Earnings Call: H1 2021

Sep 8, 2021

At this time, I would like to turn the conference over to Sherif Packer, Investor Relations. Please go ahead, sir. Thank you, Tracy, and good morning and good afternoon and good evening to everyone, and thank you for joining us for our first half and second quarter conference call for 2021. I'm Sharief Bakr, Head of Investor Relations at INPOST. And today, I'm joined by Raefil Broshka, the Founder and CEO of Impost and Adam Alexandrovich, our Group CFO. Following our prepared remarks, we'll be happy to take your questions. As a reminder, today's call is being recorded and a replay will be made available on INPO's Investor Relations website at www.inpost. Euinvestorsannouncements, where you'll also find an accompanying set of slides. Now before we get started, I'd like to remind you that today's call includes forward looking statements and expectations that are subject to risks and uncertainties. And it is possible that actual results may differ materially from the matters discussed today. And with that behind us, I'd like to turn the call over to Rafael. Thank you, Sharif. Good morning. Thanks for joining us today. Hope you and your families are staying safe and healthy. And maybe I'm going to provide first a kind of brief overview of the market to the environment headline H1 Financials and also touch on the tremendous progress we've made in the 1st 6 months of the year. And then, you know, highlighting how we have accelerated the flywheel and further enhanced our competitive strengths in Poland. Maybe also spend a few minutes updating you on the Mondi Ariely acquisition and the great momentum we have in our international segment. Later on, Adam will take you through our financials in more detail and also our full year's outlook. So we'll then be happy to take your questions, of course. So maybe let's start turning to the next page. So on this Slide 4, we see The key highlights for the first half of twenty twenty one. From a market perspective, we obviously continue to live in a very dynamic times with ongoing uncertainty related to the pandemic, lockdowns and how it may impact the consumer behavior. During Q2, we saw shopping malls reopen in Poland as restrictions were already eased, resulting in the expected return of consumers to physical stores and more broadly, we have also seen a gradual return to things like traveling for Vacations, which contrast with the initial lockdowns and closures we saw in the first half of last year. But also, you know, unprecedented growth for particularly in the quarter 2. In the near term, we also are seeing Strong GDP growth in Poland with almost 11% growth in Q2, albeit against the worst point of the Pandemic as well as significant increase in the number of new merchants entering the market. Approximately 5,000 to new merchants signed by ourselves in just the first half of the year. While I expect that The shorter term uncertainties from COVID-nineteen to continue, we are very certain that the accelerated shift to it digital economy is Structural, strong, driving e commerce growth, great focus on sustainability, but also changing consumer to our preferences. This is expected to provide strong tailwind for us and of course, an expanded opportunity to continue to deliver great value to our to customers. And finally, on the competition in Poland, because that's a kind of very often asked question. I know some of you will have detailed question about this. But just generally, The fact demonstrate that our relative scale advantages continued to grow in the first half. We added more than 50 times capacity of all our competitors combined. But in details, I will come back to this later on. At the end, Adam will take you through the financials, but at the high level, we delivered a 54% year on year revenue growth in the first half of the year with 61 percent APM volume growth in Poland and more than 300 growth in the international segment. So we continue to benefit from this Acceleration in our flywheel effect and the strength of our financial model driving also the margin expansion, 4.70 basis points of adjusted EBITDA. That's a great and very exceptional performance as for the first half of the year. We also delivered very strong free cash flows in H1, exceeding the level we generated in the whole 2020 Yeah. So from a strategic perspective, we've made excellent progress across and we took multiple steps to accelerate The execution of our plans in Poland, we have extended the leadership position, as I said, new installations, new lockers, New services, we have accelerated all these elements of our firewall, with APM surpassing 13 to 1,000 at the end of H1. As you probably noticed recently, we deployed machine number 14,000 in Poland. So Also progressing very rapidly in mobile app active users, more than 7,000,000 and progressing. So we are adding more and more functionalities. And also our NPS, which is the kind of metrics we track and trace on quarterly basis, giving us a clear view on the quality and the perception of the end consumers. As you remember, our end consumer centricity, our NPS again to have increased. So great progress with also ESG Engle, new program we've launched, Green City, key strategic initiative for us. We're already 6 cities, main cities in Poland joined the program. More to come in coming months. On the Mondial Rilla angle at the very start of Q3, as you remember, we closed the Transaction beginning of July, 1st July. So we will consolidate Mondialwala in Q3. In the UK, Great momentum, more deployments literally today in the key three agglomerations, We matched the number of post offices. So we said that in out of home, we are becoming a market leader in the UK. Of course, now we need to expand to other geographies, other cities, but in those three On the next few slides, I will focus mostly how we have accelerated the flywheel effect, how we believe this Has filed a restraint in our competitive position in Poland, but also how we want to support our long term growth strategy. So very briefly, just a kind of reminder, Flywheel, Virtual Circle underpinning our growth strategy. Consumers sits At the center of the strategy, everything what we do, we do for consumers. So as we deliver greater convenience, they increase because we increase the size And density of the network, this drives the usage. People are ordering more parcels because the main obstacle, which is Poor door to door experience simply doesn't exist. So as this expands, that drives more scale. There is a pull effect. To merchants, especially the new merchants coming to Polish market. You also probably I've seen news about, I don't know, new players like Shopee entering Polish market. You see clearly that without imposed, Every single entry like this may not happen because we make people happy and they want to have in checkout process to APM's as a delivery