Q4 2020 Ozon Holdings PLC Earnings Call
[music].
Yes.
Good day, ladies and gentlemen, welcome to the ores on fourth quarter and full year 'twenty 'twenty financial results cool before I pass the floor to old problems management I would like to advise you that some of the information you will hear today may include forward looking statements under the private Securities litigation.
Reform Act.
Forward looking statements are based on management's beliefs assumptions on information currently available and are subject to known and unknown risks and uncertainties.
Many of which maybe beyond our control.
Caution you that the forward looking information presented is not a guarantee of future results I'm not actual results may differ materially from those made in or suggested.
Or suggested by the forward looking information presented in todays call.
Any forward looking information presented is made only as of the day took today's call and we do not undertake any obligation to update or revise any forward looking information.
We encourage you to refer to the cautionary statements contained in the company's press release issued today.
On.
S E SEC filings for a more in depth explanation of the inherent limitations of such forward looking statements joined.
During today's call. The company will also discuss some non I F. R. S financial measures on the other metrics, which.
Also on beliefs.
<unk> useful information for investors.
Also on will include an explanation of it just adjustments on other reconciliations of our non ISR S measures to the most comparable ifr S measures in the company's press release issued today on <unk>.
Company's investor presentation available on also on the Investor Relations website.
Now I will pass the flow to Alexandra Shogun C E O of auto on please go ahead.
Thank you.
Good morning, everyone and good afternoon.
Thank you for joining us today.
Welcome to our inaugural.
Inaugural earnings call.
David will discuss fourth quarter and full year results.
Yes that was my game, we're going to make some comments about the development.
And so on Sun's out and look forward. Thank you. Thank you on them.
And we will try to give as much time as possible for the Q&A.
Before diving into the numbers I would like to recap our vision for Ya.
Well, it's on aims to transform shopping experience crush on consumers by offering them. The maximum convenience and provides us the widest selection of goods online and.
Suddenly reliable delivery service followed by others.
We also aim to empower our partners net growth faster than the Columbus circle of system to achieve greater commercial success through partnership with always on.
But the live on this mission and to achieve scale and leadership, we will work on.
<unk> core business and new initiatives and they will expand our offering for buyer to sell us on the variety of is on business partners.
Russia is one of the largest.
And you can make on them is globally with strong fundamentals interest say inflation is high per global standard at 83%.
In contrast, irrational on the Columbus market remains underpenetrated on the 9% if I Miss penetration.
The market is still very fragmented on it.
What percentage of market share for book three players.
As a result of limited investment in fulfillment and logistics infrastructure make on this players over the last over the past decades.
And you have to step up and on investments by players such as awesome in the last 33 years and that yourselves tailwind from COVID-19. The market is set to grow at least three times in the coming five years.
Nation of all this factors presents us with a unique opportunity to you.
And to drive not just commerce, but brought on line services adoption in Russia.
Let me say if you work on how we're going to ship. This our strategy is to build the platform and took on next slide seven Russians the minutes, that's got some us in Russia by our marketplace.
In order to do this we have been and will continue to invest in logistics and technology.
We can offer highly reliable and convenient service and the best user experience to our customers and so on.
All of our business partners.
We see strong positive network effects stemming from fast growing buyer base and the customer loyalty.
This is attracting more sellers to the platform, which can feed the stores on the assortment expansion. This further drives a flywheel effect.
It accelerates growth.
Longer term awesome aims to build a diversified platform around our core pas and marketplace and satisfied your direct sales business.
Including new adjacent verticals, such as index services.
Estimates on merchants and online grocery for example.
The last three years heavy on transformational pause on our primary focus was to get it up to achieve this we're launched marketplace and then investments in fulfillment and logistics.
You can see is we're more than quadrupled our fulfillment footprint from 50 to over 220000 square meters with nationwide coverage.
During this time, we've also made significant investments in product development. This kind of started that efforts enabled us to create leading multi category marketplace, which attract millions so buys from thousands of sellers.
Our buyers made 74 million orders on OSM platform.
In this past year in Stark contrast, the 2017, when our blood from generated on the 8 million orders.
Oh My God, that's currently accounts for over 50% of all Janie.
And allowed us to accelerate growth from 6% of 2017, the 144% year on year in 2020.
But we're just getting started with.
With G&A of $2 $7 billion. Since then the trend here or there.
