Earnings Call: Q2 2021

Aug 5, 2021

I think that we should have all the participants by now. Good morning, everybody, and welcome to Allegro Q2 'twenty one results call. We have with us today our CEO, Francois Neuets. Good morning. And our CFO, John Istik. Good morning. My name is Mihael Kosavinski, and I'm Head of Investor Relations. A few organizational announcements before we begin. Firstly, you can download our quarterly presentation discussed today from our IR website on allegro.eu. Please read the disclaimer on slide 2 of the presentation, in particular, the comments about forward looking statements. Secondly, you will have an opportunity to ask questions. You can actually do so by typing the pressing the Q and A button that you will find on the bottom of your webinar screen. You type your questions and then we will answer them at the end of the presentation. And then finally, we are being recorded today, including the Q and A session, and the recording will be available for download from our IR website at alegro.eu. Enough of introductions. Over to you, Francois. Hey, thank you, Michal. Welcome, everybody. It's great to see you in our almost Polish summer. And In Q2 and now Q3, that looks a little bit more normal than last year, and hopefully, it continues that way. Normal in a sense that in Poland, everything is open. People go around on their normal business, can go shopping, offline, online, At the multiple of choices, you also see our e billet business, our entertainment business is also back in. When we talk about Q2 result this year, you'll see a couple of themes that go through. 1st Is the continued improvement across what we call core retail basics, whether it's a selection, the delivery, the number of smart users we see on the platform And also, obviously, take rate advertising. You'll see also some context in terms of explaining the lapping year on year. If you put ourselves back to last year at the same time, it was the peak of COVID closures. So not only retail offline was closed, But also, a lot of the 1P online stores couldn't scale up in terms of meeting demand. On the opposite end, on Allegro last year, because our 3rd party model is so resilient in terms of accepting peak demand, We were able not only to scale up to that demand, but also to additional things. If you recall, we did things such as offering free shipping For all customers during that period and also extending a number of seller facing benefits to make sure they maximized Their online presence during that period. The good thing when we look at the numbers this year, we're not only able to lap this, But we're able to keep a number of those consumers that joined the platform, that joined Smart to the platform and increase their engagement. And that's a lot of the things we're going to be talking about today. Without further ado, let me move on to the slides, if Petit can please project. So as usual, I'll cover the highlights, John will cover the financial results, I'll summarize, and Michal will help us go through Q and A. So moving to next slide. So as I said, right, Allegro in Q2 this year is growing at 10.6% versus the Toughest comparative quarter in 2020. We look at the 2 year CAGR as a way to kind of smooth those kind of spikes, both when they were, Let's say market driven, and they were driven by Allegro, such as full extended free shipping last year. So CAGR at 38%. We continue to see stronger progression in both revenue and EBITDA due to the growth both the maintain Maintaining, is that an English word, of our take rate, which is not tapering off as expected, and also the strong growth of our advertising business. All in all, it means that we're maintaining the raised guidance within Q1 with a slightly marginal lower CapEx. Moving on. This slide, I will not cover. As usual, this is more a placeholder For you to have all the key financial numbers in one place in the presentation, but I will cover a little bit the underlying levers of the business. As per prior occurrences, I will not cover every single one of them, but I'll cover the single ones where there was strong progress or Noticeable news in Q2. So, let's start with Retail Basics, right? So, Retail Basics starts with the Choice, Which we call selection we offer to consumers, which is sequentially continued to progress at 50% annum per annum, that's in terms of raw quantity, But also in quality with the addition of key retailers, EULA in Polish pronunciation, CD Projekt, Redgear, Time Trend, Contigo. And as I Mentioned at the beginning, with a return to close to normal in Poland, we also see our e billet business, which was obviously the most impacted During the lockdown, starting to open again, selling concert, which is great, both for overall, but also for people in country. Now, past choice, we always look at being very competitive in terms of price, which is important both for smart and nonsmart consumers. Here, we continue to improve our price leadership By widening the coverage of competitors we include, including new entrants, But also by improving the way consumers discover it. That's what we call Allegro Ceni, which is how we qualify products. And the number of sellers that participate keeps on growing because, obviously, it drives their sales. As choice, as price, We keep on working on the convenience that consumers have when they use the platform, both online and here you see the continued progress In driving mobile app usage is very important because consumers that are both smart and mobile app users tend to be much more engaged in the platform, But also by simplifying and making it easier for them to interact. The first one, which is actually a post sales process, is improving the way they can Resolve issues they have with us. So we simplified the bioprotection program. It's very important because even when we get it Which happens in very few occurrences. If we make the customer whole, those consumers actually tend to be much more engaged after if we resolve their issues well. We also made it much easier and faster for them to contact consumer service, Notably through the use of bot for simple queries, where we see actually not only an improvement in speed, but also in quality because of the again, the easiness to contact. Last but not least, we launched a program called Allegro Family On July 15, Allegro family, just to describe it very briefly, allows a household, they