This meeting is being recorded.
From our Prague office. We have with us there our CEO, François Nuyts.
Good morning.
Our CFO, Jonathan Eastick.
Good morning, everyone.
My name is Michał Kuzawiński, and I'm head of Investor Relations. A few usual info comments from me before we begin. Firstly, you can download a copy of our Q1 2022 results presentation from our website at allegro.eu. Please read the disclaimer, which is on slide two, and the comments about the forward-looking statements included in this presentation. You will have an opportunity to ask questions after the main part of this presentation, and in order to do so, you have to click the Raise Hand button, which you will find at the bottom of your Zoom screens, and you will be added to the questions queue. Finally, please note that this call is being recorded and a replay will be available on our website at allegro.eu. Let's start. François, over to you.
Thank you, Michał. Thank you for joining us today. We'll cover obviously as always with Jonathan Eastick, who's next to me. It's absolutely fantastic to do this from our new Mall office in Prague. Without further ado, let's start. As you know, Q1 was a bit of a rough quarter, right? First and foremost, the war in Ukraine. Double-digit inflation, partially linked obviously to that war, and very tough comparison in Q1 2021 in terms of growth driven by a lockdown. Now, despite all of those headwinds in Q1, we managed to deliver solid business performance.
We grew about 13%, which is a cumulative two-year growth of 64% in overall business. We're able to grow revenue by about 50%, which was in line with both our own expectations and market expectation. This shows the resilience not only of the Polish economy but also of our third-party business model that consistently drive improvements in the inputs that are important to the consumers choosing our business to do their shopping and the sellers transacting through Allegro. All of this wouldn't be possible without the sequential improvement in inputs, and that's what this presentation will cover. There are also a couple of additional things that happened during Q1. It's really the acceleration of our international roadmap
First, the launch of Allegro.com, which enables us to deliver to all European countries in English in Europe. Obviously, that's a great testament to the investments that have been made on transforming our platform from a single country to a multi-country stack. Also the launch, pardon, the acquisition of the Mall Group, which just happened at the end of the quarter on April first. Without further ado, let's start the presentation. You can start the slides. The first screen has changed a little bit, and it's not innocent. It's a screenshot of what consumers see when they shop from outside of Poland to choose where they want to deliver, in which country they want to.
In which currency they want to shop. One thing here, we were able, when the Ukraine crisis arrived and obviously, quite a bit of immigration for protection of population to Poland, we were able to use that new technology and stack to launch an additional language, Ukrainian, within a few weeks. Again, that's because of the investment we've done in the platform. That is, how do you say, an investment for the future growth and internationalization. Moving from disclaimer to agenda. As usual, I'll cover the highlights. Jonathan, next to me, will cover financial results. I'll cover Mall and international update. Jonathan will cover expectations, and we'll both cover Q&A. Starting with results.
As I was saying earlier, we managed to deliver strong results in Q1. Solid GMV growth despite the fact that we grew 46% last year over the same period. Solid, and also the early impact of the Ukraine invasion and solid revenue growth as we're progressing both in monetization, in advertising, and the change of co-financing we did in February across the platform. We expect the support from take rate and monetization going forward to keep on sequentially improving. In terms of inputs, we managed to sequentially improve the delivery speed. We do invest in our asset-light model, meaning incentivizing merchants to deliver faster, more predictably. Year-on-year, this is improving eight percentage points in next day delivery.
As I said, we're also delivering on a number of important milestones to our development plans. Notably the launch of allegro.com and the acquisition of Mall Group last month. I'll cover those in a bit. All these initiatives and progress made on the business inputs allowed us to deliver the adjusted EBITDA that was in line with our expectation. We expect the monetization of courier MOV investments and continued investment in platform innovation to sequentially drive improvements through the rest of the year. We basically, in Q1, as you recall, across the later part of last year, we invested in making the shopping experience much better, notably when it comes to delivery, courier delivery and minimum order value.
We delayed the monetization to mid Q1 and forward, as we don't change the rules during Q4 to improve the way sellers do business on the platform. Now, moving to key results on page five. As always, I'm not going to cover this slide. It's more for you to have it as a placeholder where all the key data in terms of financial outputs are. Now, let's move to retail basics. First and foremost, offering more choice to the consumer is the tool we directly control to make them shop more with us across more brands, across more categories. This continues to sequentially improve double-digit year-on-year growth in active offers in Q1, but also the addition of many core brands that are actively sought by consumers.
A few examples here, Skechers, Vans, Grohe, that most of you will know. We also continue to provide tools to our merchants to make the platform uniquely sticky and easy to use. Normally, and how it helps them manage and create new assortments, but also give competitive pricing to the consumers. We see that the continuous launch of pricing tools for merchants continues to allow us to progress in not only price competitiveness and price perception, and keep us very competitive across.
In improving convenience, here I'll mostly cover in an update where we're given for the fourth year in a row the Star of Customer Service award. I think it's a testament to the continuous work that we do to keep that marketplace give great selection, great price, pre-sale, but also incredibly post-sale service no matter what the seller is. That's kind of the 1P feeling of that third party platform. Delivery speed already covered. We are sequentially improving it under our merchant-fulfilled network. We're also sequentially increasing the number of APMs, which is well on track to reach the 3,000 we targeted by the end of the year.
Here, we also secured an agreement with one of the largest offline retailer to install 2,000 lockers by the end of the year. Moving to key growth initiatives. Smart still has a lot of growth ahead, both in terms of how many consumers can still join Smart, but in how much of the shopping those consumers do on Allegro as we continue to improve retail basics. The real story in Smart between Q4, Q1, and the rest of the year is the sequence between the improvements we did consumer facing, the investments we did. If you recall, in Q4, we lowered the MOV from 80 to 40 in Courier.