method. So underpinning the flywheel of our investments with data and technology, of course, that's building even higher conviction that This flywheel effect is actually in a strengthening mode quarter by quarter. And if you recall our full year 2020 results back in March, I commented that the key priority for this year was to accelerate the firewall to drive this consumer and matured adoption. And also I will give you more details about the execution of this plan. So as you can see, we have accelerated all four elements of the flywheel in Poland. So starting at the top left, and as I mentioned, we have deployed more than 400,000 lockers in the first half of the year. And over the last 12 months have added more capacity than we have had at the end of 2019. So we are not stopping here. We continue to enhance the user experience, adding new features, new services, which is reflected in the more than 7,000,000 active users of the mobile app, But also, more than 5,000 new merchants added to our ecosystem in H1 that offered to our consumers, the broadest choice in Poland with almost 80% coverage of the e commerce market. Point number 4, we continue to benefit from the economies of scale, of course, that's driving ongoing unit cost reduction and productivity gains, which allows us to continue to invest in areas such as sorting automation, which again drives the productivity to Gains. On the next page, you see the evolution actually of how we have accelerated our investment to enhance the consumer convenience. So strategically, The first mover advantage is the key. This is always what we were communicating, being first, land grab, Great relationship with Landlords. So we ended with approximately 1,900,000 Lockers, putting that into the context that it's 50 times more than all our competitors combined, deployed in the first half of the year. In spite of all the press releases, brief declarations, 100, thousands of to machines. And that's actually the real result. And we are not expecting that This may change in coming quarters as we are accelerating And we are deploying more and more every single week. From a coverage perspective, that's approximately 53% of the Polish population. Today, within a 7 minute walking distance to our APMs from 47% a year ago. And what's very important, the coverage is well balanced between urban and rural areas. The rural areas are performing very well. So we build our new barriers in the villages, small towns where the number of good locations The number of good location is limited, that's first, but also the stickiness of those clients is similar like in the urban areas. To that said, we may face some competition in some of the cities, but if you look at the split of the coverage and the purchasing power. And also, you know, which group of people is becoming more and more active in e commerce. You see that this is actually the case of our investment to drive the new users, new adoption and to this covered areas, which is mostly, you know, the rural part of the country. So on the next page, Very briefly highlights how we have extended our leadership position in Poland, operating at a completely different scale and speed relatively to our competitors. So in the first half of twenty twenty one, as I said, we added close to 2,600 new APMs And more than 400,000 lockers, whereas our old competitors deployed around 210 locations. It's very important to say locations and 7,000 lockers over the same period. Locations because in most of those 210 ATMs, you see the capacity of the machines on the level of 16 to 30 lockers in comparison to 160 lockers per location we see in our network. So This is a very, very different scale and impulse accounted for more than 99.4 Percent of total locker capacity in H1 in the country. So when you combine our network size, density, coverage With the speed at which we are operating, quality we are operating, services we are implementing, we believe that our competitive advantage Has significantly increased since the start of the year and since our IPO. On the next page, very important element of the flywheel, Focus on continual improvements to the consumer experience. The Net Promoter Score, the NPS has increased again and it's 72. As I said, more than 7,000,000 active users of mobile app and growing. Every single month, the number goes up. And also, you know, the features such as remote locker opening and label as returns, we have added new functionalities on top of this As the ability to extend the pickup time for your parcels, the ability to redirect the door delivery to an APM, that's massively improving the to my experience. So imagine that there are merchants that are still reluctant, for instance, to put APMs in the checkout process. And they have only door to door. And thanks to our mobile app, You can redirect this door to door parcel to the ATM. So people were charged, they paid as door to door and we deliver that to APMs, expanding our profitability on every parcel that is redirected. So All those elements were reflected in the 3rd party surveys. A recent Kantar study showed that 89% of Polish consumers choose in post APMs as their preferred form of last mile delivery. So we saw This and the improvement on the NPS reaching a record 72 points high, a level that no other company in our sector has achieved And around 6 times higher than the average logistic company in Poland. On the next page, very briefly about The merchant adoption, so great progress in first half as we continue to demonstrate the unique value proposition and consumer pool effect. From a strategic perspective, becoming increasingly pan European player that enhances our value proposition. So we are already seeing benefits, negotiating Pan European deals, benefiting from leveraging our relationship in different markets And especially the newcomers, the new players, they, from day 1, they realize that they they may actually address most of their needs to you. Not only in Poland, but on several markets at once. So in Poland, as we added around 7,000 new merchants, We support Amazon in their entry strategy to Poland. We also continue to benefit from the cross sell model And the strong consumer pull effect, for instance, little case where they've just launched recently APM service, whereas in the past they started with door to door. So as mentioned, This is the part of the end consumer centricity we are really putting together and Trying to accelerate also by new services, like we announced our MVP in post trash in early July, partnering with Makrokesh and Kari to deliver a completely new e grocery service and experience to consumers and part of Warsaw. So we started literally a few weeks ago, and we already see that we have around 10% Registration rate from the traditional Impulse user app into the Impulse Fresh app in the region where we operate. So very promising first results still, of course, early