don't have to automatically live in the same household, But to share, for example, their smart accounts, but also to do transactions together. Let me an example. You're a kid on the platform. You don't have a card or you're below The legal transaction age, you can interact with the platform, select the product, and then it's you kind of push the transaction to your parents, for example, to approve it and pay for it. So, the idea here is also to get a better clarity on the true active user base. If you recall, with the launch of Smart, active users have tended to Amalgamate. Amalgamate. Thank you, under 1 Smart subscriptions. And we have an interest in getting a better understanding of the true active user base because we can target to them better. Moving on to delivery experience. We see sequential improvement on the speed at which we deliver and also the predictability To consumers, you see very strong improvement in 1 to 2 day deliveries. That's mostly driven by The fast delivery subsidy program we offer to sellers if they ship fast and also the visibility of those fast shipping offers. If it's more visible to the consumers, easier to choose, they tend to shop these offers more. And in turn, it Provide a flywheel effect on the sellers to adopt the program more than just the incentive alone. We're progressing on Allegro fulfillment. So we completed the fit out of the first phase, and we'll see the first shipments in autumn. The pilot phase in terms of selecting merchants and It's encountering a slight delay as not unexpectedly for this type of large innovations As we have some slight delay in the 3rd party warehouse management system, but the more intensive capital fit out will still occur in Q2 And is well underway to prepare for full scale operations. Moving to last mile. So you may have seen our first APMs deployed in Q2, And we still will do the 1st deliveries this autumn. When you saw those APMs, you may have seen the great reception from the overall public and market in Poland. This is due to the time the team did team spent to really Focusing on the eco friendly, not on design, but also a number of features to make this really a leading proposition in country. We also launched our own pickup drop off network in partnership with 1 of their largest Onivolvos press network. Press kiosk network in country. So moving on to Smart. Obviously, in Smart, we keep on growing the user base and also the GMV penetration. One of the key drivers is we prolonged the Smart for Starters program. If you remember, the Smart for Starters It's for consumers that are initially low engaged. It's the 5 free shipment program. And what we saw is we had even better conversion to the PaidSmart program. So that's why we continue this program as a feeder program to the wider paid user base. Now, we also keep on improving SMART itself. If you recall, I covered it In the last call, that we had a what I saw, product defect in the sense that if you were living away from a Pickup network off from a locker. It was difficult for a consumer to benefit from Smart. Only 50% of the offers qualified for courier delivery. We changed this with, obviously, the seller base. We now cover nearly 100%. And that means also that more consumers, notably further away from the cities, can benefit from the great smart program. Lastly, as I said, we launched Allegro Family, which allows consumers to benefit from household smarts, but also the each individual, so we can target Different programs to them individually. Talking about monetization, We see a continued take rate at 10%, 46%, not quite seeing yet the tapirization. Is that the word you use? Yes. The tapering down of takedown, and we see continued progress on our advertising business at 39.5 of Revenue Growth. Our marketplace take rate, very similar to last quarter, driven by the monetization of co financing. But also, we see continued robust demand from the promotion services during Q2. There is no major commission changes introduced in Q2. Moving on to advertising. Again, similar to last quarter, the strong results come from, I'd say 3 main points. 1st is a continued penetration of the seller base. More and more sellers see the use of advertising and benefit from it. We're also better using AI to better monetize, which is important because it means those ads are more targeted to consumers And as a result, drive more revenue both for the sellers and for ourselves and are more informative for the consumer. And lastly, we also see an increased ramp up of our advertising network. If you recall, that's selling other advertisers' inventory, such as Google SponsoredLinX. The great thing at this, this is traffic that comes to the platform already paid and with the margin. So that's greatly contributed to the business across the board. Now let's cover a little bit how we're doing on the seeds we're planting for future growth. Actually, a couple of those are more than seeds now. They're becoming Significant. So let's start with AllegroPay. AllegroPay is continuing its great ramp up on plan, 95% quarter on quarter growth in terms of loans originated, mostly driven by The metric I like the most is this NPS at 89%. That NPS is just the top of the iceberg in terms of consumers loving The ultimate simplicity and convenience, the one click use, which is very different than banking products. Lastly, this is driven by also Sequential improvement in the road map, on track. In Q2, we launched card repayment, one click buy. And there's a lot coming up in the next quarters in terms Making this product more and more universal and not only to our own consumer base. Moving on to B2B. So B2B continued to outperform the overall marketplace Since launch, you can see the B2B NPS at 75.8% continues to increase as we continue to launch features and continue to roll out the existing features through the base, mentioning 1, which is the price discount specific to B2B, Which more than doubled since the platform launch. Lastly, and a little bit earlier in the development phase, we after Helping international sellers sell to Polish consumers to allegro.pl, we keep on making it easier for international shoppers to shop on the platform. So in Q2, we made it easier for shoppers and sellers to ship products across all EU through integrating a broker carrier for EU. Now with this, let me give the mic to John. Okay. Thank you very much, Francois. Good morning, again, everyone. Really nice To be with you here today and take you through the key KPIs and the key financial performance indicators for the business. So as usual, let's start with the active buyer performance. 