On the accounts for only 7% of ecommerce market and less than 1% of Russian retail market.
We believe we're best positioned to benefit from a commerce adoption.
We aim to drive that.
On the Columbus was in total addressable market, which is already worth more than $450 billion and as we're developing on our platform and expanding into adjacent verticals. Our total addressable market will keep on growing.
Now I would like to say a few words about our new verticals.
Although it was on marketplaces. The main threats generator, we can offer our bias on sellers on number of complimentary on land services, which has got some expense. This services create additional monetization of procuring just awesome and bring more customers and business partners to the platform.
Let me highlight our initiative in financial services.
And this past year, we expanded and diversified the portfolio of financial services offer.
Developed both payments and lending solutions within the B and B to C streams.
The idea is to deliver smoothed and frictionless experience to all buyers and sellers when using was on payments and lending solutions. This increase loyalty and engagement of our buyers and sellers.
And I'll get to see domain, where test and buy now pay later solution at awesome.
Our lending solution is aimed at making kind of weighted purchases more affordable followed by us.
He was on the payment solution increases customer retention.
60% higher order frequency amongst ozone card holders this means greater customer lifetime value and plus the payback period for these players.
As of the end of 2020 customers activated over 450000 parts.
Adoption of his on court has been accelerated materially by the launch of the virtual card in Q4.
2020.
And I'll get the midstream we aimed to support our sell out was developed since that business was easy access to financing.
Now online grocery adoption was accelerated by Covid globally.
In the rush of penetration on the commerce is less on 1% in the grocery retail market. Thus online grocery market represents in the men's opportunity zone.
Online grocery is also an important driver.
Higher frequency and traffic generation led from such as ours.
It also includes a number of touch points within the cash with a customer which helps to promote brand recognition.
And due to our large existing customer base the customer acquisition for online grocery product within our platform is easier and very cost efficient.
We rolled out a network of dark stores in Moscow that allowed us to deliver grocery store customers in multiple within an hour.
Our Doctor concept office, a wide range of food and nonfood items, including some unique assortment not typically offered by classic docs operators with total assortment was nearly 22000 skus as of year end.
And this current day closer to 20 force.
Skiers.
We aim to further fine tune the model and expenses on express into regions.
On.
Before we proceed I would like to announce the appointment of Daniel further off as Chief operating Officer Zone, and eager Gerasimov as Chief Financial Officer.
I would like to take the opportunity to thank them for their incredible dedication and contribution towards on success story, so far and to congratulate them and wish them. Both good luck there in euros.
I look forward to work on that is still very talented individuals and building the best in class local E Commerce champion that transforms the way Russian consumers truck.
Now I will pass the floor to Daniel.
I will discuss our quarterly results.
Yes, Thank you Alexander.
Hi, everyone and thanks for joining us on our first earnings call as a public company.
And as we have already seen this morning, 2020 was a very successful year for us on and we ended the year on a high note with strong operational performance on successful IPO during Q4.
Before I move on to discuss on our financials.
I want to tell a few words on COVID-19.
Pandemic had a mixed effects on our business and it's impossible to determine precisely on the input.
Covered on our operations in 2020 and future performance.
One hand, COVID-19 accelerated adoption of online services in Russia, which is positive our business on.
The other hand, COVID-19 impacted our employees our customers on our business partners you didn't call. It it was more important than ever for millions of customers across Russia to be offered costa reliable and safe.
Livery options, we facilitated contactless payment.
Payment methods.
I'll close deliveries from Q1 2020 onwards.
Since the start of pandemic.
Zora deliveries increased to more than 80% of our liquidity deliveries.
I was on also ensured safe working conditions for all employees in our source book.
To keep our employees, our customers and staff of our business partner Safe I was on introduced a wide range of pulses and provided protective equipment, because it's a countrywide network of fulfillment centers cross docking stations.
Points and Courier services.
We know those merchants to integrate and align ensuring business continuity from many smes and luxury retailers in Russia.
To support the transition on line, we launched our ecommerce on lines call point to printers, that's wanted to sell products on line.
The platform offers regular webinars by industry experts.
On product team on currencies on sellers.
On behalf of our management team I can say that we are part of the wells on rose to the challenge.
And then in Lafayette, lifeline, and reliable partner to many businesses across Russia, and ensuring safe provision of essential and non essential products.
So fresh and households.
