Good morning or good afternoon. Thank you for joining Shoper Conference call. My name is Tomasz Pokora from Investor Relation in company. It's my pleasure to have with us today management board, who will discuss the third quarter financial results and the key events. After they prepared remarks, we'll open up for your questions. From board members, we have with us today Anna Miszko, Chief People Officer, Piotr Szydłuszko, Chief Financial Officer, and Paweł Rybak, Chief Commercial Officer. I turn the call over to Piotr.
Good morning, good afternoon. This is Piotr Szydłuszko speaking. Let's take a look at the key highlights of the third quarter of this year. Of course, yeah, first agenda, please. Okay. Briefly about our agenda. First, we will briefly present the main parameters for the third quarter of this year, then we'll discuss the main areas of business development. In the third part, more detailed presentation of the financial results for both Q3 and three quarters of 2023. We will conclude with information on the Shoper Group growth prospects. Let's turn on to key highlights. The challenges of the macroeconomic environment are not holding back the Shoper Group. In the third quarter, we reached new records.
Group revenue surpassed that of the fourth quarter of 2022, setting a new revenue record for the quarter at over PLN 37 million, with year-over-year growth of 19%. The group continues to sustain excellent double-digit GMV growth, and this despite the weaker September results in terms of retail sales in Poland. The value of orders processed across all channels operated by the Shoper Group increased by 11%. Q3 was also another quarter of high 32% growth, 32% growth in adjusted EBITDA, while maintaining high profitability at 32% margin level. Let's look at other Q3 developments. In the third quarter of this year, we continued to further develop our products offerings in all four major product pillars. We prepared a comprehensive product portfolio for Home.pl customers in connection with the change in the model of cooperation between our companies.
We also prepared the launch of our online advertising services in cooperation with our partner in Romania. In the third quarter, market growth remained under pressure from lower consumer purchasing power related to increase in consumer prices. In recent months, a decline in price growth has been observed, which allows us to look at the next quarters with cautious optimism. Given the macroeconomic factor observed in recent quarters, we estimate that retail sales growth in nominal prices will not exceed 10% in the economy. However, we expect to have, of course, higher growth than this. Importantly, despite the challenges coming from the market, we have not observed an increase of outflow of customers. As previously announced, we have signed a new agreement with Home.pl, which changes the model of cooperation between our companies in providing services to Home.pl customers.
The new agreement means the migration of about 3,000 stores to Shoper platform. It opens up the possibility to offer Home.pl customers all additional services that are in the Shoper Group's offer, and also the model switches the billing model to based on revenue share.
Good afternoon or good morning, everyone. Paweł Rybak here. Now let's go briefly through our business development piece. First of all, I would like to briefly remind you what we actually do by implementing our strategy based on our main four pillars. Our company specializes in providing comprehensive e-commerce solutions primarily for small and medium-sized enterprises. We create a full ecosystem of tools and services that help our clients easily develop their online businesses. These main pillars are omni-channel, where in this segment, we develop products for which we are currently best known, such as software for running an online store or tools for omni-channel sales. Thanks to these tools, but also support and services in this category, we help our clients reach their customers on various platforms, both in their own online store and hundreds of marketplaces in Poland and worldwide.
In the area of digital ads, we offer tools and campaign management to help our clients to increase the visibility of their products online, attract new customers, but finally, in the end, increase their sales levels. Finance and payments, we provide here solutions that facilitate the processing of online payments, obtaining financing, and many, many more financing services. The last pillar, but the last maybe, but not the least, that's for sure, is logistics, when we constantly develop tools to optimize all delivery-related processes. Which of course finally translates into final customer satisfaction, business efficiency, and lower logistic costs.
The first very, very important aspect of our business development of the past quarter was the final conclusion of negotiations with our longtime partner Home.pl, the biggest hosting and domain register company in this part of Central Europe. This model is resulting in a change of the cooperation model, which will start to bring results to Shoper, to merchants, and to Home in the coming months. The main parameters of the entire business case are as follows. We are transferring about 3,000 existing stores from the private label model directly to Shoper with an estimated GMV for the last 12 months close to 1 billion PLN. Moreover, Home will sell stores from Shoper to new customers interested in online sales.