7.2% growth year on year from Q2 to Q2 2021, With 13,200,000 active buyers on the platform, you'll obviously have noticed that the growth was actually flat For from Q1 to Q2, so I thought we would dive a little bit into what's behind that. You heard earlier in Francois's opening remarks a reminder about how much demand there was in Q2 last year because of the lockdowns, because of the free smart that we were offering. And that translated into a much higher increase in active buyers In that Q2 2020 cohort that we normally see, it was about 50% higher. The retention rate on those customers is about 2 thirds, which is actually historically a very good result. We've been focused Quarter to quarter on improving how well we turn a new active buyer who makes a first purchase into a recurring buyer on the platform. And we're getting better and better at it. But the 1 third that did churn on that very high total number of active buyers. That unfortunately translates into something that offsets a more normalized rate of new active buyers that we saw in Q2 this year. So net net, that meant that we didn't grow the active buyer base. As we're getting now into quarters that look more normal in comparison to the previous year, we will expect to see the active buyer base growing again going forward. So the 2nd key KPI that drives the GMV, obviously, is the spend per active buyer. And here you can see more familiar trends, 29.4% growth For the year on year comparison, we're almost zloty of spend on an annual basis per active buyer. And this is really the sum total on the demand side Of all the different projects that we've been running over the last 12 months, Francois has been mentioning many of them in the context of Q2 only. These many projects that we've been running to grow the business, to grow the platform and drive the flywheel faster, It all comes back into this GMV per buyer spend figure. And this is really the key reason why we've been able to lap this 72% growth we had last year and actually grow further this year in Q2. So before I go to the GMV, let's just have a quick look at the COVID situation. The big picture here is that Q2 is much more benign situation than the terrible situation we had in Poland In Q1, infections right now are running at less than 200 a day on average. And as Francois mentioned, the economy has really totally opened up. Retail is fully opened since the 5th May, and all other aspects of Normal life has also reopened during the course of Q2. So we're continuing we're planning for the rest To the air on the assumption that lockdowns will not return, and we really hope that they won't come back in the autumn with the colder weather. But we do have the flexibility in our capacity that if something does happen, we'll be able to ramp up our operations and react to that situation. So the GMV performance, 10.6% growth in Q2, Up to PLN 10,400,000,000 for the quarter. The important thing here is, first of all, That CAGR result, that 38% growth, it's only slightly lower than we had in Q1 when we reported 40% growth. Looking at it the other way, it means that the business in Q2 is 90% bigger than it was back in 2019. And that's, I think, a really impressive performance and a really impressive growth rate. Looking at our month on month growth, The low point was in April. We told you at the last Q1 call that the current trading for April was in the mid single digits. It's been moving up progressively. And we as you see, we did 10.6% for the quarter as a whole. And July has continued in the same frame. We're already printing mid teen year on year GMV growth for July. So the expectation for the second half of the year is that the growth is going to move up significantly from what we've just reported for Q2. So moving on to revenue. Francois already mentioned that the Key drivers here are the higher take rate versus the prior year and also the advertising, which is growing at over 39% year on year. So that lifts the revenue by 28.4 percent for the quarter to 1,300,000,000 And 42.3 percent for the half year. We're now over zN2.5 billion of total revenue. Looking a little bit closer at what happened on the take rate. If you remember, I was saying when we reported the 10.43% take rates for Q1 that we were expecting it would taper down over the rest of the year. In fact, it went up 3 basis points in Q2. We still expect that it will taper down in H2. What happened in Q1 was that with the reopening of the economy, the amount of discretionary spending that merchants were bringing to the platform It was actually a lot higher than we were expecting. Some of that money goes into promotion of offers and that in itself goes into the take rate. And that over performance on that element offset the sequentially higher amounts of money that we're putting into pricing. Francois was describing the Allegro Seni program and how we're expanding the reach of that program. This was offset that effect and therefore we got the slight increase in the rate quarter to quarter. Okay. So cost of sales now. If you look at the reported numbers for cost of sales As a percentage of revenue, we've gone up from 23% of revenue in Q2 a year ago to 29% of revenue in Q2 2021. But we thought to make it easier to understand exactly what's going on in the business, we would put together a pro form a, Which you see in the second column here on the left hand side. Because if you recall, last year in Q2, because of the lockdown, we offered smart for Free to anyone who wanted to use it. Where customers took us up on that offer and there were literally 1,000,000 who did so, The cost of those deliveries was actually booked as marketing expenditure because there was no incremental revenue either from the customer or from the merchant from that initiative. So under the accounting rules, it went into, marketing spend. In total, that was about zlot71,000,000 and Zloty of Spend. If we classify that as net delivery cost, it would have increased the net delivery to 21% in 2020, Which means overall, it's only 1% higher in Q2 of 2021. Now in absolute amounts, because of the revenue growth, that's still 32% higher spending on delivery. And the main drivers of that are