stage. Still, this is the MVP, but strong interest from other retailers that want to join the platform gives us A visible sign that this could be something we want really to push in terms of the development in the future. So as you can see, we've also made a great progress in the UK and with Mondiar Rille immediately gaining 80,000 merchants. That transforms the scale of the market opportunity, of course, and potentially also it's opening us A very wide gauge for the cross border services that are very reaching margins, especially on the traditional door to door setup. On the next page, very briefly about our ESG angle. So just a few minutes. That underpins our strategy and is actually a very important part of our business model and operations. Since our IPO, we have engaged with a number of rating agencies and received our first ratings from ISS, Which placed us in the top third of companies in our peer group, and this is just the start. While you know that it's not the only benchmark, we were pleased to score highly in areas such as customer and stakeholder responsibility, transport safety and pollution prevention. As mentioned, we've also created progress with our Green City program, which covers a wide range of innovations, ecological initiatives. Since we launched the program, we've signed 6 partner cities with whom we expect to launch a range of initiatives over the course of the year. Of course, focus on increasing consumer awareness and supporting the local government. Again, that improves the well-being of the local communities. So we also implemented new version of machines. The machine number 13,000 deployed in the city of Sopot. First, really green to machine that is fueled by the solar energy. So first, photovoltaic panels giving us conviction that not only in south of Europe, but also in Poland, we may benefit from such innovations. More broadly, we are implementing the highest ecological standards across our departments in Poland, but also You know, a broader ecosystem partners and suppliers, we've started also our EV chargers project. We deployed again a few 100 of the e vehicles fleet of courier events. So really fast tracking the ESG angle massively as we understand that this is the new addition to the flywheel effect and especially the younger generation we target will make Choices are based on the ESG angle very soon. And all the surveys we made are convincing us that this is the right track to implement. Finally, I was delighted also to see ImpulseName as one of the best employees in Poland in 2021 by Forbes, something we are very proud of Let's continue to hire and retain top talents. In the next section, I will update you on how we have advanced our Pan European strategy. This is, as you know, a very important element of the overall strategy in terms of expanding the scale addressable market, Providing new and innovative consumer experience, but also enhancing value proposition to merchants, especially those that operate on few markets. So in mid March, we announced our intention to acquire Mondiar Relais. Now we closed the transaction beginning of July. So in addition, we've made also great progress in the UK in terms of network development and first signs of flywheel effect we already see there. So starting with Mondiariele very briefly. This is a kind of reminder of the slide we showed back in March. Why we want to acquire this company? That's lying out Why we believe modularly is so compelling, both strategically, but also from the value creation potential. And since then, We've been working at pace to prepare for the closing so we could hit the ground running. So delighted to have closed the transaction at start of Q3, Shared vision and ways of working given even more confidence about the opportunity ahead of us. On the next slide, you See some initial observations and actions we've taken in the 1st 60 days after closing. So First, very important, I want to confirm that all the key assumptions and analysis that were done during the due diligence process are very consistent with what we have found. That's good. Overall, we have added a great business and set of assets operating in some of Europe's largest to e commerce markets. In France, especially in France, we estimate that B2C and C2C market make up more than 1,000,000,000 parcels. And by the way, Mondiariele is underrepresented in that segment. So that opens really a great potential for us. Relative to other leading EU markets, there is an under penetration also in d plus one delivery. So we noticed that really French consumers, they Expect Express deliveries, but it's super premium right now, not offered by all the players. And Mondiar Relais also was lagging with Express here, mostly focused on economy service D plus 2, D plus 3, sometimes D plus 4, Which in our opinion is not building the end consumer centricity of the flywheel. That's why, you know, this is another great potential. Also very, very pleased with the strength of the brand, which gives us strong platform to build upon. We don't want to change, Especially in France, the name of the service from Mondiarie to Impulse, simply, the brand is very strong and that's an asset. And in addition to France, there are clear opportunities to expand on the Arulace existing footprint and markets where to operate so far, such as Benelux and Iberia, very exciting in the context of our pan European strategy and also in all Our ability to offer to big international merchants, almost 100 percent coverage of the European e commerce market, except from the CCE. In terms of the Value creation opportunities, we remain confident in our ability to generate incremental EBITDA enhancements we communicated earlier in the year. And also we've moved quickly from getting full alignment on our strategy to actually implement our plans. For example, We've already deployed 1st APMs in early Q3 and we are accelerating our deployments week on week. And the traction, and that's most important, is absolutely great. I mean, over Definitely over our initial expectations, which gives us a very clear sign we need to progress with the network creation at pace, because also that's this undiscovered potential we want to touch as quickly as possible and transform it into the financial results. On the next page, some operational priorities, Which are very consistent with the communication at the beginning of the year. So Mondiale's leading position in PUDOS, that's the fact We want to still enhance this to unlock white spaces, but also to improve the speed and efficiency of the service and overall capacity to you of the service. So this will include investments in mostly in the network capacity, including depots, hubs Being prepared for peak volumes, and that was always a challenge across the market, especially last year. But also we want to improve the speed and that too, so capacity and speed of delivery, Those 