Now moving on to quarterly results I am pleased with the execution execution across our business units in Q4 to sum up Jamie in Q4 was significantly accelerated year on year.
In addition to accelerated growth of the business. We also reached positive operating cash flow.
Improved significantly adjusted EBITDA margins.
Now, let's look at our financials in more detail.
In the fourth quarter.
GDP growth accelerated on the back of ongoing rapid shift to marketplace strong adoption of e-commerce, among Russian bias on tell us across Russian regions and positive network effects.
<unk> included in services increased to $75 8 billion rubles with growth accelerating to 100.
The 7% year on year on a full year basis <unk> reached.
197, 4 billion rubles up.
144% year on year.
The growth was primarily driven by strong order growth of 107% year on year on the back of 7% to 5% increase in the non both active buyers and more than 30%.
Increase of order frequency and average non usable new and existing license on a 'twenty compared to 2019.
We also saw greater contributions from our original expansion regions now constitute around 50% of our JV.
The biggest driver of <unk> growth was the deposit growth was non marketplace.
In Q4 share of marketplace, which reached.
52, 3% of group's gene, which has more than doubled compared to Q4 2019.
Much greater contributions from us on marketplace is attributable to significant growth and solid base the seller base nearly quadrupled.
And there is now well over 20000 sellers.
This jump in number of <unk> was fueled by those on.
Attractive and.
Attractive and comprehensive offering for the interactions.
On offers merchants national wide fulfillment and logistics services.
As to the large and fast growing customer base.
And also trading.
Trading and analytical tools and advertising business solutions.
In addition to that would be on SBS. We're now also offering extended to have this solution, allowing for full flexibility around fulfillment and logistics essentials on offer supply in place solutions for the sellers, where the bill logistics backbone that's use the business needs.
Lastly, as Alexander mentioned, we have launched in lending service haul emotions. Although it is still in its infancy initial results are encouraging and it gives us confidence that.
Sellers will use this solution to grow their business.
<unk>.
National to grow facilities. These initiatives will helps us.
<unk> on marketplace.
That said, we could see.
As much as 350000 sellers on our platform on the long term.
So on GDP growth is underpinned by growing number of bias that has increased by 75% year on year or two of $13 8 million customers in 2020, and almost tripled in two years.
It is also important.
That's all on frequency and retention on increasing as well.
We believe that the current levels on frequency as a small fraction of what it would be for that shift.
Which is multiple times slower compared to.
On the search at 262 orders per annum non maturity of commerce market with ecommerce penetration of or Houston on some time since funding per cent.
Yeah.
Spending on our fulfillment and logistics infrastructure with focus on the regions allowed us to improve delivery times and improve overall quality of service.
Over 95% of our vessels were delivered on time in Q4 and is even higher so far this year.
Improvements in the buyers' behavior can be seen from our cohorts performance, both frequency and Jamie per buyer increase in 2020.
<unk> compared to 2019.
And all the cohorts.
Frequency from 'twenty to 'twenty cohorts compared with a cohort of 2019 increased by 28% and almost doubled compared to 2018 cohort.
Retention keeps on growing as we improve our quality of service and delivery.
Positive cohort trends are continuing into the first quarter as well.
Now, let's move to the operating expenses, our main expense items are fulfilling on delivery sales and marketing and G&A.
Across all cost lines. There was a significant increase in absolute terms was on is an investment stage and growth in our operating expenses reflect the ramp up from the expanding of our fulfillment and delivery infrastructure growing business volumes and increase in headcount.
Our general and administrative expense increased the nose up eight 6% year on year as we invested in enhancing our talent pool from 'twenty to 'twenty, one we plan to accelerate investments into talent acquisition to accelerate our platform development.
Fulfillment and delivery costs were the second parcel Goldman expense up 78% year on year as we processed nearly sits on in orders in Q4.
This is a 7% higher compared to.
$12 5 million.
Q4 2019.
Sales and marketing and technology costs saw increase of 7% and 46% respectively.
This increase was attributed to digital and offline advertising and then technology by investments in talent and product development to improve our seller experience and our customers use as well as our data capabilities.
However, as a percentage of Jimmy on all other expenses decreased noticeably thanks to operating leverage.
Utilization of logistics and growing scale.
After significant investments in 2019, adjusted EBITDA as a percentage of achieving proof from 'twenty to 'twenty and in Q4, adjusted EBITDA as a percentage of JV showed the market.