several. The first one is that we actually have more smart subscribers And more smart users than we had in Q2 a year ago. Secondly, those smart customers are actually doing more transactions. They're They're even more engaged now than they were a year ago. And thirdly, as Francois was saying, we've made a lot of advances around the courier proposition within Smart. And that's increased courier within the mix of deliveries, and that's driving the unit cost higher somewhat on average. Okay. So quite a stability on the cost of sales side. Looking at the SG and A side, we've done the same thing in creating a pro form a taking out the delivery cost from the marketing. And you see that there on the left hand side of the slide. And what that shows is that year on year, we've increased by 2 percentage points of revenue, Our SG and A spending, here we're investing very strongly for the current and for the future of the business. We're spending more on marketing, Particularly on PPC spending, we're getting very, very good ROIs that is helping to drive the GMV. But secondly, we're growing the team as As fast as we can, we're growing we grew 29% the headcount year on year, so salary costs moving up. And really, we're investing across the board to be ready for or to be able to run as many initiatives in parallel as we can to innovate and keep growing the business as we move forward. So putting that all together and looking at EBITDA, we had just over just under The PLN 560 1,000,000 in the second quarter, 23.8 percent growth Just under PLN1.1 billion for the half year, which is 35.6 percent growth. Most importantly, I think, is to look at the margins there. The adjusted EBITDA margin to GMV, Comfortably above 5% throughout the period and significantly ahead of last year. And that's obviously primarily The monetization progress that we made both on take rate and on advertising, there's funding much of the investment in SG and A and in the SMART program. So moving on to net Profitability and Everything Below EBITDA. Nothing particularly new here in that as we're Still a very low CapEx intensity business. Our amortization and depreciation costs are only moving up about 10% year on year versus that 30 odd percent increase in EBITDA. Our financing costs So down about 40% year on year, lower leverage after the IPO, lower interest rates in the market producing that result. Our leverage I'll get to leverage in a moment on the next slides. Net profit as a result is almost doubled at 95 Higher, dollars 565,000,000 for the half year and 60% higher growth for Q2. Capital investments. As Francois was mentioning, the fulfillment program and the APM programs are both going well. We're expecting to get through the full CapEx plan, consume it all during the course of H2 on those two key programs. There are certain small changes to our CapEx program. First of all, part of our IT spending, particularly around our server park, we decided to use a leasing based Solution, which means it doesn't run through these CapEx numbers. Secondly, the Two offices that we're fitting out in Poznan and Warsaw, they've both been handed over slightly later than we originally anticipated. So some of the fit out spending is going to slip into next year before some of the staff move into those offices, hopefully, if everything goes well with COVID. So CapEx pretty much on track. Going to leverage. Leverage is finished the half year at just under 2% for the group as a whole. As a result of that, we will be informing the bank group of lower leverage, and it will result in our interest rate payments going down by 30 sorry, by 50 basis points for the second half of the year. So that's going to help our bottom line by about $11,000,000 in cash terms. There's also there'll also be a larger amortization of loan adjustment, which will be favorable about €100,000,000 but that's a non cash item. We're continuing to work quite effectively on identifying a source of dedicated funding for Allegro Pay. We still haven't got a final announcement to bring to you, but we are hoping Something will come in the second half of the year. And we're also starting to think about whether or not we should Tapping the Polish corporate bond market as a way to diversify our long term financing going forward. At the moment, as you know, all our long term funding is bank based. So that brings me to our final slide on my side, which is obviously the guidance. The year is panning out very much as we Expect to with a tough comparative to deal with in Q2. From here, we expect the growth to start to tick up again on the GMV side. The revenue growth, the take rates will be, we think, ticking down slightly. But also we're starting to lap initiatives on take rate that we introduced a year ago in the second half. So that won't be quite as strong a driver on revenue growth as it was in the second half of the year. We're ramping up on SG and A expenditure. We've also got some reserve here in case the competitive situation gets more intense than it's been up until now. So all of that results in us basically confirming the guidance that we already increased back in Q1. The CapEx for the two reasons I mentioned a couple of moments ago is ticking down slightly, but nothing significant. The big programs are So with that, I'll pass it back to Francois for the concluding remarks. There you go, Francois. Thank you, Jean. So just wrapping up. So 10.6% GMV growth versus comparative of last year's spike, Most of our e commerce, but especially of Allegro due to the factor I explained earlier. We see continued take Great and growing advertising, which drives revenue and EBITDA grows faster than GMV at 28% 24%. We're very happy with the continued ramp up of our Allegro pay scale up with so much innovation still ahead in the rest of the year. Delivery experience continues to progress also with a number of the investment that we're making starting to have an impact in H2, both in terms of fulfillment and last mile. We continue to see limited impact from the changes in competitive landscape. And then, as a high growth company, it continues to be very important to us to invest in our people, And both in the quality, notably in software development engineers, but not only and also at the top of the organization, we continue to ramp up the team to continue to scale Fast and Raise the Bar. All in all, all those initiatives are progressing. As John