2 main goals are addressed by this operational investments into operations. As I said, we deployed 1st machines. Actually, today we have 100 machines already on the ground. Every week we deliver more and more. But the pipeline of locations that we have prepared for the future growth It's already impressive and accounts for more than 10,000 potential locations we may deploy machines in France. So In terms of capturing the incremental growth, we plan to focus on executing the cross border opportunities with our existing merchants. We provide them services in to Poland and in the UK. Leveraging those relationships, but also we see a lot of interest from retailers We're already looking for Pan European partners, not dealing in every country with a different service provider. So Also consistent with our sustainability agenda building to our last mile deliveries, we intend to leverage on the aerialized leadership in green deliveries as well, which is even more important for the French consumers than for the Polish ones. On the next page, briefly about UK operations, We are seeing increasing signs of the flywheel effect. We have significantly accelerated the APM deployments. So pretty confident about reaching 3,000 APMs in the UK. So That's 6 times the number of new APMs in Q2 versus the prior year quarter. Already surpassed our 2,000 to APMs. Also, a few 100 already deployed, not yet active. As we will release Our news with new landlords cooperation based not on just press releases or signed contract, We will start with them from switching on few hundreds of existing machines. So the real number of machines in the UK is already It's higher than 2,000, but here we are referring to the active ones. And of course, we still focus on the 3 major urban areas, to London, Birmingham and Manchester. But as I said, already, we surpassed a number of post offices in those markets. So very proud of this. Also, the emergence adoption, more than 40 new brands in first half of the year. So already past to 100. Of course, in comparison to Polish, more than 35,000. It may look like Not not a big achievement, but just a quick reminder, UK market is 10 times larger than Poland, And the average size of a player is also is Even bigger than average size of the Polish market in Poland, we have a lot of SMBs, very fragmented market, also because of Allegro's position on the market. So UK 10 UK 100 merchants, it's not 100 merchants in Poland. So Looking at this, how we increase the number of APMs and the number of merchants, we've also brought new innovative consumer Services to the market like instant returns. A great example of this helping to resolve one of the biggest Pain points for consumers and merchants in the UK, 400,000,000 returns just in the UK. So we are targeting to this market, particularly with a big success. So it is the fastest way literally to return an item in the UK. And we see it as a game changer already. We have since launch, we have seen a 3 times increase in our share of checkout with those merchants that we collaborated earlier on. So In summary, following our exceptionally strong start to 2021, we had great quarter in Q2 following really unprecedented growth we saw in Q2 last year. We continue to outgrow the market. It's very important. Delivering 30% year on year revenue growth, Continue to expand the margin, accelerated the progress on key initiatives to support also PON Europe in growth strategy. And we have enhanced literally our leadership position in Poland, seeing increasing signs of the flywheel effect in the UK. And of course, a very promising closed acquisition of Mondiale Rele. So Turning the call over to Adam for the financial section, and then let's jump into the Q and As. Thank you. Thank you, Rafael. Thanks very much. Good morning to everyone on the call. I'll take you through our financial performance, starting with a snapshot summary on Page 19 of the presentation. So as Rafael mentioned, we're very, very pleased to see how our improvements in operational performance Continue to very strongly translate to our financials. We continue to see the benefit of Flywheel and driving the growth and margin performance. As you can see on this page, first half of year revenue increased by 54% with 73% adjusted EBITDA growth. So clearly, leverage effect, very visible. We have seen 4.70 basis points of year on year EBITDA margin improvement and 6.30 basis points of margin improvement in Poland. So, as mentioned before, as we were guiding before, that margin expansion is continuing. We also continue to invest at pace to support our growth strategy, accelerated APM network deployment in Poland and internationally. As a result of this, CapEx has increased by 53% over the 1st 6 months of the year. And free cash flow, very important metric and also reflecting the strength of our operating and financial model, Increased by 90% year on year in first half of the year with cash conversion increasing to 58% of EBITDA. Also from the balance sheet perspective, if you look at our net debt and leverage ratio, we've ended 6 months of the year with the leverage of 1 point 8 times. But clearly, given that Mondiorilla acquisition has closed on the 1st July, so a day after the close of Q2, It's reasonable to provide also pro form a leverage. So adjusted for the acquisition price, we paid for Mondiorilla 1st July. And on a pro form a basis, the net leverage ratio for the whole group was 3.0. So roughly half a tonne better or lower than what we've guided for at the time of Mondial Rilla acquisition back in Q1 or announcing that acquisition back in Q1. So also, you know, strong financial performance for helping us to improve our leverage. Moving on to Poland on the next page. As mentioned, very strong performance in first half of the year. Volume is clearly converting into margin expansion and EBITDA growth. Also very true for Q2, where we've seen operating leverage and profitability to continue, although The growth in percentage terms has obviously slowed down, driven by the very, very tough comps of Q2 2020, Driven by the 1st lockdown in Poland a year ago. But the strong effect of the operating leverage has continued, as you can see here. So the volume growth has translated almost 1 to 1 to revenue growth, essentially flat revenue per parcel year on year, which given the change in the segment mix. So APM taking continuously a higher share of our business compared to Tudor. As you know, APM is lower price point. Taking that into account, I think pricing aspect, Very strong underlying pricing structure and mix structure here. And very strong adjusted EBITDA margin performance, as mentioned, 630 basis points expansion driven by the gross margin expansion and leverage of G and As. And then last but not least, obviously, Q2 growth, as I mentioned, slowed down 20% 29% Growth all in all, driven mostly by APM, who basically the segment