A little bit earlier in H2, we had made Courier universally almost universal coverage of offers, and that pivoted a lot of the volumes to Courier. Also at a much lower monetization for us as we didn't monetize the 40-80 AOV band, which is quite significant. In February, we started monetizing this by introducing the same kind of co-financing for MOV below 80, and we see that it drives the sequential monetization of Smart and better economics for us. We still, in terms of co-financing, at a very low percentage, about a quarter.
We don't want to move too fast here, but there is still a lot of opportunity to better monetize on Smart and better share the cost of shipping while we continue to grow the business. In advertising revenue continues to grow 21%. The penetration of GMV continues to grow also, but at 1.1% it's still far below what we see in best-in-class platform across. It's why we continue to invest notably in AI and targeting and tools for merchants. We see a continuous improvement here and a number of innovations coming in next quarter that will sequentially drive that advertising revenue up. Now, Allegro Pay. Allegro Pay is obviously one of those earlier seed that is truly scaling now.
In terms of NPS overall, which is the key reason for the success, it's incredibly simple and straightforward to use for consumers at 94 NPS. Also that drives a huge increase in loans originated, up five times year-on-year. What is important here is our collaboration with Aion Bank means that this translate in a minimal increase in our loan book, which was up PLN 6 million quarter-on-quarter in Q1. That obviously reduced the working capital requirements on our end. Lastly, we launched allegro.com. That's an English language platform. Again, with the tools, the ability to add additional language reasonably easily. Ukraine in a few weeks is a good example of that, with available payments in euro.
We look obviously at adding additional currency, and that's the conclusion more than the first step of the investment we've made over the last 18 months in transforming our platform from a single country, single currency, single language to be much more flexible to do multi-country, multi shipping destination, and multi-language. Now, let's talk about ESG progress for the first part of the year. First and foremost, obviously, while it wasn't in our plan, Ukraine took the forefront. As always, when such a crisis like this happen, we pivot to see how our unique scale, our unique technology, our unique employee base too, can pivot at making a difference. On the unique scale, obviously we started collecting and also contributing to donations.
That's what you can do from the scale and the reach of consumers and sellers we have. One of the things I'm the most proud of is also the continuation of our program called We Help Because We Care, and that's actually about helping group of employees we have across the company that is making a difference on small and large initiatives across and helping that develop by just helping with the funding and the time needed. On the corporate governance front, as you know, we have a goal to be over 50% independence. Here there's a great development. We announced the appointment of Pedro Arnt as independent director. That's obviously pending approval at the AGM.
For those of you who don't know Pedro is the CFO of Mercado Libre. A true leader, also in e-commerce, a company with whom we have large interaction and knowledge sharing. Pedro, I know I talk for myself, the management team and the board, is truly a welcome addition, and we really welcome his additional contribution to Allegro and knowledge expertise. Last, in terms of environmental contribution and perspective, you know we have a multi-year goal, not only for Allegro, but also for the whole contributors to Allegro, merchants, delivery, to be more green and eco-friendly. Here, we translated this into science-based targets to reduce emissions that were approved by the board, and we're currently going through the science-based target initiatives framework.
Now, to sum up, it was a busy quarter for Allegro. A number of great investments on the consumer end. In Q1, the start of monetization on a number of them, but I'll leave Jon to cover that in more detail. Thank you, Jon.
Thank you very much, François. Good morning again, everyone. It's a pleasure to take you through the Q1 results. As François was saying, we think this is a really solid set of results into the headwinds that we were facing in this quarter. Let me take you through that step by step. As has been the case in recent quarters, our growth has been mainly driven by the increasing loyalty and engagement of the customer base. You can see this manifested in one of the key metrics, which is last twelve months GMV to active buyer. You can see the 14.2% growth on a Q1 to Q1 basis and another sequential increase of 3.4% Q4 through to Q1.
The average buyer right now is spending 3,265 PLN a year with us, which is a pretty impressive number. What's driving this rate of improvement? Obviously, it continues to be growth in the Smart program, which is driving and also the great results of Allegro Pay. Those two things together, they're really driving engagement, frequency, the numbers of transactions. Increasingly we're seeing the order values moving up. Also the first impacts of the inflationary pressures starting to move up the product prices was starting to become clearly evident in the first quarter. All of that contributing to the growth.
When it comes to active buyers, we're continuing to deal with the carry forward of very occasional shoppers caused by the COVID periods, and those are rolling through the numbers. We also have the account consolidation effect that is caused by Smart, where households tend to congregate their purchases under a single buyer account. That is somewhat depressing the buyer numbers. Looking at GMV growth, as you've already heard, we grew 12.8% in the first quarter year-over-year to 10.8 billion PLN of GMV. Just to recap on the headwinds that we were facing here, last year in Poland, in January and from the second half of March, there were retail lockdowns where the shopping malls were closed.
That second lockdown actually carried on until early May, and that was the last retail lockdown that there was associated with COVID in the Polish market. That created a tremendous headroom. In that context, the 13% growth rate is a really very solid result. As François said, 64% over the two-year period makes the business massively larger. It's worth mentioning the impact of the outbreak of war in the Ukraine due to the Russian invasion and the impact on our sales.
We analyzed that there was about PLN 140 million impact, about 1.5% on the growth rate, because similar to the 9/11 tragedy, there was this moment where people paused, they started watching TV, they weren't thinking about shopping, which for about 10 days did take down the growth rate impact, not that material, it's gone right back to the normal trend from March. Also, a good contribution coming from the eBilet business now fully up and running again now that the economy is open and events are taking place. Okay, moving on to revenue. We booked 15.1% revenue growth, so faster than GMV, as is always the case with our business.
