Ladies and gentlemen, thank you for standing by. I am Yota, your call Operator. Welcome, and thank you for joining Allegro Group Earnings Call and Live Webcast to present and discuss the third quarter 2023 results. All participants will be in a listen-only mode, and the conference is being recorded. The presentation will be followed by a question-and-answer session. Anyone who wishes to ask a question may press star followed by one on their telephone. If you wish to remove yourself from the question queue, then you may press star and two. You may also type your questions on the webcast screen. At this time, I would like to turn the conference over to Mr. Tomasz Poźniak, Investor Relations Director. Mr. Poźniak, you may now proceed.
Thank you, Yota, and welcome to everybody on our call. It's my pleasure to have with us today, Roy Perticucci, the CEO of Allegro, who will guide you through the business highlights of the third quarter, and Jon Eastick, our CFO, who will elaborate on financials and the outlook for the fourth quarter. Our results presentation is available for download from our Allegro.eu webpage. You may also download the slides from, from the link available on the webcast screen. As a reminder, today's presentation and discussion contains forward-looking statements. Our actual results could differ materially from the plans expressed in such statements. Please make sure you review the full disclaimer on slide number two. Please note also that this presentation and the Q&A session are being recorded and will be available for a replay on our website at Allegro.eu.
With this, I would like to hand over to Roy.
Thanks very much, Tomasz. It's my pleasure as Chief Executive of Allegro to present the results of this, my sixth earnings call, quarter three, 2023. I think overall, there's a sort of a theme that I think is emerging. One is that Allegro continues to outperform the bulk of its retail peers, and then also, over the last six quarters or so, we've been able to outperform our preceding recent history. Allegro's shoppers' loyalty continues to increase. Active buyers grew, and we've been able to and continue to improve monetization over the quarter three. Group GMV grew by 9%, and Polish GMV grew by 10.5%.
And though both of those figures, particularly the Polish one, reflects the average spending outpacing nominal retail sales, which in the market has grown by only 3% year-on-year. We continue to enjoy strong GMV contribution from those categories that we've prioritized, specifically Ambient Grocery and Health and Beauty, and that reflects buyers' growing loyalty and trust. We've enjoyed a very strong hard launch of Allegro CZ, that's starting on the thirty-first of July, and enjoyed very high brand awareness in the Czech market and also very strong organic traffic flow. GMV has grown 3.4 x, quarter-on-quarter, to PLN 195 million. Take rates also continue to improve, and that reflects the impact of changes to the rate cards. We'll talk more about that later.
Rate cards being, of course, the fees or the structure of fees that we charge merchants and also the co-financing effect. Those changes were implemented in July. Should hasten to add, we used to have a fairly complicated rate card with no less than 230 different lines in it. We reduced that to 70, and we will continue to reduce that further in an effort to make our charges towards merchants as transparent as possible. Advertising continues to grow as well, with growth accelerating by 38% year-on-year. Of course, group revenue growth was held back by declining mall segment retail values, and I'll talk about that more later. Cash generation continues to be strong despite our investments in the Allegro.cz launch.
We've enjoyed exceptional GMV margin, with our ongoing efforts to control capital expense, very much focused on return of investment, as we've talked about many times, before. Group EBITDA grew by 26%, and Polish EBITDA grew by 32.4%. These are likely to be high watermark figures and reflects the happy combination of both the take rate changes made in July and the transic, the transportation costs, which are expected to grow later this month. Take rate and cost focus delivered an exceptional GMV margin. That's 5.86% in Poland. That's 87 basis points quarter-on-quarter.
As we've reiterated for much of the last few quarters, we continue to focus on return on investments for all our capital expenses, and that has resulted in the fact that we've spent most of our time, at this point, focused on utilizing the assets that we currently already enjoy. Leverage has also been, I think, a good progress. We were at 3.4x in Q3 2022, and we've reduced that now to a current 2.2x . Most of you, by this point, if you've attended any of the more recent calls, are familiar with our seven priorities. I will not go through these in an overview, as I will be stepping through them one to one in the following slides.
Just that before I do, I should hasten to add that when we meet with you again next year to present the annual results. We'll also be introducing a revised list of priorities that will reflect our work that we have done on formulating a long-term vision and priorities for growth. So first, let's talk about strong in Poland. I think the key thing is all these figures are as of September. This is our flywheel for Poland, and you can see that we've continued to make progress in recruiting new customers. We have now risen to 14.5 million active buyers. That's up in the quarter versus last year by 660,000.
The share of app visits in the mix has increased by 4.5% year-on-year, and Smart subscriptions are up 15% year-on-year, even as we reduce the number of free trial options that we offer. Of course, a large number of active customers attract merchants, and merchants are now above 140,000, and that number continues to grow, particularly international merchants, those coming not only from elsewhere in Europe, but from across the world. We've continued also to work on the convenience of billing to merchants. We implemented fee netting for selected merchants who opted in in July, and this will be our standard way of working as of early next year. Of course, there are cash flow advantages for doing this.
So the growing number of merchants, of course, enable us to broaden our selection and further refine prices. We now have over 120 million products available on our Polish site. That translates into 400 million offers, and of course, that number continues to grow. We've made great progress in productization, which improves both the findability and relevance of the selection presented to customers, and the share of productized offers is now over 90%. And we've also continued a very strong rollout of the Best Price Guarantee . It now covers 600,000 products, and it also now extends to our offers in the Czech marketplace. Excellent prices and excellent and very broad selection, of course, drives traffic. We have now reached more than 20 million visitors, and we're stable at that number.