said, it means that we maintain our guidance And we expect accelerated growth in Q3. That's So in terms of presentation, I leave it to Michal to help us facilitate the Q and A. Thank you. Thank you, Francois. And once again, a reminder to our guests today that you can still ask your question by pressing the Q and A button at the bottom of the screen and then type your question. We received a number of questions from you. Firstly, from Cesar Tiron from Bank of America. Let me ask them 1 by 1. How do you explain that GMV growth during 2Q 'twenty one was slower than the market growth? I'll take that one. Maybe so it depends what you call market, right? So I think if you call market in that definition, that's probably e commerce as a segment, but I'll explain both. So when you look at total, which is normally what we do, right? We look at total retail. There is indeed a switch from last year when all offline retail was closed to this year when it's all mostly open. And that's a good thing, right? There is it's not in the business model of Allegro to have consumers shop with Allegro because they have no choice. So it's great that they have choice again this year. And then it's great that we're still growing with that lapping that period of no choice versus offline. Then if you look at online, it goes back a little bit to the explanation I gave earlier, right? It's purely mechanical at the end of the day. We realized early on at the offset of COVID that our 3rd party, let's say, disseminated logistic model was much more resilient into taking spike demand. So, our growth was much higher. And we actually doubled down on this because our model was so resilient by doing things such as extended free shipping, Doubling down on some marketing initiatives that grew that spike even more than, let's say, more supply chain constrained 1P model. So, what you see is indeed the lapping of that last year's spike, which is even globally, It was reasonably unique to that extent to our model of 3rd party with a 1P kind of delivery Experience. And then towards the rest of the year, as I said, we'll see those kind of odd mechanical effects Resorb as hopefully, we're more into, let's say, normal comparison. And the second question from Cesar, why did customers stop growing Q on Q? And what makes us comfortable that they will be back to growth in the second half? Cesar is also wondering why the customers Allegro acquired in 2Q 'twenty weighted until 2Q 'twenty one to churn rather than dropped in 1st Q 2021, for example. So it's a question about the definition. Similar mechanical effect, but drawn, yes. Yes. So I think, hopefully, Cesar, I already explained in the presentation what was causing The flat quarter on quarter active buyer number. So it was The very fact that we had so many new active buyers in Q2 last year that even though we did a good job on retaining them relative To the historical norms that we've been working hard to continuously improve, there were still so many churners that So it offset the active buyer growth that was a much more normal level, in Q2 this year. So that, In a nutshell, was what I said during the presentation. The second part of your question, I think, is The more the nuance of what the way that the KPIs work. The way that we are reporting active buyers Is that anybody who performs one transaction at least during a 12 month period and has their own unique email account that their user details are attached to. That is an active buyer, okay? So We've got, obviously, people that are doing hundreds of transactions per year within that active buyer account. We've also got some people that have only done the one transaction. If they get through to the end of the 12 month period without making a second transaction, then they churn off of our active buyer base, okay? So Both that measure and the GMV per active buyer are both last 12 month measures. And that's one of the reasons why we also call out the last 12 month GMV figure because if you multiply those Two drivers together, you'd see that's that 37% growth in last 12 months GMV. I think it's on the GMV slide there. I think it was about PLN 39,000,000,000. You'd be able to reconcile where that growth is coming from across the active buyers And across the extra 29% of spend. And then finally from Cesar, he would like to discuss Some of the regulations that we've mentioned on our guidance slide with regards well, the risk of regulations with regards to the digital taxes. Yes. I mean, that's an interesting one. When we met 3 months ago, The ruling party had a proposal that they put well, they published for consultation basically where they were proposing Digital Advertising Tax. That one's fallen by the wayside, but there's now another proposal that It's circulating in the Parliament, slightly different proposed by The left alliance originally, but seems to be potentially going to be picked up by the government. In addition, at the EU level and at the OECD level, as we know, there are also discussions around, in particular Internet based companies and potentially charging them additional levies or taxes. So it's very, very difficult to predict if any of this will come in to actual fruition. None of it has actually gone into first votes or anything like that at this point in time. But we're somewhat concerned that something could happen in the relatively short term, and that's why we're flagging it in the guidance. Then we have a couple from Pavel Espiglia from Mbank, the first one we've dealt with. The second one, if you could give some guidance on the number of active buyers in the midterm and how we are going to win them. Well, we're not we don't guide on active buyers. As I said in my comments, that One off effect that we saw in Q2 should ameliorate over the rest of the year because in the rest of the year, The challenge that we get from the COVID impacts that were there last year is much, much smaller. So we should start to see some growth again in our active buyer base. The Allegro family project that we issued that we announced 2 weeks ago It's also something that should help us with active buyers and that it's bringing out Multiple users who are using one email account today, it will encourage them to have their own dedicated email account under the one family, which will allow them to actually have their own dedicated purchasing history, their own dedicated Recommendations