continues to be our growth to ENGINE. Moving on to the APM segment. So clearly, 61% to growth for 6 months of the year. As Rafael mentioned, that's the multiple of market growth rates. So we continue to grow Very strongly ahead of the market, we continue to gain share. This is driven by the number of factors. Clearly, Acceleration in overall e commerce penetration is helpful. But increasing size and density of our APM network, the investment we make into the acceleration of the network rollout, to rollout increased density, increased convenience. That's clearly translating also into an increasing adoption of APM as a preferred delivery option in the last mile by end consumers. And also, you know, the growth of the new merchants we have added in the second half of last year and the run rate effect from this as well as adding new merchants this year that is also helping us to continue to grow way ahead of the market. For Q2, we saw 30% year on year growth as we lapped to the unprecedented growth of Q2 2020. So in Q2 of last year, we've grown at almost 190%. So clearly that has provided a very challenging base of which we've grown another 30% in Q2 this year. So I think very, very strong result and very, very, very good performance here as well. On pricing, as you can see here, We've seen that's a bit of a different view that we've seen in previous quarters, obviously. We saw a moderate year on year Price increase both in H1, but more notably in Q2. That's not really driven by like So like price increases or list price increases or change in the mix. That's an effect of the fact we've taken a hit on pricing in Q2 2020 When we've invested quite heavily in the Allegro Smart promotion together with Allegro, that has taken a couple of percentage points of our price as the cost of promotion coming back to the normalized pricing this year basically resulted in the price Slight price step up. Looking now at the APM network on the next page. So the capacity of our network is, as you very well know, defined by 2 actually dimensions. It's the number of to APMs, but it's also the number of locusts per APM. As you remember, we continue not only to add new APMs, but also to extend to the mature cohorts, which are highly utilized. If you take both dimensions into account, We have increased our locker capacity by 75% year on year in first half of this year. So significant acceleration of the network development compared to previous periods, adding more than 1600 APMs alone in Poland in the first in the Q2 of this year and 200,000 of lockers in the quarter for Poland. So very, very significant step up in terms of locker capacity. By the end of Q2, therefore, as Rafael mentioned, the number of PM locus in Poland reached almost €1,900,000 So we've accounted for more than 99% of total locker capacity in the country. In terms of utilization, so we've seen the average blended rate for the total network decline over the past 12 months. That's expected basically and again driven by 2 factors. First of all, Unprecedented demand that we've seen in Q2 and Q3 last year, driven by the first COVID restriction, first lockdowns and very short term boost in volumes. And then secondly, obviously, the pace of rollout means we are, I think, proportionally Much more lockers and much more new APMs than in previous periods. Therefore, we see that dilutive effect from the new cohort, as you see on this page. But if you look to the mature cohort, despite the fact it's also seen a marginal step down in utilization that mid-80s utilization is what we've always guided as a kind of long term sustainable utilization And obviously, a very healthy result. Now, you know, this Also, basically and more specifically, if you look at the new cohort and the size of that new cohort, this underpins our strategic intent to really invest into our long term growth to secure our long term competitive position in the market and cement our footprint in the market. And that is obviously slightly at the expense of the utilization dilution in a short term. But nevertheless, if you obviously look at the margin expansion, you know, debt utilization levels Still have driven very significant margin expansion as the density is the key element here helping us to improve our profitability. Now moving on to 2 door segment. So very quickly here, much lower growth rates, 24% for 6 months of this year, 10% in Q2, we believe that very much reflects the broader market growth rates. We think That's how the ecom market in Poland has grown in H1 and clearly gives you a very good comparison where we are with the APM segment growth and how we should think about APM taking share in the Polish e commerce market. Pricing here declined very modestly. That's mostly result of the customer mix. So we see more to speak and strategic merchants taking higher share of our volume. They typically at a lower price point. But please bear in mind, they're also cheaper in terms of cost to serve, more consolidated, bigger volumes. Therefore, all in all, in terms of unit economics, Very healthy and very also supportive in terms of expanding our margins. Speaking of which and moving to gross margin performance. So as mentioned, we continue the trends that we've observed for a few last quarters, Continue to expand the gross profitability, 670 basis points year on year margin increase in first half of the year, 650 basis points in Q2. That's again consistent as I mentioned, consistent with previous quarters. We continue to be to do more of the same. Pricing almost flat. So it's all driven by the improved cost per parcel operating cost. And as we mentioned in the past, it's the same drivers that we continue to optimize, utilize. So first and foremost, APM density that's helpful in reducing last mile cost, merchant scale size and density on the 1st mile, as well as automation in the middle mile. All these elements basically continue to drive and improve productivity and translate to improved margin performance. Probably the key highlight here is that on the APM segment, the gross profit margin increase Year on year in Q2 was 7 10 basis points. So really very, very strong performance. Moving on to adjusted EBITDA performance. So again, reflecting the underlying productivity improvements in operations. EBITDA margin in H1 outpacing revenue growth, as mentioned, 77%. Adjusted EBITDA growth for Poland. 