And it's now the most popular shopping app in Poland, with nearly 15 million average monthly active users. That's up by 4 million versus last year, and traffic, it continues to outperform almost every other e-commerce site in Poland. We continue to double down on advertising. We've enjoyed excellent growth, 3.5 x ahead of GMV, and that translates into 37.6% year-on-year. That's 1.4 or 1.58... Sorry, 48 % GMV in Q3 2023. That's 29 basis points up year-on-year, and that's thanks to a variety of causes, particularly the continued acquisition of new advertisers, up by 60% or more than 60%, actually, in the quarter, and also strong pricing, which is continuing to maintain stable despite an overall market slowdown.
Year-on-year performance improvements to off Allegro inventory, that is, reselling for advertisers or media buying, for, for our merchants, also continues to improve. Allegro Pay goes from strength to strength. It's 43% up in, in year-on-year on originated loans, which have now crossed the PLN 2 billion złoty mark in Q3. That's 39% up year on year, also in GMV finance, financed. That translates into about PLN 1.6 billion złoty, and it, it accounts for 12.5% of GMV. Loan balances, however, despite the strong growth, are down by 39% year on year to only PLN 279 million in Q3, thanks to the extended scope of loan sales.
In fact, those loan sales are achievable predominantly also because of the very high quality of the loans, which is, which has credit losses that are still, well below the 1%. It's not only our, our financers who are happy, our customers are also happy with the Net Promoter Score, with an unusually high 91, for Q3. Of course, the flywheel applies to all markets with it we're active in. In our Czech marketplace, we now have reached more than 800,000 active buyers. Actually, I should say that was by the end of the quarter. Currently, we have crossed the 1,000,000 mark of active buyers. 53 of those customers, 53% of those customers are newly acquired, and 300,000 of them or more are Smart users.
Our above-the-line marketing campaign has been unusually successful. After two months, we've achieved 90% prompted awareness. So the flow of customers, of course, attracts new merchants. We now have over 20,000 shops active on our Czech platform. We have recruited Czech merchants using promotional limit or time-limited promotional terms. Those will be expiring over time, and our relationship with Polish merchants selling on the platform is much the same as in Poland. We've also done a great deal of work to ease the access to this new market, particularly for Polish merchants, with a series of both software and terms changes. The large number of merchants, over 20,000 so far, has also enabled us to offer a very wide selection of products, 60 million in all.
That is 10 x more than the next largest e-shop in the Czech Republic. 50 million of those offers are available with Smart delivery, and we've just successfully launched our first Allegro Days campaign in Czechia in September, and have now also announced and implemented Black Week in Czech, as we already do in Poland. Broad selection, excellent prices, always important to customers in times like these, drive traffic, and now our family of sites in the Czech Republic, allegro.cz, our marketplace, mall.cz, and CZC.cz, our legacy brands in the market, are generating more traffic in the Czech Republic than any other e-commerce player. And we are enjoying also our position with our mobile app application being the second most populous, popular in the country, measured by downloads. Free traffic share is 90 percentage points above expectations.
Smart continues to move from strength to strength, that we increase the co-financing charges on the third of July to cover the rising costs of deliveries that are anticipated to come into effect at the end of this month. We've also phased out a number of our programs. Key amongst these is the Allegro Family program, which we discontinued on the third of July, and the vast majority of our customers have already converted to their own paying paid subscriptions. I should add also that we've boosted the cost of our monthly fee from PLN 10.99 to PLN 14.99 in mid-October, without visible churn from the program. 85% of the users are already on the new Smart terms, and again with limited churn.
Our delivery experience is in a point that we're particularly happy with, particularly the delivery experience that we offer Czech customers shopping with Polish, with Polish merchants, with their cooperation. With InPost, we launched Allegro International, which is a delivery method where we have agreed with InPost that they collect the, in the first mile, products from merchants. Merchants run those through their sort center between, before interconnecting to our line haul that connects us then with our sort centers and final mile delivery capabilities in the Czech Republic, at Czech Republic, with WeDo. This has made noticeable improvements, both in service reliability and also taken at least a day off the Click-to-Delivery times for Czech customers buying from Polish merchants.
We've expanded our One Courier coverage to Gdańsk, so we now cover no less than 25 cities in Poland, and our number of APMs remains relatively constant at 3.2 thousand, with a utilization that is increased over 2.5 x over the past year. I should add, we continue to focus, in terms of delivery, on the utilization of our existing assets, increasing the share of all of the Allegro One capabilities, be they One Box, One Fulfillment, or One Courier in terms of delivery volumes. Cost is an area where we continue to make progress, though there's much more still to do. The Mall 1P turnaround continues despite the continued or ongoing weak demand, particularly for the largest discretionary categories affected by the macro conditions in the market.
And in fact, despite continued real retail declines, we've focused on margin and have stabilized our EBITDA losses in legacy Mall segments. Inventory is down by 33% year-over-year, and idle stock share continues to decline. SG&A costs are also closely monitored and have declined by almost a third in the last year. And we have doubled down on our focus of Mall and CZC operating as merchants on our Czech marketplace, and they have contributed strongly to our success in Allegro Days in the course of September. Fit to Grow, an often mentioned program, in our previous earnings calls, continues to deliver results and also its objectives for Q3.
Group headcount is down by 5.3% year-on-year in the quarter, mainly but not only concentrated in the Mall segment. We've gradually relaxed hiring limitations for selective roles, particularly in tech and in delivery experience, and we've wrapped up the implementation of our new functional organizational structure, which reflects our operating philosophy of being a single operation, a single organization, operating across six countries from three major offices.
