that's almost 20% lower. You always said I want to have a presence there, but on a capital-light basis. What example 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?

Yes. I can take those. And Rafa, if you want to add any further comments, feel free. I think firstly, I think really, it's a later part of your first question, Henk, which is if you take Q1 this year, we've already opened 2 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 Relay, we really see market share growth and building out the consumer proposition 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 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 we continue to see it for the balance of this year. Regard to B2C share, 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 3 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 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 to Southwest region as we continue to close what I call the coverage gap, not just about lockers and PUDOs but actually the last mile component of depots and servicing that as well as hub coverage to serve that part of France. But all as 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 PUDO network while we started to 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 put business and realize we've optimized the last model and middle mile, we're able to optimize that part of the network as well.

Perhaps, if I may, a follow-up, Michael, what exactly is the focus in the Benelux countries? Should I compare that with what you're doing in the U.K. focused primarily first on C2C and then try to get a entrance in B2C with international clients?

The comment is [ the strategy is tool ]. Firstly, we have existing clients that we're basically serving and then opening up a 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 priority #1. Priority #2 is international clients, which will include as well. And then really locally then as we build the network, consider sales force on the ground to think about what we do with local merchants, but very much cross-border and international clients is the primary focus for the next 12 to 18 months.

Your next question comes from the line of Michal Potyra from UBS.