The advertising business moved on 21.1%, and that's obviously a very high EBITDA value business for us. Retail also was a driver at 40% as we address competitive pricing on the marketplace to make sure the consumers are always finding the best prices. On the marketplace itself, growth was in line with the GMV growth. That's because as you can see on the right-hand side of the slide, the overall take rate was more or less flat on the year earlier, at 10.46% versus 10.43% a year earlier. The usual seasonal step up again in Q1 took place.
In addition to that, we started the monetization of those investments that François was describing, in the Smart program and in Courier in the second half of 2021, with an introduction of a higher co-financing fees, particularly on Courier, from February of 2022. These numbers do not reflect a full year, a full quarter impact of those changes. You're gonna see that in Q2, and that's obviously gonna be supportive to the take rate in Q2. Moving on and looking at the EBITDA performance.
This has come again, as with the GMV, this is coming very much in line with what we were expecting to happen, as this somewhat mismatch between when we made the investments in the business in the second half of last year and the monetization being delayed to the beginning of this year resulted in a dip in the dynamic of our EBITDA growth rate. We had PLN 463 million of adjusted EBITDA, which was about 13.5% down on Q1 from a year earlier. I'll take you through the bridge here. Obviously, the GMV growth, plus the monetization effects that I just described, driving the growth in the marketplace revenue.
Advertising also contributing strongly to EBITDA through its growth. When it comes to the delivery costs, obviously, this is mainly driven by or totally driven by our investments in Smart. There are more users of Smart. We had 5 million when we last made an announcement on the numbers. They're still growing. The frequency, as I described earlier, engagement of those Smart customers is also moving up. The share of Courier has gone up considerably due to the changes that we made.
In fact, when we look at Q1 to Q1, the 21% increase in Courier in the mix effectively means that virtually all the transactional volume growth that was going through Smart Q1 to Q1 has accrued to the Courier delivery partners rather than to APM or to pick-up points. It's also worth commenting on the drag that we're currently having on our SG&A expenses. We have been investing very heavily across the organization to grow the innovative capacity of the business and also to start off the scale-up of our DEX initiatives. The staffing for those DEX initiatives and the assets deployed there, a lot of that cost goes through the SG&A.
We will start to see a stabilization in this metric going forward, and I'll come back to that when we talk expectations later in the presentation. Quickly, going onto our CapEx, PLN 160 million, very much in line with expectations for the first quarter, with a PLN 700 million target for the full year. Again, this is focused on investments in the future growth levers. In particular, the development teams were very focused on the international projects that François has been describing. Also our DEX projects contributing quite a large part of the investments that you see here. We're on track for our 3,000 APM target by the end of the year. Numbers of installed lockers going up steadily month to month.
Finally, a few comments around leverage. Obviously, there's been a major transaction with the acquisition of Mall on the 1st of April. Here we show you both where we were at the end of March, 31st of March. Leverage was at 1.86 times, so very conservative leverage as a starting point for making a major acquisition. The transaction took effect on the 1st of April. Pro forma, the opening leverage would have been 3.26 times after paying for Mall, which was, I remind you, also partly paid for in shares as well as cash. In terms of liquidity, we have PLN 800 million on the balance sheet as of 1st of April, and another PLN 500 million of RCF in reserves.
A very comfortable liquidity position. I'd also like to underline, given the rising interest rate environment that we're dealing with, that over PLN 4 billion of our senior debt is actually hedged at a very low 1.32% rate all the way out to 2024. This is really insulating us significantly from potential further interest rate costs as interest rates are moving up. Aion has obviously also made a major contribution around our working capital consumption to support Allegro Pay. The leverage should start to move down again later in the year as the growth rate on our EBITDA starts to come through strongly again, and I will take you through that shortly.
In the meantime, I'm gonna hand it back to François, and he's gonna take you through our international initiatives before I do the guidance later. François?
Thanks, Jon. Let's talk about how we're progressing on massively growing and scaling the business outside of Poland. That's a multi-year effort, as you recall. About two years ago, we made selling on Allegro for international sellers much simpler. We also launched over the last year or so multilingual customer service tool, mostly targeted at merchants at the time. Over the current quarter or last quarter, we closed two key developments in that journey. Thanks, Jon. First is the launch of the international platform, which launched in Q1 Allegro.com.
That's where a lot of the investments into making our platform multi-country was front loaded over the last six months to do this. The second part is the closing of Mall, which happened on April 1. At the moment, we're in the first 100 days. We are looking to deliver within the current business model of Mall's business acceleration through quick wins in the existing platform. Over the midterm, 2023, 2024, what we'll do is we'll take the investments we've made on the Allegro platform to ensure that all the customers across the region and merchants have access to the unique technology and consumer benefits that we already offer in Poland.
We'll also look obviously at further country developments, as we progress and start to deliver. In terms of where we stand here and the roadmap ahead, first and foremost, we acquired Mall because it gives us a brand awareness. It gives us an active customer base, which is about a 40% upside to our current customer base, but also a number of tools and merchants, 4,000 merchants across the region, extensive local market knowledge and cross-border operations with both Mall and WE|DO, 2,400 employees and an R&D center in Prague.
Overall, it front-loaded not only our development with Allegro.com, but it also pivots the teams across Allegro and Mall to solve for that challenge of increasing selection, better price, better convenience that we've been able to do in Poland and that we can do over a much wider consumer pool. In terms of next steps, the combined addressable market is over 18 million across the CEE region, and we want to offer the same tools to the merchants across the region that we do in Poland. That means increased selection, better pricing, Smart! across and overall product provide that unique user experience that we're able to do.