Our OpEx and CapEx committees continue tight oversight of spending, and we've moving to a established business culture of continuous improvement and focus on efficiency. That's one last thing that I should say before closing, and that is, overall, we have treated these cost optimization and efficiencies initiatives as a program, but we will be gradually shifting over the next year and year and a half to a culture of continuous improvement and operational excellence. At this point, I'll hand over to our CFO, Jon Eastick.
Thank you very much, Roy. Good morning, ladies and gentlemen. It's really a pleasure to be here. As you've heard, there's lots going on in the business. I'm going to take you now through what are in many areas really outstanding financial results. Let me, as usual, start with the Polish operations. You see the main KPIs laid out for your reference on the first slide there, and then let's move on and talk in detail, firstly, about the key GMV growth drivers, which you see on slide 15. We've had actually a very balanced growth pattern. 660,000 increase in active buyers year-on-year, which is a 4.8% increase. We're now at 14.5 million active buyers in the Polish business.
This has been balanced off by a 7.3% increase in average spend per buyer, which has now reached PLN 3,699 on an annualized basis, as of the third quarter. So if we think about that, that's each of our customers, on average, spending 7% more than they did on Allegro a year ago. It, against the background of a retail market, which in the third quarter of this year in Poland, was only growing at a nominal rate of roughly 3%. And that's because inflation has been coming down quickly, and we're still dealing with slightly negative real growth in retail.
So to be able to grow the spend of the consumers by 7% really reflects the strength of our value proposition, in particular, the wide selection, and also the fact that the customers are coming to us, looking for the best prices and shopping more and more frequently. So looking then at the GMV, we have growth of 10.5% in the quarter, and this is coming mainly behind that transaction growth and higher frequency that I, that I was mentioning. And as Roy said, the big growth drivers have been in the everyday shopping categories of supermarket and health and beauty. Although we make, continue to make progress across the board. The total GMV, therefore, for Q3 was PLN 13.3 billion in Poland.
The last twelve-month GMV has moved on to PLN 53.5 billion, which is up 12.4% year-on-year. Now, a couple of comments about the dynamic of the growth. The growth in July and August in Q3 was very similar to Q2, but we had some headwinds encountered as we got into the final month, into September. First of all, warmer weather meant that the usual fashion season was delayed into October. And secondly, and to some extent, thankfully, we didn't have a repeat of Ukrainian citizens buying large amounts of expensive boilers or electricity generating equipment and that kind of thing related to the ongoing war situation. It wasn't the same as it was last year, and that put a bit of a headwind onto the growth rate.
Moving on and looking at revenue. And as you're used to seeing, revenue growth is obviously significantly ahead of our GMV growth. This quarter, 19.9% growth to PLN 1,952 million. And the major story around revenue is our increase in monetization. At the beginning of July, we increased our take rates in a number of areas. Co-financing was moved up in anticipation of the higher amounts we'll be paying to our delivery partners, particularly in starting in the fourth quarter, in November, with our biggest partner, InPost. So we've made those changes in anticipation so that in the fourth quarter, everything will be clear and stable for the merchants. As Roy already mentioned, we made changes to the rate card, which also added a few basis points on success fees.
Finally, we introduced on Allegro Pay, an origination fee for merchants of 0.35% of the amount of GMV delivered using an Allegro Pay payment method. That is very low compared to what most financial services businesses charge for origination, but we think it's well justified. So those take rate changes meant that the total take rate moved up to 11.91% in Q3, which is up about 85 basis points versus a year earlier and considerably up Q-on-Q, as you can see. That, therefore, means that the marketplace was delivering 19.3% growth.
As you heard from Roy, 38% growth coming from advertising, and another big contribution or important contribution from dynamic growth in the other category, fees for Allegro Pay from various financial services, fees and interest, and also the external revenues that we earn from our various delivery assets.... So then moving on and looking at adjusted EBITDA, and I think this was a really, truly outstanding number to be able to report to you 32.4% year-on-year growth in adjusted EBITDA for the Polish business. Which means we landed on PLN 778 million in Q3.
Our margin, expressed as a percentage of GMV, as you can see, has moved up from—sorry, from 4.9% this time last year to 5.9% this year, considerably above our long-term aspiration in terms of which was set at around 5% for the medium term. So really very strong result. Now, a chunk of this, as you can see from the bridge, is obviously coming from the revenue story that I mentioned a moment ago. Let me focus on the cost side. The increase or the drag that we're getting from net cost of delivery at PLN 114 million is a bit lower than you'll—those of you familiar with our quarterly reports will recall from previous quarters.
The net cost of delivery increase to GMV is up 3.87% year-on-year. And this is mainly coming from the extra Smart subscribers, but primarily from that frequency and transaction growth that I was mentioning earlier. The measures that we've been taking, mainly in the context of Fit to Grow, have really enabled us to mitigate a lot of the volume growth impact on this number, and a couple of them are mentioned here. First of all, the MOV changes we implemented in November last year mean traffic has moved towards out-of-home, away from more expensive courier by, to the tune of 8 percentage points in the mix year-on-year and a further 1% quarter-on-quarter. As Roy mentioned, we've discontinued the Allegro family program, so there are no longer free subscriptions to Smart available on Allegro.
That's had a quarter-on-quarter impact. This was actually done right at the beginning of Q3, and the quarter-on-quarter impact was PLN 7 million. That's coming from more subscription sales on the one hand and less, let's say, free subscription holders who were getting free deliveries, paid for by Allegro. Blending it all together and looking at the cost per parcel being delivered, we had 7.9% growth year-on-year, which is considerably lower than the average inflation over the 12-month period. Fit to Grow, Roy's already talked about. You see in the numbers, SG&A growth at only 10%. That's including staff costs and is way lower than where we were this time last year. At the start of Fit to Grow, we were growing at 26.8% year-on-year, 12 months ago.