Thanks to these activities, Shoper gains a direct relationship with merchants and the opportunity to upsell all services from Shoper Group portfolio. The new model is based on revenue share principles, much more favorable than it was before, with a huge opportunity to upscale our business in the next months and years. Another big leap in our development was the official launch of sales and service for the customers in cooperation with our partner Gomag in Romania, which is also an important step for the company to sell outside of Polish borders. To remind you, the basic assumptions of these cooperations are using the Shoper platform to provide digital advertising services for Gomag customers, thanks to which merchants from Romania will have access to performance marketing products with the experience and know-how from Shoper.
First and foremost, merchants will have access to the most popular advertising service, which is Google Ads. The initial business goal of our cooperation is, of course, to reach over 3,000 Gomag stores with our digital ad services and afterwards outside of Gomag platform itself. To conclude the business development summary, I would like to announce the long, long-awaited premiere of our new storefront, which will take place actually tomorrow, October 27th, during the biggest E-commerce event in Poland, the E-commerce Warsaw Expo in Warsaw. As a reminder, merchants will have access to the world-class store design system with an advanced visual store drag and drop editor. Every merchant will get access to the absolutely best cart and checkout functionalities, all of it to increase conversions, among other things, thanks to a significant improvement in store loading speed and fantastic impact on Google rankings.
After the premiere, we will start giving access to the new stores for our strategic partners, to, you know, really thoroughly test it, in about one month later, we will enable to use the storefront for all new customers.
Let's now turn to details of third quarter and nine months results of the year. Revenue in the third quarter this year reached an all-time high of more than PLN 37 million, as mentioned before, and was over PLN 600 thousand higher than the previous record achieved in the fourth quarter of 2022, with year-on-year growth of 19%. By the way, recall that in the third quarter of this year, the third quarter of this year was the first quarter of fully comparable results with Sempire, company that we acquired in May 2022. Group continues strong revenue growth despite market challenges related to macroeconomic situation. The solutions segment was a strong support for growth, achieving revenue significantly above PLN 28 million with 21% year-on-year growth.
Financial and logistics services had the highest revenue growth in this segment. Revenues of the subscription segment increased by 14 year-on-year, 14% year-on-year, reaching PLN 9 million. The decrease in the growth dynamics of this segment compared to the level observed in previous quarters is mainly related to the staggered revenue effect of subscription price increases introduced in the first half of 2022. The share of solutions segment revenues in total revenues in the third quarter increased to 76%. Let's look at the group's profitability in the third quarter of the year. In Q3 ended with an excellent result of adjusted EBITDA of more than PLN 12 million, with a very high 32% increase in the value of this indicator compared to the third quarter of 2022.
The achievement of this result was mainly related to the development of higher margins, despite higher costs incurred in the third quarter of 2023 compared to the same period in previous year. The adjusted EBITDA margin was over 32% and increased by three percentage points compared to the level recorded in the same period of the last year. It's worth noting that Shoper stands out with significantly higher profitability compared to competing platforms, including foreign ones. As we have repeatedly emphasized in the Shoper Group, we focus on business development, but at the same time, thanks to active cost management, we take care of level of profitability that allows us to finance our growth while achieving excellent performance.
Shoper Group not only has excellent results, but also generates a significant amount of cash by achieving a high level of EBITDA to operating cash flow conversion rate of nearly 90%. I would like to draw your attention to the fact that at the beginning of July 2023, the employee incentive program, one of the two programs carried out in the company, ended. We had and will have lower incentive program costs in Q3 than in previous quarters and of course in the future as well. The total cost of the employee program, which were almost entirely charged in the first half of the year, amounted to PLN 245,000. Costs of motivation programs have been main adjustment to adjusted EBITDA and other adjusted measures that we've been presenting on our conferences.