coming from Allegro, where today it's all sort of one big soup around the multiple users with it that are using that one account. So as that project gets traction, that will also have some positive impact on the number of active buyers and should feed through into engagement as well. Thank you. Now we have next, we have Max Nekrasov from Goldman Sachs asking for the key drivers behind the take rate improvement year on year and Q on Q and what is the outlook for the future? Sure. So the year on year, it's very much the same story as a quarter ago. Starting in Q2 of last year, we started to monetize the investments we were making in Smart by introducing co financing. Originally, it was only on courier. Then 1st January this year, we added co financing for lockers, which is a big chunk of the mix. So that brought in quite a lot of additional revenue. From the 1st July last year, if I recall correctly, We started also charging success fees not only on the value of the goods, but also on the delivery that was actually charged to the customers. So merchants that were in the Smart program and where we were paying for the delivery, they didn't have to pay anything extra. But those that were choosing to stay out of the SMART program had to start paying success fees on delivery. And obviously, that's another reason, another impetus to get them to move into the Smart program. We did make some adjustments to the core success on particular categories during the course of the last 12 months, but most of that was in Q4 and Q1 of this year, and wasn't nearly as material as the co financing aspect. Going forward, for the second half of this year, First of all, we'll start to lap those changes that I just mapped out. So the Year on year improvement in the take rate will get smaller. And secondly, we're also expecting that the absolute value of the take rate, which is 10.46 percent for Q2, will taper down a little bit later in the year. We'll be putting more money into commercial initiatives, especially around competitive pricing. And Generally speaking, in Q4, there's a seasonality effect that also takes down the take rates. So That's basically what you can expect to see for the rest of the year, a slight taper down in the absolute number and less year on year growth. Al Maxim also is asking for the trends we are seeing so far in Q3. Okay. Yes. So we have mentioned that in the MD and A. There's a Current trading section, we also alluded to the GMV performance in the presentation. We hit a low point in April, which It was last year right in the middle of this massive lockdown with all the offline closed. And it's been going up The year on year sorry, yes, year on year monthly GMV growth rates have been going up sequentially since then. As of July, we are seeing midteens growth year on year. So we're expecting that will keep moving up for the time being. Towards the end of the year, There were lockdowns reintroduced last year, which will create a bit of a headwind, assuming our assumptions are correct and there's no lockdown in Q4 this year. Next, we have Elena Zhronova from JPMorgan. Elena is wondering what percentage of overall GMV Can Allegro International become? And is it already part of the midterm GMV guidance? I'll take the first part. The short answer on the second part is it's not really included at this stage because the project It's so early stage. The first one is a harder question. I think the way to look at it is more that if and when we start launching, let's say, organically notably, dedicated website for other consumers. A lot of those initiatives will make It's so much easier in terms of having the seller base, international, the shipping, international. Those are sequential steps to making international user experience either on .pl or Another much easier and become over time significant, but we're not at a stage where we have Anything to announce or share? Yes. The key competitive advantage that we have are these really low price points that are in the Polish market And in particular, on Allegro. So that should fuel the demand once we launch the product. Then sort of follow-up on this topic from Andrew Ross from Barclays, who is asking for an update on international M and A Strategy. Well, as you well know, we don't as a policy, and many public company have the same policy, We don't comment on potential M and A. Obviously, we keep on looking at our internationalization through both organic and tactical M and A Lenses. And we'll update if and when we have anything that we can announce. The next one, we have a few questions asking for a competitive update. We have some questions asking about Amazon's behavior in the market, how much of competition intensifying were reflected in the guidance, if we can provide any color about how competition is progressing in Poland from that one player. So, I mean, it's more questions for Amazon than for us. As I said in the summary slide, we don't see any significant can challenge in terms of competitive landscape. At the same time, obviously, it always pays in business to be humble. So we keep on benchmarking not only The company you mentioned, but other companies and making sure that we drive our own retail basics and innovation focused. So, whatever any competitor does, whether local or international, we're a few steps ahead. So that's why you see sequential improvements in selection, in Pricing and delivery and smarts and just across the board. So I'm not assuming whatever initiative anybody else does, We can remain the how do you say the preferred place for shopper online and offline to do business and definitely the best place for sellers in the country. And that we're We're very confident, but at the same time, it pays to be helpful. Now we have a few questions from Catherine O'Neill from Citi. Firstly, can you provide more detail on the Smart Family plan in terms of pricing, what's included and how many people can be included in one plan? Okay. I'll start and then, John, you fill any gaps, please. So it's not a paid program. So it's open to all. And the way so let's say, you come as a consumer to the platform, you'll see, how do you say, An explanation of what does Allegro family means for you. And it means I mean, the main benefit to start is that you can share your single Smart account with several people within your family, whether they're in your household or outside. The limits, did