So then, last slide on Poland, it relates to our capital investment. As you've already heard, we're down 50% year-on-year on a level of PLN 80.1 million. Our cash conversion in Poland up to 90%. Now, this is really a combination of factors coming together. Our Fit to Grow strategy around increasing utilization of the assets already built translates into a lower expenditure in the current year. But as we soak up the excess capacity, we will start to pivot towards making profitable investments again as we go forward. Nothing in this year's numbers relating to office fit outs, as those projects were finished a year ago.
On the capitalized development side of things, the break that we put on the growth of the team, to focus on more efficient, management of the projects that we're developing, is paying dividends in terms of, the size of the amount that we're capitalizing each quarter. So we only added PLN 65 million in capitalized development costs in Q3. Another PLN 5 million of work of the Polish team, however, has also been booked in the international segment around Allegro.cz. Those Fit to Grow controls that have been very important to us, are being eased somewhat, but we're still running the CapEx committee, and looking closely at return on investment and profitability. Okay, so that's Poland, which has really been an outstanding quarter. Let's move on to our international operations.
There's lots going on here too, to describe. You see the combined KPIs of two segments laid out on slide 20. And just as a reminder, in international, we have the legacy Mall segment, the business that we bought in 2022. And secondly, our Allegro International segment, which is Allegro.cz currently, and will include, over time, all the marketplaces that we launch outside of Poland. So looking first at GMV, and the key development here has been the strength of the Allegro.cz offering. Roy told you a lot about the scale of the traction that we're achieving.
In terms of GMV, that translates into a 3.4 x improvement quarter-on-quarter, PLN 195 million of GMV generated versus PLN 56 million a quarter ago. The eliminations is also a proxy for the amount of business that the Mall brands are doing on the marketplace. That's up from PLN 6 million to almost to PLN 23 million złoty in the third quarter. So together, that contribution reduced the overall contraction in GMV and international by 19 percentage points. And that's because on the Mall side, we've had a contraction of 29.9% in our GMV. This is reflecting a number of things. The continued difficult economic situation.
Actually, the Czech market, in particular, has been taking a step back in terms of its, let's call it macroeconomic recovery, and then now six quarters in a row with real declines in in retail spending, so demand is not helping. But on top of that, we've started the process of really repositioning and transforming Mall. One, firstly, to be a very successful merchant on the marketplace, that's the key priority. We're also working with them to try and improve the the way that they invest their Internet marketing budget, to make sure there's a positive return on investment at the bottom line. This is a multi-quarter project. At the moment, it's translating more into reductions in the top line and mitigation of losses on the bottom line, as you'll see in a moment.
As a result, the Mall segment landed at PLN 627 million of GMV for the quarter. Moving on to the Adjusted EBITDA, and here you see, carrying on with that theme of the MOL segment, the bridge on the left-hand side here shows that despite that drop in GMV and gross margin, with the mitigations that we've implemented in the beginning of the transformation of the back office aspects of the business, the operational aspects, we were able to cut our EBITDA loss by 12% compared to a year earlier at PLN 44 million. The increase in the total investment in the international market is therefore all coming on the Allegro.cz side.
And here you see, first of all, a rapid increase in revenue from PLN 3 million a quarter ago to PLN 16 million. The take rate is moving up as some of the Czech merchants start to pay fees after the expiry of their introductory free period. The direct cost, mainly marketing, but also increasingly free cost of delivery for Smart registered customers, is at PLN 59.5 million. That was PLN 17 million a quarter ago. And this is reflecting, in particular, the ATL campaign that we launched to support the hard launch in at the very beginning of August. Fixed costs are relatively flat at PLN 13 million. So overall, we invested PLN 56 million in really getting the traction and the flywheel moving in the Czech Republic for Allegro.cz.
So moving on to the consolidated group. Here, we mainly talk about our leverage situation, and again, lots of very good news here. We were down 0.339 turns of adjusted EBITDA in Q3, so we're at 2.17 x leverage. And this is reflecting a number of positive factors. Obviously, the very fast growth in our last twelve-month adjusted EBITDA from the Polish business, plus the low CapEx spend, on the one hand, is contributing. And in addition, as you've heard from Roy, we're starting to net merchant fees. We're at the early stage of this project, but it's already translating into lower receivables and PLN 180 million extra cash on the balance sheet at the end of Q3.
It's also worth or important to mention that in November, we announced that we've extended the term of our existing bank facilities by two years to October of 2027. That gives us considerable financial flexibility when combined with the low leverage and the cash that we have on hand. But having said that, we're still very committed to keep reducing our leverage, and you should expect it to keep going down over the coming quarters. So with that, then, that's the Q3 position summarized. Let me move on and share with you our Q4 outlook. The first thing to say on this slide is that the Q3 results across the board are either in line or better than we guided for when we met last time.
Let me then talk about the Polish business, initially, when we talk about Q4. Now, the Polish business has been seeing what I would characterize as choppy growth, over the last few months. So you heard already that September wasn't the strongest, but then it rebounded very well in October. We had double-digit growth in October, and then there was a slight dip in the growth rate in the early part of November. We think mainly because consumers are waiting for the Black Week, which kicked off actually this past Monday. Black Week has got off to a very solid double-digit start, which we're extremely happy about.
We are cautious on what will be the state of the Polish consumer in the three weeks following Black Week in the run-up to Christmas, which is really another critical shopping period. Will a considerable amount of the usual discretionary spending come back, or will the spending be more subdued than in previous years? This is something that we've managed to cover in this 9%-11% range of our GMV guidance. If things carry literally, then we'll be definitely towards the top end of that range. So GMV at 9%-11%, that will translate, as usual, to a higher rate of revenue growth. We're expecting between 17% and 20%, and that then feeds down into an adjusted EBITDA growth rate we're expecting to be between 20% and 23%.