630 basis points of margin expansion, really strong. We continue to invest significantly in G and As to to support the long term growth, as mentioned, mostly on the IT side of things, but not only. We've seen stable G and A per parcel in H1, as you can to see here. But it's stepped up somehow in Q2. And that is actually a result of 2 elements. First one, as I mentioned, Long term investment into our G and A's IT platform. Secondly, some step up costs, which are a result of us becoming a public company. So employee incentive costs And also, you know, the costs related to listing such as additional auditors costs, etcetera. Going forward, I think we expect the G and A spare parcel to marginally increase, but at a level that should not stop us from continuously demonstrating expanding our EBITDA margin, which will be further driven by the gross margin expansion. Then moving to International, very quickly, we continue to ramp up the scale and scope of our international segment in the first half of the year in Q2 with a step up mostly in the pace of APM deployments. That's mostly obviously in the UK market, But also launching new services to further enhance our value proposition. Rafael was mentioning that instant returns In the UK, a fantastic uptake of the product, very good reception from both merchants and consumers. In the H1 in the UK, we've almost doubled the size of our APM network and increased our parcel volumes almost 4 times to close to 1,500,000 parcels. And despite the tough comps, The growth rates are quite healthy, albeit from a low base. So overall, a great momentum building on the scale side of things. Moving on to financial performance of the international segment. Year on year revenue growth, obviously strong, following the parcel growth. Relatively still relatively low volumes, to our unscaled business. So revenue per parcel continues to be volatile. That's driven by the change of mix. And the dynamics Of the mix change will continue to impact the average price as long as we don't have enough critical mass and continue to scale the business. Also an impact of promotional efforts, especially at the launch of the of the instant to returns in the UK. So the revenue per parcel in H1 declined by 6% year on year due to those promotional activities and mix changes. Q2 increased modestly. So again, as I said, that pricing volatility will observe for quite some time before the business reaches critical mass and has stabilized here. In terms of adjusted EBITDA, we're investing quite significantly to for long term growth into international segment, adding new operational and commercial capabilities, headcount people also to support Our capabilities are actually expand our capabilities to grow our network even faster. And that combined with higher initial logistics costs from our new courier partner who we have introduced to specifically ensure best to in class quality of product. For instant returns meant that we've seen adjusted EBITDA loss increase in first half of the year. Important to mention that the new logistics cost per parcel that we've seen increased from the new service from the new Logistics provider is mostly driven by the fact we still at the launch stage of the product, so very early stage As we continue, hopefully to see the volumes of the returns increasing on the per stop Fee basis, we should see that volume optimizing our unit cost per parcel and therefore having positive impact on to gross margin going forward. Moving on to CapEx. So That basically just demonstrate the scale at which we continue to invest to support our network expansion. CapEx in first half of the year increased by 53%, driven by both Poland and even also by international in terms of percentage growth. Step up in international CapEx obviously is acceleration of deployments in the UK. Overall CapEx intensity, though, was stable. So 20% of revenue is very consistent with the 1st 6 months of the last year. And that was to an extent also supported by the continued reduction to in the unit manufacturing cost of APMs. We managed to get the cost down in the first half of the year by 7%. So very good result. Also given, you know, basically the tensions in the global supply chain, that's really good outcome. Till the end of the year, we expect the CapEx to step up and CapEx intensity to slightly increase by a few percentage points in terms of percent of revenue as we'll keep the pace of the APM network rollout. And as you remember, we've also mentioned during the Q1 results to address the stretches in the global supply chain that I've just alluded to. We will prepay some of the 2022 CapEx in the second half of this year. So this will have obviously an impact in the CapEx intensity increasing in the second half of the year. Moving on to free cash flows and cash conversion. So clearly, the underlying strong performance, margin improvement and growth as such is clearly translated into cash generation. In the 1st 6 months of this year, we've generated PLN400 close to PLN400 1,000,000 of free cash flow. That's a 90% year on year increase in terms of the absolute number, and it's more than we've generated in the whole of 2020. So really very, very strong improvement. And also translation into the cash conversion metrics of 58% cash EBITDA cash conversion versus 52% in H1 of last year. But again, please bear in mind, we'll increase The intensity of CapEx in H2, so clearly expect the cash conversion ratio to come down a little bit on a full year basis. Moving on to bridge from operating EBITDA to adjusted EBITDA just to give you visibility on the number and what drives adjustments. So as you can see here, not very different view to Q1, just most material one offs that are related to the IPO or the M and A transaction, acquisition of Mondiar Relay, the 2 to most material cash elements and share based payment as a non cash element in its nature. So the 3 ones that drive the bridge from operating to adjusted EBITDA really. And as already mentioned At the beginning of the presentation, that very strong performance of the 1st 6 months of the year enabled us to reduce the net leverage quite significantly. More than half a ton net leverage reduction year on year to 1.8. And as mentioned, on a pro form a basis, including the effect of Mondial acquisition, 3.0 net leverage as of end of first half of the year. Before we go to Q and A, I just wanted to remind you that our full year 2021 outlook is changed from what we've communicated during the Q1 results. So not really going to go specifically through each and every element. In the appendix of the presentation, you also have a breakdown into the segments, so Poland and international. But essentially, as I mentioned, no change to the guidance for this year. So with that, thank you very much for your attention and very happy to to take questions. Thank We will now take our first question from David Kerstin from Jefferies. Please go ahead. It appears the caller may have stepped away. We will now take our next question from Robert Joynson from Exane BNP Paribas. Please go ahead. Good morning, everybody. Three questions from me, please. First of all, on Allegro. Since the last conference call that you hosted in May, Allegro has now started to roll out its own APMs in Poland. Could you maybe just provide some color on what you're seeing on the ground? For example, How many APMs have they rolled out so far? What do