we is it 7? It's up to 10. Up to 10. So it's quite an extensive limit. We'll review that limit. Obviously, it's not to constrain large families. That's why we kept the cursor Quite high, and we'll review that over time if we need to expand it. And then the great thing, it's more the stickiness Of the usage, as I said again, there are many usages within the family, whether you're a teen or you're Our grandparents need help to transact. And it's all about making this experience sticky within the family in kind of a playful way. So I've explained, I think, in the presentation the example of a kid. So you get an invitation from your parents, And then you can start interacting on the platform like an adult would. But then, obviously, when it comes to paying transacting, The parent gets a request to approve that transaction, which is kind of a nice way. It's not only about sharing the SmartEcal. They also share The Allegro pay and consumer credit components. And we'll keep on adding features to make that both very useful, but also very sticky and playful within the family. That's really a beginning. I haven't seen this anywhere across Similar to what Netflix does, right, but applied to smartphone? It's true. In a different setup, yes, it's a little bit like your Netflix. But Netflix, it's kind of you sign in and then that stops. Here, it's not only you sign in, then you can start interacting. And there are benefits, obviously, on the consumer. And for us, there are additional benefits that also apply to the consumer. When Jean mentioned active buyers compressing, it's actually, I'd love to say it's the active buyer metric, which is a bit of a how do you say, an incomplete metric in the sense that since we launched Smart, There are a number of true active buyers that are using single email accounts. And as a result, they're not counted as real active buyers in our metric, Which is a bit of an issue. The metric doesn't matter that much. But it's a bit of an issue because later on, it means we cannot target marketing program to them, Right. I don't know. Let's say we're at the same household and you like jazz, I like classical music. If we're both shopping from the same e mail and the same, you're going to get Classical music rumination, which we don't care about, I'm going to get jazz, which I do care about jazz. I cannot say the reverse part that I may convert slightly less on And same for the number of other programs we do. So we have a business benefit advertising, obviously, if we cannot. AllegroPay, obviously. So there are number of usage beyond the metric to for that Allegro family program, both on the consumer side and on the targeting of different benefits to consumers and programs on the Allegro. That's why we're doing it. It's obviously very early stage, right? We launched this, is it? 2 weeks. 2 weeks ago, we just had the first review. It's promising. But as always, when you do a disruptive innovation, there's a lot of work ahead, And that's the fun part. And the next one, Catherine, asking about the net cost of delivery. Is the 22% as a percentage of revenue a sustainable level? Or will this increase further with the addition of courier deliveries in the mix? There might be As that courier penetration continues to tick up, that would have a slight impact. But the big picture is that the penetration of smart keeps Keeps going up. And with every additional cohort of smart customers, as I've mentioned on many of the calls, As you get to more marginally engaged customers over time, the incremental amount of deliveries The demand as a smart member is coming down. So with every 1,000,000 of To the smart customers that we add, the amount of incremental impact of their delivery costs is getting smaller and smaller. So I'd expect the number to keep creeping up over time, but sequentially slower and slower pace. And against that, as I often remind, we've got the growth in the advertising, in particular, which as it scales up It's very, very high margin. It's covering that cost and helping us to keep the EBITDA margin level over time because in the medium term, we're guiding to get the adjusted EBITDA margin to GMV percentage to stabilize. We received another follow-up question on active buyers from Harry Welpton. So Harry is asking what was the growth in active buyers as of 2Q 2020. We said 50%, but it he has it down at 12.8%. So it's just a clarification that we meant new buyers rather than total active is what Harry is asking for. Yes. We meant the absolute increase in active buyers, New active buyers, right? It was 50% more than a year earlier. Whereas the total buyers grew by 13%. Then we have a question from Christian La Rochelle. How much GMV uplift are we seeing from those customers using Allegro Pay. Okay. Yes, that's a great question. We're monitoring daily, but basically, we're looking at the results on a monthly basis, particularly between the Allegro Pay team and Finance. The AB testing that we're doing to see how much additional purchasing having Allegro pay is driving. Those results are still not stable to the point that I want to share them publicly. Given everything that's going on around COVID and all that volatility, It is difficult to be really sure about the level of incrementality. But I would say it's the readings that we're getting are actually above what we were betting in the business case. So it's giving us fuel to keep investing, but There isn't yet a number that I feel confident enough in that I would actually want to start announcing it publicly. Another question on Allegro Pay from Grzegorzkojewski, Trigon. So asking for more color how the A balance of loans funded by us will develop over the midterm. And are we expecting to see more operating cash flow impact from that in the future. Sure. I mean, the guidance that we gave at the beginning of the year was that we are targeting At least PLN 1,000,000,000 of loans written and for the loan book to reach PLN 500,000,000 by the end of the year. As you saw with those numbers, that's very much on track. We're already over €500,000,000 in loans written at 30th June. The buy now, pay later products, if you remember, there are buy now, pay later offers and there are also installment offers. Those buy now pay later offers are rotating very quickly, which is why the growth in the loan book is actually clearly much slower in Q2 than the growth in the total loans that