What we've seen when we do that click once, how you say, one-stop shop with millions and millions of incremental choice at a good price, we've seen it in multiple countries, acceleration always come. It's almost mathematical, and we're already progressing on some of it. I'll cover on some of the quick wins. First, in terms of current performance, and that's the period leading before the acquisition and the control of Allegro, the progress is what it is. It's minus 6%. It's driven by two things. First is an upside factor, a very hard lapping of the lockdown in Czechia, some of the Ukraine war and higher inflation, but also limited progress on the core inputs.
That's obviously what we set out to change with the Mall team. One of the things that is already progressing well, even before the closing of the acquisition is the progression of the marketplace, progressing at 40-.
44%.
44%. Thank you, Jon. Already reaching 12%. In terms of already proving the case, it's already well underway, and obviously, now we can turbocharge that with all the tools we have at Allegro and Mall to do this. Now, in terms of shorter-term quick wins, quick wins meaning what can we do on improving the retail basics within the current toolkit ahead of the full launch of the marketplace in Czechia starting early next year. Well, there are a number of things we can do in terms of improving the choice. At the moment, Mall mostly offer a consumer choice in electronics, small and large kitchen appliances.
Here, we really are starting to add both from local merchants and from Polish merchants incremental selection, making it easier at the end for merchants to list on the platform, and at the same time optimizing the 1P selection and stock. Doing that at competitive pricing. At the moment, the price perception of Mall in country is muted, so obviously we have a number of initiatives to make this competitive to consumer, and we see already some of the A/B tests that impact on consumer intake, frequency, and shopping. Obviously, with WE|DO, we can also improve the convenience. We've done a number of.
By convenience, I mean how many offers get delivered tomorrow, how late can you order that day, and there are a number of changes that have been done already, and that sequentially improve the convenience for consumers and the forward GMV. That's why we bet on return to growth over the course of a year. Now, I leave Jon to cover 2022 expectations.
Okay, thank you very much, François. To finish up our presentation, I will take you through our current expectations for 2022. I'm sure that many of you will recall that the original guidance that we set was announced on the day that Russia invaded Ukraine, and obviously, the world looked a very different place then, to the situation now, especially in Poland, where we're so close to the terrible crisis. Despite the turmoil and economic uncertainty, as you've heard, we've had a very solid first quarter, and the business is growing very well against the COVID headwinds and performing very much as we expected.
However, it's best to be prudent, and so we've factored in greater economic pressures into our assumptions for the balance of the year, and we've made minor adjustments to our expectations as a result. Now, furthermore, because we've just completed the acquisition of Mall and the businesses are still not obviously integrated as they just started working together, we're continuing to show our guidance but separately for the Polish business, for the continuing Allegro on the one hand, and separately on the right-hand side of the slide, you see our expectations for Mall and WE|DO for the nine months that we'll be consolidating them in fiscal 2022.
Let me start off with Allegro, and we're expecting GMV to grow between 15%-20% for the full year. I just wanna walk you through what we're expecting. I mean, we've been talking about the fact that the growth rate will move up sequentially over time, and I just wanna walk you through how that's gonna be the case. The final lockdown of last year completed very early in May, okay? We've now lapped the last COVID lockdown that affected retail sales as of the beginning of May. What that means is that GMV on an absolute level, in terms of hundreds of millions of PLN a week in sales, is now delivering significantly faster GMV growth than it was delivering it for us in Q1.
We're already seeing in our current trading that the growth rate has moved up to the high teens, and we have every expectation that it will continue to move up from here. If you look at the comparatives for last year, what happened was that the economy, the leisure side of the economy also opened up through the summer. There was a drop in the weekly sales through Q2 and Q3 last year. This year, we would expect it to keep moving up, and this is mainly because we continue to invest in the retail basics. We continue to drive Allegro Smart!, we continue to drive Allegro Pay, and those lockdown effects basically are not relevant to us for this year.
The growth rates are gonna go up sequentially as we move later in the year. Now, when we get onto revenue, we're expecting between 25% and 30% growth. Again, these are the usual factors that are supporting that growth faster than GMV. The over-indexation of growth in the advertising portfolio, movements in monetization. Some have already happened, so they're already baked in as we move forward. Other monetization adjustments we're analyzing and looking at week to week. Obviously, we have one eye on inflationary pressures and costs and the other eye on making sure that our merchants are able to grow their business and develop with us on Allegro.
Moving on to adjusted EBITDA. The EBITDA growth is expected to land between 10%-15% on a year-on-year basis. Obviously, we started the year because of the mismatch that I mentioned earlier between investment and monetization. We started the year with a -13% growth rate, but the worst point was already behind us after January, right? The trend is now upwards. The monetization issue factors and the GMV growth is gonna contribute sequentially quarter-over-quarter. It's also important to note that those investments that we made in particular in courier and expansion or improvements to the Smart! program are gonna start to be lapped in the second half of the year. Some of it in Q3, a large amount of it in Q4.
That will go out of the numbers and you'll start to see, again, higher year-on-year EBITDA growth rates as the year progresses. There's a final element as well around the SG&A, as I was mentioning. We pretty much got to the size of organization that we want to have to be able to innovate as an international organization. We also have the talent pool now, this fantastic extra talent pool from the Mall Group that we can also draw on as we build an integrated organization. We're very focused on increasing efficiency and increasing productivity over time, and that's gonna bring that SG&A growth rate down, and also contribute to improving year-on-year EBITDA performance. In terms of CapEx, we've made a minor tweak looking for savings across the program.
We brought the guidance down to about PLN 700 million as a midpoint for the year. It's worth underlining APM guidance, no change. We're still aiming for 3,000 lockers to be installed and running by the end of this year. Moving on to Mall and WE|DO. For the nine months to December, with all the initiatives that we're taking within the scope of the existing operational model of Mall in particular, that François was taking you through, we're targeting that we can get the GMV growth back into positive territory by the end of the year. Obviously, in parallel to that, we're working extremely hard on getting the marketplace deployment ready to drive growth going forward in 2023.