<unk> improvement from negative $17, 1% in Q4 2019 to negative $4 seven in Q4 'twenty to 'twenty.
Thanks to operating leverage economies of scale and disciplined cost control.
I just wanted to point out is on a reported positive operating cash flow.
It doesn't want to raising cash flow on the full year basis reached six 6 billion rubles and pets, a negative 14 3 billion.
On the 19th.
<unk> operating cash flow was accumulated in the fourth quarter nearly $10 6 billion of cash flow cash income compared to negative $2 7 billion rubles in Q4 2019.
This is a function of higher sales volume and greater contribution from negative working capital during the high season.
Free cash flow, which we calculated calculate as net cash from operating activities less capex and principal portion of lease liabilities was near breakeven in swine, it's millennium on the <unk>.
Strong operating cash flow.
A quick word on the company's balance sheet position, we ended the year.
With a very strong balance sheet.
Cash and cash equivalents was on.
<unk>.
$103 7 billion rubles per proximate to the $1 4 billion U S.
At the end of 'twenty one.
We have further strength strength in our balance sheet this year by issuing convertible bonds for.
$750 million in February.
Now I would like to provide you with an outlook for the full year 2020 one.
Please bear in mind that our guidance reflects reflects those on expectations as of to date.
As I mentioned it is difficult to certain overall impact of the Corona virus Corona virus pandemic.
On new potential disruptions, so that may be caused by COVID-19.
Overall, we would like to be conservative in our guidance.
We expect <unk> to grow by 90% taken into considerations.
Tough comps, especially in Q2 and Covid related uncertainty.
But we believe the growth.
Essentially be great that's over on the guidance would be 90% on breakdown.
Moving to live.
And we plan to invest in our future growth for <unk>.
The core and new adjusted verticals all marketplace on plans to continue to further scale its fulfillment capabilities and invest in products to stay ahead of the growing demands and rapidly increasing volume of orders on the <unk>.
Platform also unexpected <unk> expenditures to be higher this year compared to 2020 to be between 20 to 25 billion rubles.
Although we are not given any guidance on profitability. We will remain focused on execution on building scale, we plan to keep investing in building scale strengthening our competitive position and 17, our leadership in the Russian consumer market.
Believes that with greater scale, improving unit economics and longer term profitability.
Yeah.
And so overall I would like to say thank you for your support so far and I look forward to realizing with you in my new capacity in future.
And I guess, we are ready to simple.
We have the Q&A.
Thank you, ladies and gentlemen, if you wish to ask a question. Please press star one on your telephone Mike.
For your name to be announced should you wish to come to your request. Please press the hash key so start on one on your telephone to ask a question.
Your first question comes from the line of Slava.
Doug Paris of Goldman Sachs. Please ask your question.
Yeah. Thank you very much for the presentation couple of questions.
The first one.
Exactly a year ago, we were in the midst of the lockdown crisis with abnormally elevated the months.
As we have locked in those days currently can you comment on how the GNP growth currently stands the performance maybe of that average ticket on frequency.
Day sensor any comparison with the end of March of last year would be helpful.
Secondly on.
You made a capex outlook.
So you think on Directionally comment about the free cash flow generation going into 2021 net would be helpful. Thank you very much.
Share slow it figured let me please take your question.
So speaking about the first of all on involved the impacts of Covid last year on the comps I guess it will be fair to say that the Covid comes.
Indeed, quite often and the growth rates last year.
I mean, the introduction of logo on the measures in Russia, India are quite elevated and therefore it might be.
Beautiful challenge to demonstrate extremely high growth rates.
Congrats on the months most impacted by Covid.
Nonetheless, we're quite confident on our guidance for the full year and as you from Kevin Remember Russia.
Covid.
I love about on measures used to be in the text starting from the end of March to approximately <unk>.
As of June or early June.
While I'm on a region by region basis.
So far I mean, we're only.
Making our first steps in the months and time periods.
Have been most impacted by the Covid outbreak last year.
Therefore, probably it is a bit too early to say.
Despite that I mean.
We're quite confident that's the guidance, which was given your case with previously.
By my colleagues.
Uh huh.
So I think we share we're quite confident.
Okay.
Can you please repeat your second question.
Yes, it was with regards to the free cash flow generation for 2020, <unk> given the guidance on Capex.
Yes.