you think is a realistic number by year end? And to what And indeed, you see that Allegro are actually using the APMs that they have installed already. So that's the first question. Second question on international. The revenues were flat during Q2 versus Q1 despite the number of lockers Rising quite significantly. Could you please talk us through the revenue trajectory that you see there? And in particular, What you expect for Q3? And in particular, I'm wondering if Q3 revenues could actually be down Versus Q2 given holiday seasonality and the easing of lockdown restrictions in the UK. And then the third and final question on the full year outlook. You provided guidance for adjusted EBITDA, which is great. But if I look at the EBIT level, I. E, the consensus for full year is €1,100,000,000 that compares with The €330,000,000 also achieved in H1, so the consensus implies around €770,000,000 in H2, so more than double The H1 level, I appreciate that seasonality is in your favor during Q4 in particular, But is such a large improvement really realistic? Thank you. Thank you for the question. So maybe Well, I will answer the first one about Allegra, and then I will hand over to Adam. So first time, it's not our role to comment the pace Or to speculate what the other players may do in the coming months. I think that as for now, Allegro has deployed around 20 APMs with an average capacity per APM on the level around 70. And that's it in terms of the comment. In terms of the relationship or the collaboration, Nothing has changed. We perceive our relationship with Allegro as a kind of strong strategic friendship for 7 coming years. And, and and yeah, and we are focusing on delivery of best in class services, best in class NPS for Allegro consumers to make Allegro happy to me because that's our role. Yeah, that's it. Turning over to Adam for 2 other questions. Yes, thank you. So first of all, in terms of quarterly volume development for the UK, I think a couple of comments. I mean, first one is, We obviously provide the data for the end quarter in terms of size of the APM network. But please bear in mind, you know, there's a gradual rollout process. These APMs Tom, into operations over time. And there is a period for the ramp up. So clearly, if you average out The average for the quarter, you would notice that basically we are continuously accelerating the pace of rollout of the APM network in the UK. And therefore, clearly, the results of the Q2 rollouts will be only visible in Q3 and Q4. So I think that's just a general comment how to think about, you know, or make a link between the volume performance and the APM to network capacity. I think in terms of the absolute performance, The easing or lifting of the COVID restrictions were already very visible and impacted volume performance in the broader e commerce market in the UK in Q2. So As you remember, you know, 1st of all, the lockdown in the UK compared to Poland, for example, was much stricter and much longer than in Poland. And therefore, I think, You know, lifting that lockdown back, I think, in May June, really had a stronger kind of, a backlash fact, if you like, because, you know, the measures that were introduced in the UK were much stricter. So I think we've already experienced the kind of lifting of lockdown effect in Q2. Q3, obviously, seasonally It's a weaker quarter just because summer holidays are always, for e commerce, a weaker period. So we do not expect Q3 to be particularly strong, but we do believe and expect that Q4 will be a return to a very strong to growth trajectory. And then in terms of our outlook, we don't provide the outlook on EBIT level. So difficult for me to comment on the EBIT consensus here. But if you look at the EBITDA, you will essentially notice that to Clea. The way we look at it in terms of seasonality, absolutely true what you said. Q4 is typically very, very strong, Probably proportion naturally even stronger than usual this year, given that Q3 to you was somewhat of a slowdown all across Europe, equally true for the UK, equally true for Poland. So we expect in terms of EBITDA split, 45 of the EBITDA number to be delivered in H1 and 55% to be delivered in H2. From the normal seasonality perspective, that's not something that That would be very unusual compared to previous years. So essentially, that would be the comment. Thank you. Thank you. Maybe just one final question, if I may. I think in one of the footnotes in the presentation, I noticed a reference to IPO costs And share expenses, could you just maybe comment on how much they were and to what extent they were taken in Q1 versus Q2? I think in terms of IPO costs, that's the position on the bridge that I've taken you through in the presentation. I think that's the page 1 before last page that I was covering, you have a bridge there. You have a number for the IPO, M and A costs, one of M and A costs, as well as share based compensation that's somewhat related to the IPO, because as you remember, the management incentive program that was introduced by Advent When the company was still private, was realized actually at IPO. But important to bear in mind again that share based compensation number is essentially a non cash to item because it's settled by the shareholder. It's not the cost for the company. Understood. Thank you very much. We will now take our next question from Lottie Thomasmann from ABN Apro Auto. Please go ahead. Good morning, gentlemen. I also have three questions. First, a question on international. In your press release, Question is you state that you have a new contract with the courier. I assume this is still Hermes. Could you give some more color on how the contract is set up? So Has it changed? Do you still pay per stop and additional fee per parcel? So basically, if volumes increase, this has an accelerating positive impact on gross margin? So that's my first question. Then a question on Allegro. They lowered the bar for free to door delivery. This is for the whole year and it's for the smart users. Have you noticed any differences from, for example, shift to door? In Q3, you said basically on The questions just recently you said that Q3 International is normally a weaker quarter. Do you see a similar trend for Poland? Happy to answer the question. So first one, there is, with the return service in the UK, We teamed up with Citi, Sprint, another new carrier just also to counterbalance our relationship with Hermes, not to be dependent Just on one provider. And this is specifically linked to our label as returns. Even Hermit was unable to provide at this stage logistics, so sophisticated service for us. That said, we wanted to implement it because we feel strongly that there is a massive need and demand, and we are not Taken with this, looking at the trajectory of the adoption. So, of course, with a new driver, a new courier on the new service, The