When it comes to an EBITDA loss, we're expecting it to be somewhere between PLN 80 million and PLN 120 million, depending on how fast we're able to stabilize the GMV. And then in terms of capital investment, PLN 100 million to PLN 120 million, but it's important to point out a big chunk of this money is actually the tech development that's going on in Poland to prepare the marketplace to be deployed in Czech next year. Okay, so that's the guidance across. And with that, I'm gonna hand it back to Michał to take questions, and we'll start the Q&A session. Thank you for listening.
Thank you, Jon.
Thank you, Jon. Just a reminder to our guests that you can ask a question by clicking on the Raise Hand button, and you will be then promoted to a panelist. When your turn is due, you'll have to accept that promotion, so please watch your screen. We have the first set of questions coming from Cesar Tiron from Bank of America. César, please ask your questions.
Yes. Hi, everyone. Thanks for the call and the opportunity to ask questions. I have three questions, if that's okay. I'm just gonna ask them, all three of them in one go, slowly. The first one is really on the guidance for GMV. Obviously it implies a significant acceleration of year-on-year growth for all of 2022, because Q1 was below the growth, below the 15%-20% growth. April was towards the bottom end of that guidance, and May is kind of in line. Do you expect to see some acceleration?
I know you're not giving quarterly or monthly guidance, but just to give comfort, probably to the market that you are comfortable to meet that guidance, should we expect that we will see some acceleration of the growth in June, or do you think that most of that acceleration is gonna be 2H weighted? That was the first question. The second question is on the competition dynamics. If you can please give us an update of what you're seeing from Amazon and Shopee lately. The third question is about the inflationary impact on your business, and if you can talk about any steps that you have taken lately to mitigate this.
Also maybe if you can link this to a recent statement which we've seen from InPost, suggesting that delivery costs, which will be passed on to Allegro, will increase significantly from the end of 2022 onwards. Thank you so much.
César, thank you very much for the questions. I'll kick it off then, as I was just covering a lot around the GMV progression. Let me try and hit a couple of the points that you raised there. Yes, indeed. I mean, we do expect the growth rate is going to expand considerably. We always expected Q1 was going to be very slow because of the lockdowns. That lockdown, the last lockdown was continuing last year throughout April, right? That's why the April growth rate was, you know, similar to Q1.
As we go forward, what we saw last year was obviously a drop from Q1 to Q2 in GMV. That was because of the end of the lockdowns, and also the reopening of the rest of the economy, okay. The leisure industry, tourism, restaurants, all of this stuff reopened later than retail, okay. That took some of the spend away from retail generally, and also from e-commerce, okay. There's no reason this year why the GMV levels we're hitting week to week should be dropping down, right. Those effects are gone from the comparatives. By sticking to our knitting, if you like, sticking to the basics of growing the business, retail basics, Smart!, the Allegro Pay, et cetera, et cetera, we'll keep growing the GMV.
Comparatives are getting easier, and that's why you're gonna start seeing much higher growth rates going forward. Just to underline, the growth rate in May, right, when all these effects are starting to run through, is already up into the high teens. Things are moving forward and this gives us hope it will keep moving up. A final factor obviously is the inflation. The inflation more and more is starting to be seen in the product prices. You know, if initially it's led by the energy prices, the cost of labor, et cetera, it is now starting to be seen quite clearly in the product prices. That's a tailwind with our business model, as François was saying, that's a tailwind for us in terms of the GMV.
Should I continue with the second one and the third one?
Yes, please.
I think the second one was around competitive pressure. Very consistent to last quarter, we continue to see very limited impact from online competitors. Mostly as we continue to improve our own retail basics on top of it, Smart on top of it, Allegro Pay, that makes Allegro very sticky with consumers and sellers alike. We continue to see a very limited impact. Obviously there are movements between offline retail and online retail, but those are more due to lockdowns last year versus no lockdown this year. Here, no trend. We continue to be humble, continue to improve our own consumer and seller-facing metrics to make sure that we continue to improve at a speed which is greater than our competitors.
On the third question, which was impact from inflation and let's say InPost comments. First, on impact from inflation, we're mostly a marketplace. To a large extent, we're somewhat hedged. I don't like to specifically use that word, but we take a commission on the average price of products, so that falls through. In terms of delivery, we're in a setup now versus two, three years ago, where we have a number of shipments, deliveries, right? Whether they go to our couriers, to InPost, that is much greater than anybody anticipated, right? The 64% over two-year growth is something that was partially unexpected.
Some of it is obviously the effect of COVID, which drove many consumers to try online e-commerce, and when they try, they stick with it. Also our own investments. We covered some of it, the trough in margins in Q1, but our own investment in extending very fast, convenient shipping at zero cost to the consumer, which, in turn, drives sales to the merchant, right? We're in a stage now where we have volumes which are much beyond what we expected. This drives much better economics for the couriers, whether InPost or other. I think here there's ample space for a negotiation and getting to an agreement that is mutually beneficial.
Also worth to say, indeed, as mentioned, a part of agreement, which is a seven-year contract, there is an indexation in price. It also, because the volumes are so much higher than what we were expected, the volume commitments are actually not significant. In any case, any volume commitment stops early 2025. Here, as I said before, we have a number of options to make sure we drive the right economics for the platform.
Thank you so much.
Thank you, César. We now have questions from Lisa Yang from Goldman Sachs.