You have our capex on operational cash flow that we're targeting to be near breakeven.
Therefore, I mean, just mathematically it keeping in mind that we plan to keep investing in our infrastructure and where.
We need to keep expanding our footprint further into the Russian on the regions.
And also on the Moscow, our free cash flow is going to go into one will remain negative.
The biggest driver of that will be will it be our capex.
Yeah.
Okay. Thank you very much.
Thank you. Our next question comes from the line of Miriam <unk> of Morgan Stanley. Please ask your question.
Great. Thanks, everyone. Thanks for taking my questions on.
Firstly, just on take rates could you just give us a bit more color on how we should expect take rates to trend. This year. After some of the changes that you made towards the end of last year.
And then you mentioned the 350000 sellers as they sort of long term target can you sort of give any guidance on on sort of where you would expect to be by yearend or sort of how long it would take to get to that $3 50 number I think previously you said you had I think.
670000 centers.
Backlog that you would've been on board.
If you could just give us an update on that and then finally just on competition. If you could just comment on what you're seeing at the moment in terms of advertising spend from your competitors has there been any change in liberty progression on pricing or anything on that thank you.
Yes, Hi, Ram let me just suggest on the take rates, yes, as I think we're all as discussed previously we made the decision to decrease take rates from coverage on it on one.
This is a conscious decision, we are making tactical investments, which allows us to unlock on parts of the market.
And.
Also to align the commission structure closer to the real cost structure, so that actually helps us to help us.
I will share unit economics.
And.
We see that our strategy is already bearing fruit and relative to see meaningful sellers to the platform on the back on this strategy.
We do not give any in <unk>.
Number on the number you know on the <unk>.
Number of sellers, joining patently I mean.
We're going on with reports Q1 and Lee.
But we see that we see some acceleration in the sellers are joining the platform on the back of.
All the efforts that we're taking.
Yes.
Okay.
As for the competition.
Yeah, Mike just a question on the composition.
To be honest I mean, there is very lethal which has changed versus our previous communications with respect to the competition.
We still have seats from our view the market is very large and at this stage with them.
It would be very hard for us to show any potential impact of hernia.
ICF excellence of flames of organic actions by our competitors.
Therefore.
A lot of it there is nothing you wish were kind of giving you gave here we still believe that the biggest risk for us on a follow on growth is our execution and our ability to deliver on our own ambition.
He is expanding the infrastructure.
Making the appropriate changes to the marketplace, which will want to make launching new product initiatives.
And many of them on Yahoo.
Okay. Thank you.
Thank you. Our next question comes from the line of.
Ivan Kim of <unk> Capital Partners. Please ask your question.
Yes, good afternoon, two questions from my side. Please.
First of all on Capex, which increases quite a bit versus 2020.
So given that the fulfillment expansion with <unk>.
Tax authority.
Where is that incremental capex.
Channel two is that.
Whereas on express development or something else.
And then secondly, I understand that you do not give the guidance on numbers can be okay.
And that's probably a tricky, but can you just comment directionally on your contribution profit margin on.
Our adjusted EBITDA margin with share are easier for you for 'twenty one thank you.
Yes.
Sure and thank you for your questions.
On the Capex that a few reasons behind the increase.
First of all the share price up.
Which kind of produce maybe the higher capital expenditure on average square meter.
Fulfillment space, which we need to open.
And secondly will receive a various.
More opportunity and more demand for our infrastructure.
Especially preparing for 2022.
The cash as you probably remember many of the objects, which we're actually building.
Quite quite lengthy lead time, and therefore, some of that capital expenditure needs to be borne in advance.
In order for us to be prepared for the growth in 2022.
Additional expenditure related so I was on the express initiatives is also one of the drivers behind.
Increased capex.
Because we see that express delivery model is in big demand among our consumers and our people.
On buying <unk> value proposition of getting something levered within one or two hours and this doesn't necessarily apply exclusively so fresh on.
It is an important category for express delivery obviously.
It's also related to electronics.
All adjusted things we'd share.
Russian consumers eager to get the labor cost.
On Frac stability channel contribution on project.
At this stage.
During the adjacent previously were more focused on the cash flow generation and the basis why we're communicating guidance on operating cash flow.
We believe that.
<unk>.
Operating cash flow is a way.
Metric, which demonstrates healthiness of the business model and this fabulous year.