Let's briefly summarize the results achieved in the third quarter of 2023. We had record level of quarterly revenue achieved in Q3, surpassing by more than 600,000 previously best result achieved in the fourth quarter 2022. We maintained high profitability at a level significantly above 30% despite higher cost compared to the same period of 2022. Adjusted EBITDA increased by 32%, reaching PLN 12 million, and that was second ever result after fourth quarter of 2022. Q3 also ended with high year-on-year growth in adjusted gross and net income with 30%, 46%, and 48% of growth respectively, reaching PLN 7.8 on gross and PLN 6.5 on the net million on net level.
The most significant charges to the results at the gross profit level were higher depreciation and amortization expenses growing by PLN 800 thousand. The higher depreciation and amortization was mainly due to depreciation of servers in connection with the expansion of our server infrastructure that we did in the second half of 2022, as well as the amortization of software developed as a part of the development of the Shoper Group platforms. Let's move to GMV. Nonetheless, in Q3 of this year, GMV growth in both stores and all other channels together remain above 10%.
Achieved levels of PLN 2 billion for GMV stores and PLN 2.2 billion for GMV of omni-channel are from the perspective of the company's history's level lower only than those achieved in the fourth quarter of 2022. Take rate for stores reached 8.86% versus 1.73% last year, while omni-channel take rate reached 1.69% versus 1.57% in the last year. The lower growth rate of all the value in sales channels operated by the Shoper Group in the third quarter of this year was significantly influenced by weak retail sales in September. As is generally known, this affected both online and traditional retailers.
The main reason seems to be the exceptionally warm September in Poland, which caused consumers to postpone purchases, especially in the fashion category, which we can clearly see by analyzing GMV by industry. Looking at the October data, however, especially in this particular category of products, we see a significant improvement in sales dynamics, confirming partly these reasons. Consumption continues to be influenced by consumer purchasing power, constrained by rising prices. While consumer price growth rates have been declining for several months, reaching the lowest level this year in September, that is just over 8%, this is not enough to return consumption to the levels seen in the period before the outbreak of the war in Ukraine. Let's take another look at Shoper Group's growth from a broader perspective. The Shoper Group has consistently pursued its growth strategy.
This is confirmed by presenting key economic indicators of the past years against the results of the last 12 months. The Group's revenue in terms of the last 12 months reached almost PLN 146 million, was more than three times higher than the revenue of pandemic 2020 year. The third quarter revenue compared to the results of this period in previous years confirm the dynamic and consistent development of the Shoper Group. At the same time, despite the significant investment in human resources development, the company continues to generate high adjusted EBITDA, which is steadily growing, both from the perspective of the result of the last 12 months as well as the results of the third quarter alone, reaching high growth rates compared to the results recorded in previous years.
Let's take another look at the cumulative results after 3 quarters of the year. After third quarter, Shoper Group's revenue increased to PLN 109 million, growing by 26% compared to the same period last year. Profitability of adjusted EBITDA was nearly 33% after an increase of as much as 38%, reaching over PLN 35 million. Adjusted gross profit increased by 39%, reaching over PLN 24 million, with profitability of 22%. Net profit increased by 50%, reaching over PLN 20 million, with profitability at 19% level.
The amount of adjusted gross profit in the third quarter of this year was significantly influenced by depreciation amortization expenses, which amounted to more than PLN 10 million, and were higher than in the same period last year by PLN 3.5 million. And majority of this increase is similar to the reasons presented for the Q3, so server infrastructure development, amortization of those servers, depreciation of software created, and in addition, also depreciation of assets acquired as a part of acquisition that we completed in 1st half of 2022 year. In terms of value of orders, GMV, since the beginning of this year, increased in stores and total in all channels, called omni-channel, by 12%, reaching levels of PLN 5.9 billion and PLN 6.5 billion.