Good morning. Thanks for taking my questions. I have three as well. The first one, just to follow up on the margins. Actually it feels like the new guidance implies margin is broadly in line with true, so even slightly better despite a low revenue growth. I'm just wondering, what's going on and are there any costs where you're basically potentially scaling back to be able to sort of protect that margin? As you said, you know, you expect margin to be the trough in Q1 at 33%. I think the midpoint of your guidance implies 33% for the year. I'm wondering is that conservative then if you're saying Q1 is gonna be the trough? That's the first question. The second one is on the lockers.
Could you confirm, like, how many lockers you have been able to roll out to date? Obviously given the supply chain constraint, and I think you partner with Modern Expo, I'm just wondering whether you're seeing any impact from that on the pace of your future roll out. That'll be really interesting to get your thoughts on that. The last question is on the Mall Group. I think the H2 run rate on their fiscal year implied, I think they were down 10%. Can you comment on where we are currently in terms of GMV growth? I mean, you said negative, but is it like, you know, close to minus 10% or closer to zero?
When you say the GMV growth should be back to positive by the end of the year, are you talking about the GMV growth to be flat to positive for the on the full year basis? Or you just expect you know an inflection by let's say Q4 this year? Any clarification would be great. Thank you.
Thanks. Josh, you take number one and number three, and I take the middle one.
Yeah, yeah.
That's fine.
The first question was around the margin level. As I said, what we've done with the guidance here is we're trying to be prudent and the major change versus three months ago is that there is much more inflation. It's clearer now that there's gonna be inflationary pressure for longer. A lot of that is precipitated by the events in Ukraine, but also other factors, right? Which mean this inflation is likely to go on for longer. Although the Polish consumer is proving incredibly resilient, we did wanna factor in a little bit more conservatism in terms of what might happen in terms of their purchasing.
Now, if that was to manifest itself later in the year, then obviously as the GMV goes a bit lower, that tends to drop through to the bottom line, right? We've given ourselves a bit more margin at the bottom end of the guidance as a result. I think you should view, you know, being only at 33% as a very conservative sort of worst case outcome.
On the first one, right?
First one.
On number of lockers. Yeah, I know we shared them. Jon Eastick, if you can help me. We shared we're well on track to achieve the 3,000.
Yeah, we haven't actually said how many, but we're doing hundreds of lockers already.
Yeah.
Yeah.
A couple of drivers of that. First, the location scouting is working very well. It took, you know, as any new project back a year ago, a bit of time to recruit the team, the process and all, but now it's working rather well. We also, as I said, earlier on top of that, negotiated a deal with one of the largest offline retailer to install 2,000 over time. That gives plenty of locations available and/or choice to do efficient locations too. On the supply, you called out our great supplier, Modern Expo.
We have, and this is something that we work with them to ensure both on the component side and overall supply. There's a long I don't wanna call it a backlog, but let's say a big capacity to follow us, so we don't see any key constraints out there. They're able to follow on the number of lockers we want to install. Maybe it's also call out. We've proven the point in terms of the number of lockers we can install, the location scouting, the technology, the integration with the platform. What is coming up is how do we make the offers that are present on Allegro shoppable through the lockers.
At the moment, it's a reasonably small percentage, but we have a couple of innovations coming up across the next few weeks actually to drive almost to parity. If you recall, when we did this with courier back in the first half of H2, it drove a massive usage of that option, and we expect the same, which will drive obviously more consumption of our lockers, which is great in the scaling up of that shipping model. The third one was more on-
Third one was on the Mall Group.
Yeah.
Yeah. Yes. When it comes to Mall, what we're expecting is that the tactical quick win initiatives that we deploy around retail basics is going to accelerate the growth rate. In addition, the lockdowns that were experienced in the southern part of Central Europe, Czech Republic and further south, they wound up more at the end of May, and they were in place all the way through January to May period a year ago. We're already seeing significantly better growth rates now that we've moved into May than Mall was booking in the first four months of this year.
Those quick wins will kick in over the course of the next few months. By the end of this year, we're pretty sure we're gonna be booking positive GMV growth on the old platform, even before we deploy the new marketplace platform. You know, if we're looking for a number for the nine months across, then this is probably conservatively. We're looking to try and get to something around a zero growth across the nine-month period. Yeah.
Thank you.
Thank you very much.
Thank you. Now we move on to questions from Luke Holbrook, from Morgan Stanley. Luke.
Good morning, everyone. Thanks for the opportunity to ask a couple of questions. I guess my first one is just on the number of actives. It looks like that declined about 0.1 million quarter-over-quarter. It looks like the lowest quarterly performance since 2018 at least. Just getting a sense, is that number of subscribers on Smart falling? Is this to do with the Smart Start trial and the pull-in of the trial period? Any color there would be helpful, and if you have concerns in that regard. Just secondly, on the assumptions that you are making in terms of your internal guidance for this year, is this being driven, the tweaking to that, by the number of actives, the buying frequency or the AOVs?
Just finally, if you could just quickly update us on search for a new CEO, that'd be helpful. Thank you.
I think the first two want something the first?
Yeah, sure. Yeah. Yeah, so you know, the active buyers, it really is the two things that I called out earlier, Luke. There is this tendency, perfectly logical that families consolidate under a single Smart subscription, their purchases. Although we've developed a solution called Allegro Family, which allows similar to Netflix, right? Each sub-user of a subscription to have their own personal shopping history and their own recommendations and all this, there's still a lot of accounts where this just lumping all into the one bucket occurs. Okay. So that's kind of a drag that we're still working on. Then the other one is really COVID-related.
We're very occasional shoppers because of the lockdown situation, decided they would go and buy something in e-commerce, but they haven't really returned since offline reopened. That's still working through the numbers on something that we have to deal with. Smart still growing very strongly. The change on the Smart! for Start, right?
Yeah.
Sorry, I'm searching for the word.
Smart! for Start.