ramp up here works. Yeah. So, so the number of parcels per stop is lower and is starting from scratch. That said, We will see improvements in due course with the City Sprint services on the label as returns. In terms of the second question, we are not seeing any Change of the saturation of our APM service on Allegro. So that's a statement here. We measure that. We compare that on a quarterly basis. And it seems that the stickiness to APMs is Same or even slightly increasing. And the third question was about the summer. Yes, summer in terms of commerce was Evenly, I would say, softening the trajectory of growth. It's not a drop. It's a it's a softened growth, which we see again is like, oing back In September 1st visible signals of this, of course, could be also the back to school traditional Seasonality, but the strategic outlook is absolutely unchanged. The adoption of e commerce Is at pace really taking over traditional retail and also it's fueled by the retailers that are shifting massively their marketing budgets, Closing down their physical stores. And so we have demand and supply doing actually the same. So we envisage that mid term to long term, we really see the unchanged look on the market trajectory Suri, and the adoption of e commerce. Okay. Thanks. On the first question, so The new contract with the New Courier, is it also based on pay per stop and additional fee per parcel? Or is this a different structure? Yeah. We pay per stop. That said, the more parcels per stop we create and we are accommodating more and more merchants with our label as returns, the stop fee per parcel, the cost per parcel will go down. Yes, great. Thanks. We will now take our last Question from David Kunstein from Jefferies. Please go ahead. Thank you very much. Good morning, gentlemen. Also three questions from my side, please. Can you Please, I think if you look at revenue growth in the Q2, you highlight 29% in Poland, which I think is almost 3x faster than Allego. My question is, did you increase the share of checkout with Allego as a result? And how much did The 7,000 new merchants that you gained in the first half contribute to this strong revenue growth, excluding Allego? And then the second question is related to the guidance. What drives the pickup in EBITDA growth momentum In the second half of the year, I think you had 37% EBITDA growth in the second quarter, and you're implying around 50% for the second half of the year, excluding Mondial Relay. Is that driven by improving network utilization following the addition of the 7,000 new merchants? Or is there also the benefit from continued positive price mix effects? And then finally, on Mondiale Relay, you highlighted the first 100 APMs already on the ground. I was wondering, are you still targeting around 200 to 300 for the full year? And you mentioned already 10,000 locations. Is this just in France? Or does this also include the Benelux and the Spanish markets? Thank you very much. Happy to answer first and last to you. And then handing over to Adam. So first, yeah, this is the beauty of of of INpost. We are agnostic. We work with everybody. That said, we have exposure to the whole market. This is the difference. If you If you see an asset that is growing on the full market potential and the 100% market potential, and this is our case, There is a different exposure, different growth trajectory, but also different potential for future than you focus just on 30 few percent of the market. And this is the reason. We are growing faster and faster in non Allegro channel. So not only those 7,000 new merchants, but also the existing merchants are building share with in post much faster. Also the new entrants, when you look at the moves of the new international players that want to enter Polish market, They naturally come to INPOST. They know who is the market leader, who is providing the best in class service And who is agnostic? Who is providing the variety of services and options for everybody, starting from SME and individual to Sender ending up with the big marketplace. This is the difference. In terms of the reception of first APMs in France, It's really very positive. Too early, of course, to quantify the trajectory of the growth. But one statement that I can make is that From the deployment, every single week, the utilization is increasing, even during summertime. That gives you a kind of feeling that, that really in summer, especially August in in France, probably, you know, It's like really very quiet season for retail, both physical and e com. In terms of the 10,000 locations, that's the current Mondiale Riviera's Full potential that includes Benelux and Spain. That said, we have a pipeline of 10,000 locations. We need to scout, we need to check if, you know, typically, it's 1 third qualified for the first wave of deployments. Also because we want to focus like we did in the UK on the cherry picking and addressing In the largest agglomerations or the places where we are struggling with the capacity in the current PUDO to network. And handing over to Adam for the second question. Yes. So David, referring to your second Question around the growth dynamics in EBITDA. I think percentage Growth percentage ratios here can be deceiving and are a bit tricky. I think if you look at the Top line growth, the same is true. So essentially, we look at the dynamics here, 90 plus percent Q1, then 30 to Sandd Growth Q2. Then obviously, we expect Q3 and Q4 to go back to higher growth rates just because the Q220 base and compass such is very, very difficult and Unusually high. So I think percentage wise, it can be a little bit confusing. But actually, if you look at the absolute Numbers of EBITDA delivered in first half of the year and second half of the year and also the margin expansion that we have delivered across the first half of the year. I think the numbers would easily add up in a sense that EBITDA number and EBITDA absolute growth would just follow to the growth of the volumes and the assumed top line growth. So that's the answer, really. Q2 It's a very tricky number to kind of make a judgment for the rest of the year. Okay, great. Understood. Thank you very much, gentlemen. Thank you. That concludes today's question and answer session. Mr. Broska, I'd like to turn the conference back to you for any additional or closing remarks. Thank you very much. Once again, guys, thank you very much for participation in that call. Apologies that it took us longer to go for the presentation. But I hope that thanks to this extra 15 minutes we left for Q and A's, all the Questions were answered. So happy to take offline as well with Sherif any new questions will pop up. We will of course answer as quickly as possible. So thank you very much for your time. Have a nice day. Stay in a good health. Cheers. This concludes today's call. Thank you for your participation. You may now disconnect.