Thus, the value of orders realized during the 3 quarters of this year was higher than the result achieved in the entire 2021 year, which perfectly emphasizes the development of our merchants, stores, and the dynamic of e-commerce industry development in Poland. Brief look at financial flows. Unlike some of our competitors, including global ones, Shoper is a company that generates significant levels of cash. After 3 quarters of this year, the group generated nearly PLN 31 million in cash from operation, with a high conversion of EBITDA into these flows.
As part of capital expenditures, Shoper acquired 20% of the shares in Apilo for PLN 2.4 million as part of the exercise of the option under the agreement concluded in 2021, thus reaching 80% of the shares in the capital of this company, paid the last 10% installment of the payment for the shares in Shoplo, acquisition that we did in 2021, in amount of PLN 1.7 million. Also the last installment of the price for Selium amounted to slightly below PLN 600,000. The remaining capital expenditures were related to development of the group's IT platforms, almost PLN 7.5 million and in large part, it's represented by the new storefront project that Paweł mentioned before.
The main expenses within cash flow from investing activities were the early repayment of all debt on the loan taken out by Shoper to refinance the purchase of 60% stake in Sempire, in the total amount of PLN 6.6 million. The original loan schedule provided that repayment would be made by July 2025, and the rest is mainly repayments of lease obligations. Referring to our office and server leasing. Of course, it's under IFRS 16 accounting standard. This, what's important, the funds that were at the end of September were used to partly to dividend payment that took place on the 19th of October in amount of slightly below PLN 30 million.
Very important information here, this dividend payout caused that the next day after that took place redemption of Class D shares that were the shares with 5,000 more dividend per share ratio for this class of shares. Since this payout of dividend, they will be redempted. The story of Class D shares is almost over in front of us, just a legal procedure to remove those shares from the registries. That was a summary of Shoper Group's financial results after the third quarter of this year.
Good morning or good afternoon. This is Anna Miszko speaking, and I'm pleased to start the last part of our presentation, where we tell more about how we see Shoper Group and the market in the coming months, and I will begin with a snapshot of our team development. We are constantly strengthening our business growth by investing in sales force and service development. We estimate that the group's head count at the end of 2023 will be around 370. Half of the new hires is our investment in the sales force, especially in digital advertising. We are building a strong sales team, mainly in Bydgoszcz and Kraków, where we are developing competence centers in digital advertising and multichannel sales. These teams are responsible for sales to existing customers and customers outside our base, working on so-called cold bases.
We employ very experienced people there with a good track record in sales and retention. This investment translates directly into an increase in our revenues and an expansion of our customer base in four leading product families. We are also strengthening our management team, and three experienced managers joined us in October. Anna Nowacka took over the Head of Marketing of the Shoper Group. She previously worked among others in Empik. Dariusz Kowalski, Business Development Director, is responsible for developing VAS, including logistics, payment, and omni-channel services. Dariusz has managed the marketplace and online marketing at Home.pl for the last few years. Home is the market leader in this part of Europe in web hosting and the domain services. Last but not least, Piotr Markiewicz is responsible digital ads area at the group level.
In the past, Piotr managed the transformation process of the Sunrise System Group, the largest SEO service provider in Central and Eastern Europe. These are very experienced managers, with a good, and above all, long track record in the previous organizations that are leaders in their industry.
Hello, Paweł Rybak again. Now I will tell you a few sentences about what awaits us in the near future in terms of the new products with partners that we've mentioned earlier. Regarding cooperation with Home.pl, we've already transferred more than 1,000 stores to the Shoper platform, and by the end of November, hopefully much sooner, we will transfer all customers. Each renewal of Home.pl customer licenses will be based on the new terms of the cooperation. We've already started direct cooperation with migrated customers, which will increase their sales and consequently, the entire GMV of the Shoper platform. We're also starting business contacts with customers to offer them our services such as Shoper Payments, shipments, or advertising.
After first day, we are already successful with conversions, new sales, so we're super optimistic towards this business case.