The change we made to Smart! for Start actually was more of a Q2 move. Okay? The idea there is that the conversion rate is actually exceptionally good of these customers then upgrading to a paid subscription. We wanted to shorten the period that they need to use those five free deliveries. It sort of then will train them to be more frequent in their purchasing and will also bring forward them becoming paid subscribers more quickly. That's the thinking. We'll see how that goes in Q2. Over to you for the second one, I think, Luke.
There was a question on guidance, I think.
Yeah. What's behind the changes in the guidance, yeah? I think, you know, our core case has not really changed, right? In the sense that we're expecting sequential acceleration in the GMV growth, and the lapping of those investments on the cost side, plus some monetization initiatives to balance inflation. All of that together is going to lift the GMV and the EBITDA during the course of the year. That basic thinking hasn't really changed. What has changed is, there are various views, especially in Poland, around what's gonna be the impact on the consumer from the inflation. We've always been on the more optimistic view that the consumers are gonna be resilient to the inflation. Wage inflation here is very high.
Consumers have significant savings that they built up during the COVID times. We tend to take an optimistic view, but we have to admit, at the same time, with the latest developments, you know, caused by the war in Ukraine in particular, and the extra pulse of inflation, there is more risk than there was, right? We're starting to factor in a scenario where it could be the case that later in the year, the consumer is struggling a bit more than we thought they would do. It's not exactly our base case, right? It's just giving us more flexibility in the case that that comes to fruition.
Well, on CEO and succession. The board has retained Russell Reynolds to support on the succession planning. It's obviously Russell Reynolds and the board are progressing. There's a trove of international, local sourcing that is happening. At the same time, first, there is no announcement and there is also no rush, at least on my part. We continue to work for the time being on continuing to improve the business both on the consumer and the seller side, on developing the team, which is developing fantastically and integrating more, and then giving the time to make sure that the next CEO is fantastic.
I think that's what we owe to our consumers.
François , thanks very much.
Thank you, Luke. Now we have questions from Anik Mas from BNP Paribas Exane. Anik, if you could please unmute yourself and ask your questions. Anik?
Still waiting. Oh.
Yes, I can see that Anik has unmuted, but we can't hear you, Anik. Okay, let's wait for Anik, and meanwhile, Michał Potera from UBS. Michał, I've just promoted you to a panelist. If you accept the prompt, you'll be able to speak immediately. Just please unmute yourself, Michał. There you go.
Hi, everyone. Can you hear me?
Perfect. Thank you.
Yeah.
Yes. Thanks very much for the opportunity to ask questions. Let me go with the standard three questions. One is the technical question about your revenues versus GMV growth.
Just reading your guidance, there seems to be like about 10 percentage points over performance of revenue over GMV. I'm talking about Poland. First quarter was three percentage points. If you can give us some color why this should change so significantly. My second question is about Allegro Pay economics in the higher interest rate environment. Is that becoming significantly more costly for you? And, you know, what's really the economics of that product that seems to be doing very well? And my last question is about the capitalization of the development costs. That seems to be growing pretty significantly. I just wonder if you can give us a little bit more color why is that? Thank you.
For you and asking for
Yeah, it's all for me, Michał. Okay. Thank you. Very good questions. Yeah. Okay, so on the revenue acceleration, yeah, it does imply that we're expecting to see a larger divergence between the GMV growth and the revenue growth than we saw in Q1, which in other words, is also reverting to more what is typically the case. To get to that, there is, you know, first of all, the full quarter impact of the changes that we already made in monetization. We're looking at a whole bunch of other areas where we may monetize further during the rest of this year, and some of those, I'm sure, will come to fruition.
By the same score, it's also to the points that François was making earlier around InPost, for example, and around the relationship with different suppliers. A lot of what will actually happen will depend on the extent to which the volumes that we're providing and the extra margin that that drives for our suppliers translates into them being reasonable when it comes to inflationary increases that they expect from us, right? How much monetization we actually do will be very much managed, you know, as events unfold over the course of the year. The important thing is to keep all the stakeholders cooperating well and driving the business forward. Second question on Allegro Pay.
I think there's two things to call out around the rising interest rates aspect, first of all. The first one is that we now started charging significantly more on the installment side, where we've always been charging interest on the loans that we provide to the customers. Those loans are then sold on to Aion Bank. Those are also the loans that consume a huge chunk of the loan book because they're longer period loans. That aspect we've got covered in terms of funding. The buy now, pay later part, it's true that we're not charging interest on that side of things.
When it comes to the funding of that, the important thing is, first of all, it's very fast turnover credit, usually between one and two months outstanding, so that any money that we have invested in that loan book is turning over anywhere from six to 12 times a year. It drives for us significant incremental GMV. We can see month after month in our statistics that there's at least 35% of uplift for Allegro Pay activated consumers when it comes to how much they're spending compared to before they got credit from Allegro Pay.
Not only that, they tend to be spending that money on higher ticket items that are much higher than the average, which therefore also translates into better margin than we get on low price items because it's smart, right? On low margin items, we don't make very much money, if any, when we're down in the sort of 40-60 PLN area. But when we're up in the 100, 200, 300 PLN ticket items, we make great margins on those particular products. The short answer is that the BNPL part provides tremendous return on investment in terms of the marketplace margin that it's driving.
The final point I mentioned earlier as well, I mean, the main source of funding right now is obviously the senior debt that we have. We have the majority of that debt fully hedged at a very low rate compared to where WIBOR is at the moment. Hopefully, that answers that question. I've also got the third development.
Thank you.
The third one, yeah, about the development costs. Yeah, this one is two things. One is the expansion of our tech organization to allow us to have the capacity to innovate right the way across the technology stack in terms of adding additional functionality. The biggest component that's a key focus right now are all these initiatives around internationalization, in particular. There is also obviously the aspect of pay increases that is part of the increase in those costs.