That factors in the full increase from InPost and potential other and minor other increases from delivery partners. But it also factors in that we start to get more difficult comps in terms of SG&A spending, compared to a year earlier. We start to lap things like the changes to the MOV and Smart, so the growth rate on adjusted EBITDA drops down from what we've seen over the last couple of quarters. But it still translates to an increase in our year-on-year margin as a percentage of GMV, even with these results. CapEx is a little bit higher, as is usually the case seasonally, but nothing dramatic at PLN 90 million-PLN 100 million.
So overall, the Polish results are very, very expected to be very, very solid, and we're very confident that we're so well-positioned that we will definitely do well relative to the market overall, and we need to wait and see how the Polish consumer is going to turn up for Christmas. Moving on to the international operations. As with the third quarter, there's a lot going on in the fourth quarter that needs explaining to interpret these numbers. First and foremost, on the, let's maybe start with the mall side of things when we talk about GMV. We're starting to transform the mall business. As I said, we're mainly focused now on making sure they're gonna be a long-term, very successful merchant on the marketplace.
We're less concerned about how well they trade as an independent retailer focused on discretionary spending. And obviously, the fourth quarter for them, historically has been very important. But, as I said, we're more focused on how they're doing on Allegro as a merchant. As Roy said, their inventory, we've been reducing the number of SKUs. So it may well be that the growth dynamic in the fourth quarter is even a bit worse than the minus 30% that we saw in Q3. Now, on the other hand, Allegro.cz is going from strength to strength.
We're expecting at least double the GMV that we had in, in Q3, and that means that the overall GMV decline will be mitigated to somewhere, we think, between 10%-14%. Revenue, obviously, is over-indexed in terms of decline because the biggest chunk of the revenue is obviously the, the retail revenue done on the Mall platform, as opposed to take rate from, from the 3P business model that we have in Allegro.cz, and to a smaller extent, in the legacy Mall business. So the GMV decline. Sorry, the revenue decline would be quite a bit, quite a bit faster. On the other hand, when we talk about Adjusted EBITDA, we, we'll be containing the, the losses in Mall, as we've done in the, in previous quarters.
Continuing to invest strongly in driving the flywheel at Allegro.cz, and that's where the growth, or the widening, of the Adjusted EBITDA loss is coming from. CapEx, again, a minor amount. So lots of work ahead of us around, in particular, transforming the Mall segment and also growing the marketplace and launching new marketplaces as we go forward. So to conclude this part of the presentation, I just want to again emphasize that, we're deep into the annual planning phase. We're in consultation about our investment plans and our development plans with the board, and when we come back in March, as Roy mentioned, we'll be talking about our investment priorities for the following year. So with that, I want to hand it back, and we'll start the Q&A.
Thank you very much for listening.
Ladies and gentlemen, at this time, we will begin the question and answer session. Anyone who wishes to ask a question may press star, followed by one on their telephone. If you wish to remove yourself from the question queue, then you may press star and two. Please use your handset when asking your question for better quality. Anyone who has a question may press star and one at this time. One moment for the first question, please. The first question comes from the line of Cesar Tiron with Bank of America. Please go ahead.
... Yes, hi. Good evening or good afternoon, everyone. Thanks for the call and the opportunity to ask questions. I have three questions, if that's okay. The first one relates to the international segment. Can you please tell us if the losses for these segments have peaked? So I do understand that you're not providing guidance beyond Q4, but I think it's quite important for, for us to understand if we should take Q4 and multiply it by four to, to forecast the total, 2024 losses for that segment, or if there is anything abnormal in these losses, which are obviously much higher than, than Q3 and much higher than, consensus expected. So that was the, the first question. The second question relates to the, to the take rate.
Are you still confident that you can pass on some of the increase in delivery costs that you have to merchants through the co-financing, or do you think that's maxed out? And the third question relates to the leverage. So the company's delivered close to PLN 1 billion of free cash flow, if I look at the reduction of the debt in the first three quarters of 2023. But it looks like you haven't actually repaid on that. It looks like you're building a cash balance. Can you please explain that? Thank you so much.
All right. Cesar, thank you very much, for the questions. Let me take that first one, regarding the losses in the international segment. The short answer is no, losses wouldn't be four times the fourth quarter, but let me go through things in a little bit more detail. First of all, on the Allegro.cz business, in the short term, right, to get the flywheel going, you have to make investments in operating expenditures, especially around marketing and ATL or internet marketing and ACL to keep building the brand.
We're over 1.1 million buyers, and we're monitoring very closely how the frequency of those buyers coming back and coming back and coming back and how much more frequently they're returning, because that's gonna be what drives the top line and ultimately drives the take rate, or the commission that we're earning. So that's really critical, but there's no way to avoid losses to get the flywheel moving at the beginning. Next year, we will be launching or we intend to launch other marketplaces in the other countries of the footprint of the MOL segment. But generally speaking, these are smaller countries, which means that even with the business model being similar, the magnitude of the numbers is considerably smaller.
Now, if we talk about MOL, there's a big transformation going on, moving towards pivoting towards trading successfully as a merchant on the marketplace, gradually reducing their focus on being a retailer of discretionary goods in their own right, but keeping their brands, keeping them active on the marketplace. We're trying to improve the return on their marketing investment, and we're making big efforts around selection and inventory to reduce you know the size of the overall investment there.