And ultimately its sustainability as.
As opposed to EBITDA on projects.
Or any other P&L metrics.
Largely because as you probably.
Remember in our case negative working capital he is.
One of the very important contributors.
So the operational cash flow.
Okay. Thank you.
Okay.
Thank you our next question.
Comes from the line of Catherine O'neill of Citi. Please ask your question.
Alright, thank you.
I just want to understand a bit more about express in terms of how many stores. You have now is that the target from 21 on medium term and more specifically, how youre managing that last mile delivery.
And.
On expenses I know you previously said that yes.
In Russia people day really.
We expect to pay per delivery, but with the <unk>.
On demand delivery around express are you able to charge consumers are our highest delivery fee.
And then the other question I have to do around the use of cash flow CECO quite a lot of cash on your balance sheet as of yearend.
<unk> converted well how should we think about your deployment of cash.
Are there any areas of M&A you might like.
To target moving now to some of the competitors is it pushing a bit more aggressively into.
Intact from a net M&A perspective for example.
Hi, Thank you for the question on that Alexander speaking so our approach to express is that we need to operate his minions dark store says we need to provide one hour delivery with Moscow.
As we expense the Moscow region on some other regional cities, obviously, we'll open more so at this point in time.
We started the initiative.
I would say mid last year at this point in time, where grade nine direct sourcing most call. We're planning to open more because we share there as well.
Very strong demand for this service.
Korea deliberate German so very similar to standardize on correctly.
Fees.
And all of that.
Who are the limitations with Yoplait liquidity Liberty.
So the goal is to provide wide assortment and fast delivery in this business model on the expanded.
First of all to cover almost a in Moscow region from defense.
Uh huh.
Russia on the original citizens.
Maybe a few words on Capex also.
On the previous question, we see a very strong potential for growth on we see a very high correlation between delivery and assortment in July book of delivery as we improved timeliness of delivery over the last three years, we saw the customer customer sends us with higher frequency.
And the higher retention.
Therefore, we decided to make further investments in fulfillment and delivery infrastructure.
No it would be logical to the facilities. It takes more time to build them.
Partially this capex is for the high season of 2022.
As we discussed.
Despite periods of Covid.
Slowdown is cost since July.
The growth on the customer behavior metrics are very strong therefore, we need to or with it.
On cash flow.
Our CFO will comment.
Yeah on.
On.
On the M&A.
We have been discussing before.
We remain conscious of wireless potential.
The changes to fuel our growth both organic and inorganic.
And at.
At this stage or do not have any targets in mind.
And you're on a four letter to acquire but having so that's.
On <unk>.
The cash cushion, which will have on our balance sheet.
Working on allow ourselves to be EBIT.
The percentage tick in case, we see that.
On deals can be widely accretive okay on the help us speed up the rollout of new products and initiatives also strengthened our team.
To be present in the verticals, where we have very poor footprint at this stage.
But the key use.
The cash which were half eastern and will remain.
On your developmental their business.
Okay, great. Thank you on it yet.
One more question.
Recently launched.
Buying service and.
Our services marketplace could you maybe just comment on the plans.
How does the economics work and how meaningfully these could be longer term.
Yes.
Yeah I'll address this is Daniel.
Well the honest answer is always from from US and then that would be that we have no idea actually so.
We see that the group buying is definitely something that we shouldn't be working on and we see very good examples as April.
Got it you know better than us.
Globally, and especially in the Chinese market.
So on.
On your viral on.
Social buying industry, there and so.
We're making our first steps.
On the services I think it's essential for us to provide value added services.
So existing assortment that we have.
And.
And we also want to try it beyond that.
Again this is small like experience.
The first steps we would.
But on Donlin that make you more lift to mystic will even optimistic about that which is going to try and keep you posted articles.
Okay. Thank you.
Thank you. Our next question comes from the line of you on Yamana Menthol <unk> of UBS. Please ask your question.
Hi.
Thanks for the call.
Firstly I wanted to carry high and apologize if I missed this in the beginning on the current infrastructure versus competitors could you. Please.
What is your fulfillment.
Fulfillment capacity at the moment in square meters, and if possible to compare that to WILDBERRY from Yandex.
Sure.
Whether or not to disclose any numbers from their competitors because honestly.
Hum.
If.
However, you have better financing publicly available.
Probably.
It needs to be mindful of the fact that.
On.