As for the project, with our partner, Gomag, from Romania, we can already cheer about our first client, which was of course a huge milestone in our entire project. We also started a series of sales trainings for our partner, because our partner is responsible for sales. We help them to, you know, successfully sell and then we do the fulfillment of the whole job, that's, that has been sold. Despite that, Google works almost the same all around the world, every country has its specifics about using the online advertising. We'll definitely have to work on its development and continuous adaptation to local conditions. In the next phase, of course, we'll consider introducing other digital ad services such as advertising on Facebook, Instagram, Microsoft or TikTok.
We are truly delighted that we've managed to conclude these contracts. They are already live, and they will have a positive impact on the company's revenues, and will result from the very, very beginning with the most noticeable impact on our P&L accounts starting from the next year, which is 2024. Here you can see our basic estimations of impact of Home.pl stores to our platform. For the whole year 2023, we estimate that Shoper's GMV, including migrated stores, will be somewhere between 13%-15% altogether. We of course need to really remember that the GMV impact will start only from the November.
If you look at the chart below, that shows only the simulation, that what would have happened with our GMV if the migration of the stores would have impacted the whole year of 2023. This is much more significant numbers. Those numbers of course are now simulations, but they really show that the deal is truly meaningful and impactful on our P&L and will have a very positive impact on our company. Yeah. Let's also traditionally look at our development outlook versus our assumptions. In the case of the gross merchandise value, we are above the market average, but not double the market average growth as we anticipated. Still, we will grow our revenue 2 times faster than the GMV, as well as we will increase our take rate.
To summarize the whole Q3, we want to really emphasize that we are confident toward the uncertain future as we continue to grow double-digit rates, being very, very profitable with the EBITDA near to 33%. We are very focused on key development projects, continuously expanding the range of our products. Can we have another, the next slide? Yes. Ladies and gentlemen, I'm really excited to share with you also the summarizing highlights of our recent performance and the future strategy. First and foremost, we are really proud to report continued double-digit growth rates. This is a real testament of the hard work of our teams and the trust of our customers.
In line with our growth, we've been progressively expanding our product range to better serve the needs of our diverse merchants base. Financially, our operations remain extremely healthy, and we've managed to maintain a strong EBITDA margin, which is close to an impressive 33%. We are continuously focusing on our key development projects, ensuring that we are not only meeting but exceeding market expectations and standards. Lastly, we've been successful in extending our customer base, both, but especially for our value-added services, further solidifying our strong market position. The schedule of the meetings with us in the near future. In just over a month, we invite you to meet with us in Prague. We will keep you updated on the dates of the results in the new year.
We also encourage you to contact us directly if you have any questions or would like to talk with the board. Now let's move on to the Q&A session. First, questions from Ben. Could you please elaborate on the revenue share arrangement with Home.pl? Okay. Of course, this is a part of, you know, non-disclosure trade agreements. The main impact is the following, in private label model, Home.pl was just paying us, you know, the constant number for each license, no matter how many license, no matter how they use the license, no matter what the GMV was. Now we, together, we set up the price range, and we take, we have a revenue share on the price that end customer pays.
That's a significant change of our revenue and turnover, because the agreement was, like, lasting for 11 years without almost no price change. It will be definitely a positive impact on our subscriptions revenue. Having in mind that all other services were only sold and fulfilled by Home, and now all of those services will be fulfilled by us. Here it's like a pure win for Shoper, but also a pure win for merchants, because they get access to multiple new services for the highest possible quality on the Polish market. We've already compared our KPIs, and Shoper can be, you know, performing much longer lifetime value of the customer, much lower churn, and selling upselling many new services.
Because Home.pl had only an access to, you know, the pure store managing system. Not online advertising, no payments, no logistics directly from Shoper. These things will go now through Shoper, having, you know, giving us benefits. Lots of positive impact, truly much, much better revenue for Shoper, like very visible on, in our P&L and also from the EBITDA perspective. There is nothing that could be, you know, negatively impacted by this deal. I cannot disclose the proper, the real numbers because they have been negotiated per service. Almost every service have a different approach and, but still super profitable for Shoper and super beneficial for Home and all the merchants that we now run together.