Finally, we're doing an awful lot on the transformation of the business, transitioning to a single platform, a single IT stack, using as much of the Allegro systems as possible to make them a much more efficient and effective business. So that's going on, and that should also yield improvements over the course of next year. That's the first one. The second question was around take rate and co-financing. Roy, do you want to take that one?
Sure. I think the key thing to talk about co-financing, in particular, is co-financing is something that if you think about it in terms of percentage of GMV, should, I would hope, stay relatively constant over time, because effectively, GMV rises with inflation and our costs roughly rise with inflation. And so we need to be disciplined about the fact that we do not unwittingly increase the burden that that merchants bear. I think the second thing to keep in mind, though, of course, is that overall, we still, I believe it's about 70% of the transportation bill is something that we cover, and that the merchants are actually getting a double good deal.
One, we as Allegro bear the bulk of the cost of transportation, and the second thing is that probably we are able to acquire transportation services at a considerably better rate than they can do as themselves when they offer, certainly when they're offering free shipping. So, no, I think the key thing is the hikes in rates in sort of percentage of GMV terms is something we would take, you know, consider very, very carefully as we go forward. What I would also say, though, is we are probably the single largest buyer of transportation services, particularly in Poland, and therefore, we have a choice in terms of how we direct that volume.
I think that will be continuing to be our priority, which is we will, you know, continue to favor those transportation providers who offer us the best unit cost. And I should hasten to say, in logistics, it's a total equation, which is speed, reliability, and cost. I think, for example, the most recent collaboration we did with InPost shows the power of actually working well with your suppliers, taking off a full day of the Click-to-Delivery Time. And so overall, we'll evaluate each one of our providers and optimize for both speed, reliability, and cost, and shift the volumes accordingly. And that, as my own professional experience would bear out, generally means that you can maintain very, very tight control of costs over time.
I would also say that we have our own investments in logistics, and I think those are also, as time goes on, getting to a progressively better cost position as we focus on not expanding the network, but utilizing more and more efficiently what we have.
So, the final question from Cesar was regarding the leverage. Indeed, that's correct. We basically extended almost the whole facility. 97% of the facility was extended by the bank group. Just one out of, I think, 20 banks in the group decided to step out. Now, the reason that we've done that is because we wanted to take advantage of keeping the interest grid exactly where it was back in 2020. So despite the market changing considerably, we were able to, over the last three years, get exactly the same terms that we achieved three years ago, which I thought was a great opportunity.
It does mean in the near term that we've got a lot of liquidity, as you rightly pointed out. That gives us an awful lot of flexibility. We can also invest that money and reduce the net cost of funding to relatively low levels. And we'll keep that flexibility at least for the time being. So at the moment, I don't have plans to pay down the debt.
Thank you so much. Can I just clarify on this point? Are you, at this stage, on a cash basis, getting more on the deposits than the interest on the debt, just on a cash basis?
No, no, we're not. I'm saying that it means that the net cost is much less than the gross cost. Yeah, but there is obviously a net cost to holding the cash.
Great. Thank you.
The next question comes from the line of Catherine O'Neill with Citi. Please go ahead.
Great. Thanks very much. I've got a few questions. Firstly, I just wondered if you could give us your thoughts or comments on the competitive landscape in Poland, in particular, from the data, the web and app data. We can see Temu ramping up in Poland and many other markets. So just wondered if you could comment on the competitive landscape and if you're seeing any changes there. Secondly, back to the international losses. I know in the release you talk about in 2024, you'll be launching Marketplace across those other more markets. Are you able to give us any sense of whether those losses in international will be higher than 2023 overall, or, or lower? And whether those launches will be all organic or whether there's other inorganic opportunities you see to supplement that.
And then, finally, in terms of the GMV comp profile, because I know you said October was better against quite a tough comp, and then November's been softer in the early part and then stronger as we head into Black Friday or Black Week now. Could you give us an idea of what the comp profile is as we head into December? I just wondered how that sort of comp profile looks as we go through the quarter. Thanks.
Do the competitive landscape one or so I think that there's a lot of energy around Temu, particularly, I think, because of its success in the U.S.. Temu, in terms of a profile, seems remarkably similar in many ways to Shopee, in the sense that it's very much focused on Chinese merchants, giving access to local markets for Chinese merchants. And we'll be watching them very, very carefully as we've watched every other new entrant in the market while focusing predominantly on customers. I don't think there's a huge amount of overlap between what's Temu's offering and what we're offering. But regardless of that, there's always something new to learn when anyone new enters into a market, and so we'll be looking forward to-
... to see what lessons they can teach, while we adapt to however customers react to that.
The second question was, regarding the plan for next year on the marketplace rollouts. And in particular, whether it's organic or inorganic. The target for next year is to cover the countries where Mall has a presence at the moment. That means, going from north to south, Slovakia, Hungary, Slovenia, and Croatia. So in that sense, what we'll be doing is organic rollouts of the instances of the Allegro marketplace platform, so similar to Allegro.cz, and integrating the Mall presence that's in those markets at the moment as a merchant on those platforms.
For next year, we have no plans to go in anywhere organically in the sense of a brand-new territory where we have no no existing presence. And the final question was... The GMV. Yes, I think-
Yeah.
I was alluding to that, yeah. I was alluding to that, that, you know, the Black Week. It's early days of the Black Week, right? Because it only started on Monday, but we're now comfortably back into double-digit growth. And it remains to be seen how that goes, right? We have two weeks of Black Week, and after that, you have three weeks of the Christmas peak, with less commercial hustle, if you like, to support it. And really, a lot depends, although the macroeconomic situation is clearly improving, but slowly. And how we do for the full quarter, you know, is really going to depend critically on which consumer turns up for those final three weeks before Christmas, right?