Limited ordering behind the numbers from EIOPA difference.
And therefore.
It might be very difficult to run on the conclusions without knowing how any of these numbers force.
Was calculated.
In our case by then.
Adventure book.
The efficient fulfillment space and use.
Is it the 100 day square.
Square meters.
If you also on multi play base.
By.
Additional flow Squish you have.
On the list number obviously will they are indifferent.
I can't say that I mean is.
Is it all a bump on the.
General sentiment, which we see on the market.
We're probably on one of the largest place in terms of the infrastructure buildup.
From the last mile channels.
To remind you we have the most diversified.
Last mile delivery on that book among all of the Russian equivalent of split.
And we have very robust buildup in terms of from the fulfillment capacity, which we have.
And that a replay of measures pick up <unk>.
<unk> metrics in our case.
One measure.
Since you buy.
Big Day Bussell.
And if I tell you the number without the context of what it is.
When it comes to other place probably it will tell you where we're at.
Lethal Unfortunately.
What I would say that we remain very focused on making additional investments in our infrastructure and are on your guidance on capex shows thats, because we see that on day, one hand demand for our oil infrastructure, a four day doing model.
It's quite high.
On the fulfillment solutions, which we offer our emotions.
Based on costs on the market right now, therefore, whether or not see any significant composition in terms of.
Price versus quality when it comes to the fulfillment service, which will.
Very helpful. Thank you.
Secondly, I wanted to discuss.
Unit economics.
Maybe cohort deferments in Egypt reverses because it is so you've mentioned that regions are now more than 50% of GMP.
What are the differences in unit economics and that user base.
Here in Moscow, or a big Cedar prices.
Sure.
And Eurasia surprisingly I mean.
Analytics and.
Sometime.
Excellent to hear that from the Russian region some poor.
Everything is disastrous there, but right now all the numbers, we see a completely different setup.
The regions are performing very well.
Partially because of the fact about regional consumers, albeit by half.
Free to do some level of disposable income.
Where the price of the Assortments, which people in bigger cities like most clients say you'd have.
Therefore for them lack of appropriately develop a plan on retail and lack of our brands.
The other things.
Influences.
We're on line for changing patterns.
And therefore cohorts in the regions.
Before as well as the cohorts.
In the bigger cities and some of the regions cohort performance isn't going but.
And in terms of field economic system, and just how quickly.
It's a M.
So long term, we expect actual regions to be.
On the fall with multiple in terms of for St. Petersburg from tens of into comics.
Hey.
On multiples in Petersburg.
Sure.
But that's mainly because of the ramp.
Ramping up infrastructure in the regions. So it gives the fulfillment centers on last mile.
Last mile delivery unions on either pick up points, or let's say lookers or hubs.
They are ramping up and.
And being an investment stage paging unit or unit economics.
While drastically poorer, but maybe a couple of percentage points of central Jamie, but still I mean multiple insensitive St. Petersburg is much better.
Okay. Thank you and when you see quicker sent regions.
The remaining 60% would be just most questions right.
And then in a small school Moscow region and Cindy.
Okay. Thank you.
Okay.
Thank you. Your next question comes from the line of Kirill Panarin of Renaissance capital. Please ask your question.
Yeah, Hi, everyone. Just two questions. Please firstly a follow up on competition.
There isn't any material impact on us on from competition at this stage, but could you share your thoughts on your marketing budget for this year should we expect further material improvement in marketing cost per order or is the share of GMB and will generally has anything changed in terms of your vision on path to profitability since the IPO. That's number one and secondly could you talk.
About the <unk> segment within a zone.
Youll key ambitions on key initiatives here and if you could also give some color on the size of the opportunity categories and maybe competitive landscape that would be helpful. That's it. Thanks.
Sure.
Let me start with the question on competition.
Honestly marketing career marketing spending on cave.
Greenlee, a poor proxy of the competitive dynamics.
Even if you will spend insane amount of money on marketing without having to develop infrastructure.
And without having developed products and value.
In addition for yourselves and bias it will heal nothing.
You probably would result in a zero cutoffs conversion rates I mean, the huge traffic Bowl zero conversion rate.
And ultimately incredibly afore.
Marketing from.
Marketing from from the investments will follow on from the investment standpoint.
Therefore.
It is very very deceiving, so think of marketing spending against any proxy or the competitive dynamics, but from.