There's a global market for software engineers, especially the talented ones that we use, 'cause we have some of the best of the best in the Polish market. That is also contributing to the numbers. As I said, going forward, we're really looking towards a stabilization of the size of the team. We think it's getting to the point where it's as big as we need. Going forward, that means that the growth in those numbers over time should start to level off.
Thank you.
Thank you, Michał. Meanwhile, I was able to get the questions from Anik, who couldn't ask these questions herself. The second question, can you confirm that CapEx is not shifting to next year? The quick answer is no, it's not.
Mm-hmm.
The first question is, can you talk about the allegro.com opportunity, how much of the future guidance is baking in growth from here, and where are the buyers coming from here mostly?
Well, I'll cover the second one if you want.
Yeah, sure. I mean, the allegro.com in the first instance is providing the foundation for all the multi-language and everything that we wanna build going forward. At this point in time, it isn't something that we're actively marketing, so we're not looking to it to have a material impact in the short run on GMV. We'll probably get to marketing it more actively later, and then, you know, then we'll keep you posted on progress with that.
Yeah. It's also an incredible source of customer and seller-facing improvements. Right.
Mm-hmm.
We're tackling those one by one and shopping quite a bit. But you took the one I was planning to answer, so you take the other one too.
Did we miss something, Michał? I didn't track that one.
No. That was the first question.
Did we cover any impact from the guidance and where are the buyers coming from, which countries?
Oh, right. Yeah, that one was.
Guidance on the guidance, Jon, answered where it's really not.
Yeah.
Because at this stage we're not heavily marketing it, and we're working on the sequential improvements in terms of customer experience.
Yeah.
In terms of where the customers come from, let's say the nearby countries constitute, as expected, most of the shoppers when you launch something like this that is not fully marketed yet.
Yeah, there's quite a lot coming from places like Lithuania, from Germany, Czech Republic, Slovakia. The further away you go, logically, the less is the demand that's coming.
Great. Now we have questions from Sebastian Patulea from Jefferies. Sebastian, you can talk now.
Hello, everyone. Thank you for the presentation. I've got two questions, please. The first one, do you see some of your competitors slowing down their CapEx deployments, either in lockers or fulfillment centers or maybe even OpEx deployments in marketing, given Poland's proximity to the war? Secondly, from a consumer perspective, do you see some users choosing to shop on Allegro, the local Polish commerce champion, versus choosing to shop on some of your Asian competitors, maybe more from a patriotic sense? Thank you very much.
Sure. I'll start, and Jon, you build on.
Mm-hmm.
In terms of, I mean, we've seen some of the news in terms of global spend, notably in fulfillment of CapEx of Amazon, notably. That's somewhat expected. We start with a very different base where we continue to maximize a very asset-light model, where most of our shipments, I mean, the overwhelming majority, is done without touching it. We have one fulfillment center that we continue to progress on to close a few gaps, let's call it that way. We start from a very different scale. Obviously on lockers, we also target, as we say, about 3,000 by the end of the year.
At least in the impact it has on us, it's extremely limited. In terms of shoppers and potentially going to Asian competitors, I mean, here you have two, mostly, AliExpress and Shopee. Here, as I said a little bit earlier, and it's true across a competitive set, both local and international, we continue to see extremely limited impact from competitive activities.
They obviously continue to develop their own roadmap, but in terms of active shoppers, frequency of shopping, any metric through the funnel, we see extremely limited impact because, again, we're able to sequentially continue to improve the shopping experience on Allegro, whether it's selection, whether it's pricing, whether it's delivery, and we'll continue to do so and continue to expect the same results humbly, right? The humble part is the key word because when you lose that humble part is when you can lose the plot a little bit and get a little bit jaded because you have a head start.
Thank you very much.
Thank you, Sebastian. We have no more raised hands, but we did receive some questions on the chat from Konrad Szczęsny-Połski from Haitong. Konrad, your first question about Shopee and Amazon has already been addressed. Your second question is, do you consider lifting Allegro Smart! price to reflect inflation and growing costs?
I would tend to say no announcement at this stage. I mean, keep in mind that the main driver within Smart is not so much the subscription price, it's more the usage that consumers do and how frequently they transact. Now, over time, we keep our options open, but obviously we won't do any. I don't know, Jonathan, you want to add something but
As I was saying, generally around the monetization, I mean, we're looking at the situation as it develops. It's dynamic around inflation. You know, the price points, what can't stay, you know, in this kind of inflationary environment, they can't stay constant forever. That doesn't mean that anything's gonna happen in the immediate future. You know, we're looking at it from a tactical perspective. You know, to a large extent, what happens with the suppliers and how they deal with the inflation versus the huge business that they get from us will also have an impact on what we can offer the consumer and what we can offer the merchants.
The last question from Konrad was about the split of delivery volumes between APMs, lockers, and couriers. Unfortunately, Konrad, this is not a KPI which we provide and disclose. With that,
Maybe just let me underline, though, what I said earlier, right? In that 21 percentage point increase in courier in the mix, from Q1 last year to Q1 this year, because of all the investments we made, to make courier more accessible within the Smart program, emphasizes, one, that customers actually appreciate courier delivery, but most importantly, it means that the couriers took far and away the majority of the volume growth between Q1 last year and Q1 this year, as a result of those changes. Going forward, Q on Q, because those changes are now quite a long way behind us, the incremental changes in the mix are now much smaller.
I think it's in about two percentage points of increase in courier share between Q1 and Q4, if I recall.
Thank you, Jon, and thank you, everybody, for joining this call. Thank you for the active participation and your questions. If you still have any questions, please don't hesitate to call or email us and we'll answer them. Goodbye.
Thank you.
Thank you. Bye-bye.