Is it only the trading down consumer, or is it the consumers are feeling a bit more confident and are gonna spend a little bit more on each transaction? And that will define where we land on the range. But right now, based on the Black Week, things look, you know, at the top end of that range.
Mm-hmm. Okay, and sorry, can you just remind us of what the profile or the growth rate was in December last year compared to November? I don't know, were they dramatically different when we think about that comp?
No, they weren't dramatically different. There's another interesting thing, that last year was a bit weird because of the World Cup being in the fourth quarter, which is the first time that's ever happened, right? That also had a bit of an impact last year. And that should theoretically give it a little bit of a tailwind as well for this year.
Mm-hmm. Okay. And sorry, just going back to international, are you able to confirm whether you expect international losses overall to be higher for 2024 versus the expectation for 2023, or lower?
I think the question depends on whether you mean for the year as a whole or on a-
Yes
... on a quarterly run rate basis, yeah? So for the year as a whole-
Year as a whole, yeah.
For the year as a whole, yes, we'll need to invest more money than this year. That's clear, right? In order to do these marketplace startups, while working to gradually reduce the losses in the legacy MOL business. I think, I think that's clear. But going back to Cesar's question, which was more looking at it from a, from a final quarter perspective, you know, we should be seeing significant progress in terms of margin on Allegro.cz as it, as it, as it, as time progresses, as the flywheel spins more and more self-sufficiently. But against that, there'll be initial startup losses on new marketplaces.
Okay. So the sort of roughly PLN 440 for this year is not the sort of high point then, of losses overall?
Well, we will give clear guidance in March about how we're seeing things. But you know, too early to say.
Okay. All right, thank you.
The next question comes from the line of Lisa Yang with Goldman Sachs. Please go ahead.
Good morning. Thanks for taking my question. I have a follow-up question on the GMV trends and in general the health of the consumer into Q4. Just wondering, are you seeing any major change in behavior? It feels like maybe the environment is a bit more promotional. Do you continue to see a lot of trading down compared to the past couple of quarters? And also wonder, with inflation coming down, are you seeing that as potentially a headwind to your GMV growth and hence you know potentially slower GMV growth in Q4 versus for instance what you achieved in Q3 despite sort of easier comps? So just like help us understand like where you know how the consumer is shaping in terms of behavior.
That's the first question. The second one is on the take rate. I think you initially guided to Q3 take rate expansion of, I think, around 50 basis points, and you did a lot more than that. So, I just wonder, like, if we think about Q4, should we just, apply seasonal, whatever, 20 basis points of decline, so that gives us about 11.7%? So there, there was no, so, you know, additional one of benefit compared to what you were expecting for, for Q3, that should differ into, into Q4. And, and, and lastly, as I know you'll be think- you're gonna be updating, the market with your, priorities for, for the coming years. Clearly you've done really well on costs, and you reduced CapEx significantly for, for, for this year.
I just wonder, you know, are you seeing any areas where, you know, you might want to reinvest a bit more, 'cause you probably see, you know, chances of better returns over time? And does that mean that you, you probably think you're maybe increasing CapEx or any OpEx line, or any divisions where you think you, we need to invest a little bit more for 2024 and onwards? Thank you.
Thank you for the questions. Let me take the first two. So the first one was around some color on GMV, and I think mainly the impact of inflation. If you look at what's happened over the last few quarters, there was definitely really more of a tailwind last year than there's been from inflation, in the last 12 months or so, right? I think the trading down behavior started in Q4 a year ago and gathered speed during the course of this year. So at the moment, the GMV growth that we're seeing is coming from the higher number of transactions and this phenomenon of more everyday shopping and greater loyalty on Allegro, but the average ticket is actually deflationary, in the sense it's lower than it was a year ago.
Now, going forward, some of the macro key leading indicators like real wage growth, have gone positive over the last few months. Retail sales is still growing negatively, but it's improving slowly. And basically, what we would hope to see as the sentiment of the consumer returns during the course of next year, would be kind of a reversal of that effect, and they start trading up again, if you like. Yeah, so they start spending more per ticket, yeah? Now, if that comes to fruition, that's gonna be quite an important tailwind next year that will help us. And when we meet again in March, we'll be able to tell you, you know, how that's been looking over the first months of the year, yeah?
That's the first question. Your second question was on the, on the Q4 take rate. Yeah, that seasonal decline of a few basis points, maybe 20 basis points, that kind of level is something that you could expect. We're not making any changes to the take rates relative to what we did in July for the, for the fourth quarter. And then, Roy, the, the final question regarding investment plans?
Yeah, I think the first thing to say, of course, is that we're in the process of talking with the board. We have a board meeting coming up soon, where we sort of talk about our sort of investment plans for the coming year. The broad theme would want to say is the focus of this year has been bringing our financial house in order, and I think we've done that quite well. There are clearly one or two problems we still need to sort out. The luxury we have is having sort of sorted out the fundamentals, I think, particularly the Polish business, we have more resources and time to focus on the remaining problems that we have.
One theme that we've really iterated really pretty much for the last six quarters is that whatever CapEx we make is very much focused on a return of investment, and also reflects the fact that money is no longer quite as cheap as it was a few years ago. That means we have to be very focused on also making sure that these investments are worth our while.
I'd say the other thing, though, is, and I think this is also reflecting, you know, that we probably are at a high water mark on the EBITDA results, and that is just that, because we're making steady progress on sorting out our financial affairs, that we can also double down on some of the growth opportunities that we've already quite clearly identified and in many cases, spoken to you already about. So, the international expansion does require a bit of ongoing capital expense, although we have already made. We're sort of past the bulk of those investments.