we wrote during the period, which is a great thing in terms of High rotation of the loan book driving high incremental transactions and incremental take rate, it's a great ROI on that part of the business. Going forward, so you're probably looking at something around €500,000,000 by the end of this year. But as I mentioned when I was talking about leverage, we have identified certain institutions that are interested in helping us with dedicated funding for the loan book of Allegro Pay. We are only prepared to move forward with that if it doesn't Do any damage to our user experience, Francois was mentioning the fantastic NPS score that we have. But if that all comes together, then we should have something to announce regarding dedicated funding for Allegro Pay. And that would even further, obviously, improve the economics of the project. And now going back to the active buyers for the last time from Catherine from Citi again. Catherine is asking if the launch of the family program will drive the active buyers number as it will increase more individual a number of users with Smart Family. So there's two answers to that. So obviously, as When you create programs that are consumer sticky, we are expecting and we're seeing, but it's very early days, so it's too way too early. New customers joining because they like the program. That's one, but this is very early. And then, as I was explaining earlier, That program also helps splitting real active buyers into major active buyers. But that's On its own, it's just a metrics impact, which downstream has some benefits that I've explained a few minutes ago. Again, we since the launch of Smart, our measured active buyers are how do you say you like that word tapered? Taperedel by real active buyers joining from a single account to avoid the Spark Despite the fact that the Spark yearly is incredibly low, that talks back to the, How do you say the price sensitivity of the Polish consumer, which is at the core of the Allegro offering. We have another follow-up question from Christian La Rochelle on the drivers of GMV growth in the coming year. Are we specifically going to Add any incremental product categories that would drive that overall GMV growth on the platform? So let's take obviously to Holiday's active buyer growth in terms of an overall lever. We see continued selection expansion, so choice within existing categories, by the way. But also, there are some categories that we've covered in the past that are still largely underpenetrated, Whether it's fashion, grocery, but not only, right? When you look at the penetration of online versus total In Poland, it's still significantly lower than other countries in Europe and even a third of what it can be in other Asian countries. So you'll see continued improvement in selection and choice, whether in existing category and others. And then even in categories that we've been offering for quite a while, So we recently launched, for example, a heavy, bulky product. We started having a healthy product. When you look at Home and Garden and even some categories, subcategories of electronics, You obviously have a very low penetration because some of the Boost products need a heavy bulky delivery or even a room of choice installation. So you'll see us and it's we often tend to talk about how we ramp up software development engineers and innovation. That's really what we're talking about, right? Solving consumer problems in existing categories and potentially new categories to keep on sequentially grow the platform. And At the level of online penetration that we have in Poland, you can see that really the road is much more ahead of us than behind us. And now we have a question from Anik from Icine BNP Paribas. Can we please provide an update on the lockers rollout? Sure. I mean, we did a bit in the presentation, but I'll maybe I'll recap and don't hesitate to follow-up. So Was it a couple months ago? We you saw the first ones coming out. No, I have we don't likely share the actual numbers until launch, which will happen in the next few months in H2. So you have a team dedicated to sourcing locations, contracting locations, and then you have a team sourced in installing them. As we talked about, we're targeting 1500 by the end of the year. That's progressing well. The ones that are installed are not yet fully connected, meaning you cannot deliver to them yet. That It's the consumer launch, which will happen in H2, in autumn, I think, is what we've announced. We've announced Everything going according or better in terms of market reception to the units we've already put on the market, Great. For those of you that are in Poland, you can already see A few both in Warsaw, Bosnia and other cities, and you'll see that more and more over the next coming weeks. And then the final question, we have a couple of questions asking about the reasons for the CapEx Decrease in our guidance this year, how much of that is the genuine saving? How much of that is shifting some of that CapEx to future years? Yes. In fact, the whole investment program is expected to be realized in full. What's changing is that, as I mentioned, we're in the middle of an ambitious program of Fitting out 2 large offices, 1 in Poznan, 1 in Warsaw. So we'll be moving to those offices over the next few months. Those projects are running slightly behind because the landlords handed over the floors in question a bit later than was originally planned. So that's simply a delay in fit out spending going into next year. And the second one was we made a decision to take advantage of a good leasing offer that we had For some of the servers that we were intending to buy using traditional purchase CapEx. So That's more just a different classification rather than a real saving. So on fulfillment and APM, which 2 of the big incremental projects for the year. We're still expecting to essentially spend all of the money that we predicted at the beginning of the year. Thank you, everybody, for your very active participation in today's call and the many questions you have asked. I promise I will get back to you today to all of those questions, which we didn't have time to answer today. If you want to ask any more, please don't hesitate to e mail us and call us. I thank you for today. Goodbye. Hey, thank you and looking forward to talking to you in Q3. Have a safe few months ahead. Much appreciated. Bye. Take care.