The second question, are there any other opportunities like the Home.pl transaction, which exist within your wholesale customer base?
Well, Home.pl was the biggest, that's for sure. There are some opportunities on other parts of the market, not only in Poland, but I cannot promise right now that something will happen super soon. We see that where we have been super successful working with SaaS on firstly, you know, proving a good point for Shoper was online advertising. We now started this thing with online advertising for Gomag in Romania. We see that they like it, the customers like it. It seems that it's still really blue ocean. Even though online advertising market, you might think of as a close to red ocean, it seems that this service provided by us is very well perceived and customer like like it.
That's also, you know, some stepping point to have strategic partnerships with other SaaSs here. With private label, of course, there are many private label stores. Some of them are very, you know, very old. We assume that if we prove Home.pl business case, it's also like with online advertising, that we can, you know, really deeply scan the market, show that we are successful, that we can bring much more money, less problems for companies that have other private label solutions and go with us.
To ask a question, please mark the button with raised hand to give you a voice or send it through Q&A panel. Oh, Stephan.
Yeah.
Yeah, Stephan, please go ahead.
Hi. Hi. This is Stephan Bruschke from Piper Sandler in Frankfurt. Thanks a lot. Great results.
Mm-hmm.
Thank you very much. Thanks for opportunity to ask a question. I was just wondering how you would describe the environment going forward. As I understand, I think I understand it's still gonna be pretty challenging. In a way, the optimistic kind of outlook you give is basically specific to you, rather than the environment in terms of GMV also going forward. Also maybe you can give a little bit of an outlook for 2024.
Basically, we are moderately optimistic. We are just after the election in Poland. We are still under, you know, new government construction and some kind of, you know, internal tactics between now governing party, but the governing party has lost the election. In the end, still the entrepreneurs wait for, you know, some final decisions. From this perspective, we are relatively optimistic. The inflation in the last two years and, you know, the consumption power due to this inflation has been really impactful on the wallets of, you know, Polish people. We assume that it will be still double-digit growth organically for Shoper from the perspective of GMV. Much stronger in the revenue.
We work hard, you know, to add new services to, you know, approach other parts of the markets that we haven't touched yet. We detached the services from Shoper itself and sell outside, like for example, online advertising. Probably we'll be able to sell more of those services in 2024. Of course, the market is really, like, if you, Piotr was saying about it, that comparing to competitors, we are super strong. Like super strong. They have debts, they have negative profitability, so we kind of, you know, look at the markets. All of almost SaaS e-commerce solutions are for sale. Still expectations are closer to the pandemic, not to the today's results and growth rates.
Mm-hmm.
We are waiting a little bit if they maybe bleed and think through where they were and how they can, you know, behave in the competitive market. Maybe there are also opportunities to acquire some companies in all of the categories that we have. It's possible to do in SaaS e-commerce, on also in SaaS digital advertising. We're still really scanning the market for some good opportunities, but it has to be, you know, reasonable price, very impactful on the Shoper P&L, adding some new service to our service portfolio. It's not like we see the opportunity, close our eyes, you know, write a check and go for it. It's not us.
Great. Thank you.
Any other questions? If there are no more question, then oh, Stephan.
Maybe one last question from my side. I mean, you obviously paid the last dividend to preferred shareholders. Would that option open the possibility maybe next year to pay a dividend to all shareholders?
You know, our view for the future dividend as a management board is to be focused on development. If, if we had good opportunities on the market to acquire something or to invest-
Mm
... into development of the company for the future, results. We'll definitely go for it. If of course the situation, or opportunities will not be on the table, then, of course we'll be considering. At the end of course, this decision is in the hands of our shareholders. We, as a board, are definitely focused on development. If opportunities on the market, there will be any good opportunities on the market, then we'll be using our cash rather for investing into the future.
I understand. Thank you very much.
Okay. If there are no more questions, we'll be finished. I remain at your disposal, and thank you for your presence and conference today.
Thank you very much. Goodbye.
Thank you very much.
Thank you. Bye bye. Thank you. Take care.