I think there are a few other areas where, again, utilization of our assets is rising quite nicely, and we may quite possibly reach a point where we need to be able to expand capacity, given to the amount of volume or the amount of work that we're giving. But I think there'll be more that we can say to that in the course of, or actually, you know, following the closure of this quarter and sort of announcing what our full year plan is for next year.
Can I just clarify, when you say utilization of your assets rising, do you refer your lockers, and you might need to expand your footprint there, or talking about something else?
I think it's any asset, and of course, we are a tech company, so a very large proportion of our assets is actually software. So we made a substantial investment in internationalizing, if you will, our marketplace.
...Most of that work is now completed, and we want to make sure that we can reuse this capability in as many places as we can, and that does require some smaller incremental sums to open up in every market. So it's not just APMs, but I think it is first starting with software, and then I think going around the houses and looking where else additional investments we made. I think some of that will also be further investments in software. Of course, we have a booming financial services business. We've already identified that advertising is an opportunity. So all of those things are things that, I mean, you see the numbers, you see that there are a number of things that merit, I think, further attention going forward.
But it also includes things like lockers or sort centers or anything else that you need there. But again, it's. I'm gonna say all these things, speaking specifically to transportation, is we can redirect the volume to wherever the best solutions are for speed, reliability, and cost. And at the moment, I can't answer that question about where the best solution may be, but we will redirect our volumes according to whoever's offering us the best deal.
Understood. Thank you.
The next question comes from the line of Andrew Ross with Barclays. Please go ahead.
Great. Good morning, everyone. I've got a couple more, if that's okay. The first one is to ask about working capital and to dive into the receivable balance you see in Q3 as a result of changing the settlement terms with merchants in Poland. There's also quite a nice benefit you've seen already. But, Jon, maybe can you help us size the remaining benefit you'd expect to see in Q1 next year, when I think I'm right in saying that it becomes mandatory for all merchants to accept these new settlement terms? But I guess second question is, you know, with that in mind, it's logical that your leverage is going to come down, getting nicely below 2x by the end of Q1 next year, which puts it into a pretty comfortable position.
You've now refinanced the debt or at least pushed out the maturities and, you know, the whole debt situation is looking much more comfortable. So I'm kind of interested in why you feel the need to keep deleveraging next year. Like, below 2x is a pretty comfortable level, given how much cash the business generates. I'm kind of curious to understand what your priorities are for capital allocation and uses of that balance sheet in the next couple of years as more flexibility starts to, open up. Thank you.
Yeah, Andrew, thanks. Thanks for the question. So let's start with that working capital question. Yeah, so basically, there was PLN 180 million of cash came in from moving certain merchants, which was mainly volunteers on the one hand, because actually many merchants find it convenient not to have to worry about putting money aside for paying their commission fee at the end of the month. And also merchants who've had a checkered payment record have already now been moved on to this early deduction, and that's brought in about PLN 180 million and reduced the receivables balance, as you can see. So we'll get to the rest of the merchant group in the first quarter of next year.
Big picture-wise, that means that there'll be virtually no receivables from Take Rate, but there will be still receivables from other value-added services, in particular, advertising. So the balance will not go to zero, but will be considerably lower. We are also looking at various opportunities to, let's say, provide some financing solutions for the merchants so that those for whom this is a big deal, will have some sources of liquidity, and that may result in seeing the full benefit taking a bit longer than Q1, but it should all come through during the course of next year. Now, the second question was about the Leverage.
The leverage will come down partly as a one-off benefit because of what I was just describing, right? This change in the way that we build the customers. In the short run, I want to keep, and Roy wants to keep a lot of financial flexibility. And we'll see, you know, we'll see over time, to what extent we need to keep that and to what extent we should actually start to simply reduce the debt in order to save, to make that net saving between the interest I'm earning and the interest that I'm paying on the debt, you know, to going back to Cesar's question. That may be part of the story as we get later in the year, next year.
But basically, we wanna just keep, keep a situation where we have significant financial flexibility to take advantage of any opportunities that come along, either, or in particular, where we see a good, a really strong return on investment, we wanna have the financial flexibility to take care of, to, take the opportunities.
... If I could just start, is it possible to actually size the receivables on the Q3 balance sheet related to take rate in Poland? Just so we've got a good sense of what the remaining balance is that did go away. And the second follow-up is, in terms of that financing solution we talked about for, for merchants who want liquidity, is that gonna come with some kind of, you know, take rate, alongside it, that we should start to think about from next year, or what not?
Sorry, the second part of that question I didn't quite understand, Andrew. What was the connection you were making on Take Rate?
You touched on providing working capital financing solutions to merchants who wanted that when you change the settlement terms in Q1 next year, and wondering what the monetization of that working capital financing solution might look like.
Right. Okay, let me deal with that second part first. We're not expecting material, either material amounts of money needing to be, let's say, deferred on our own balance sheet. We're also talking to partners about how to help the merchant base. So I don't think there's a big story in that. The receivables up until now have been fairly similar in terms of payment profile between advertising and take rate. So I think if you use, you know, the relative size of advertising revenue versus commission revenue as a proxy, you can calculate roughly how much the receivables should drop. If that makes sense.
Thank you. Yeah, yeah, that's all. Thank you.
Ladies and gentlemen, there are no further audio questions at this time. I will now give the floor to Mr. Poźniak.
Thank you, Yota. In terms of written questions that we have received, the majority of them turns around what we have already discussed, the international development, the EBITDA results in Czechia. So there's no need to repeat them. Therefore, I believe we can close this conference call. And thank you, everyone. Looking forward to catching up with you again with the full year results, and in the meantime, during our road shows and marketing events. Thank you.