As mentioned.
I mentioned earlier.
And just whether or not.
Went up.
Experience any significant competitive pressure.
We're obviously aware that the competition on exists, especially pasta.
Although ongoing public I mean.
There are.
Lots of little Morrison ambitions.
I mean <unk>.
James.
Tom will follow up.
The big competitors.
With respect to the development in the equipment space, but even on the eve for all of their plants from <unk> for 100%.
Steel, where all the view that the market opportunity is so big of the stage.
For us to feel any damage from the developments of <unk>.
All of the competitors.
On the pass the price tabular here.
Once again with another communicate on your formal guidance on the flexibility and whether on this deliberately entity.
We're way more focused on the cash flow generation.
Because for US this is a weighted by the proxy of the business and business model performance.
However, having said that obviously I mean, if we wanted.
I hope this is quite evident from our 20th venture results.
From the company to positive EBITDA.
What have to sacrifice their growth.
And from.
From all of your products.
Huge strategic mistake, I mean, prioritizing EBITDA and earnings per share is up also.
The market share.
In building, our footprints in rational kilometers landscape.
What was your last question on <unk>.
With Covid I guess on <unk>.
Sure.
Yeah, So hmm, let's go one blow on on.
On this view.
We we see huge opportunity there because.
There is we don't see that there is a lot of competition there.
But we definitely see potential I mean, there are several segments.
There is a little bit <unk> segment with some non online to offline segment and so there is segment four offices.
There is a tender segments. So there were multiple segments there and we.
We believe it's very old school, an inefficient market overall there.
And that's why we see big opportunities here.
What we're doing there is.
In Q4, we just launched the very basic steps. So you just got that.
So we just enabled businesses to register as a business.
Consumer and not as a <unk>.
Direct to consumer.
We worked out some.
Some see GM Ford.
<unk> so that they can receive a Vulcan is the day requires so on and so forth you know to the color of the tea for example.
And now we continue working on the products integrating.
On integrating some of the Fintech products and.
And in Q2, we're going to start working on the more on the commercial matters you know working on the funnel.
Advertising some marketing.
We know those guys on any specific condition there.
Again as usual as usual I mean, we just don't know how big it could viewing will have some internal targets.
But we need to leave it at that.
Huge market I mean in terms of competition difficult to say I mean, the smaller more traditional players.
We believe that if we.
We apply effort correctly.
It would be close to impossible to compete with us.
And so we are ready to provide all of this our services.
Two businesses, including smaller businesses and posted on our extra actual solid base. So we will continue working there.
Today on this business represents about I think.
It's.
So I think it's a volatile three to two 5% of overall business from zero in on.
For example in Q3 last year so.
We will continue working on the ethical sit here on those.
Great. Thank you and just quickly a quick follow up on the B to B in terms of category breakdown would it be similar to your core business or something different.
Well.
It looks like.
Most likely as you know.
Less of food less of books.
Less of apparel.
So beyond those three categories. So it shouldnt be simple.
Okay, great. Thanks, a lot.
Thank you. Your next question comes from the line of Elena Tour, Nova of J P. Morgan. Please ask your question.
Hi, ladies and gentlemen, congratulations well kind of on a special congrats from me.
Igor.
Quite a new roles on good luck on your.
Question on <unk>.
Per mile coming back to growth through lots of you can talk about profitability I mean, I wonder if it can actually have positive unit economics at some point or is it going to be a drag to your personal stability for a while and a related question.
<unk> Corporation, who is on offline play on what makes sense in order to give you the purchase on scale.
Mhm.
Yeah. It wasn't on shows let's look.
We believe that.
I mean, the challenge of this category is that low value item a little item value. So that's that's the biggest challenges there and 19 value has been booked on on economics.
Longer term, we're absolutely sure that the segments is it profitable on I think you should you can use a coupon close for the reference which.
Which is which sells mainly from <unk>, including food.
And it looks like there are close to breakeven.
Hum.
One important thing there is that yes, low price and value is a challenge, but marketing is low as well because it has to agree by itself generates traffic. So so we have we actually have.
Right good level of comfort.
This catch agree on.
So on I mean overall from Sydney right you shouldn't look at food people not just food itself on a case I think since you itself.
Should be a day from economics perspective.
I would never be very profitable, but.
Breakeven.
Sometimes we would actually the absolute polar ins for some sub categories to be loss, making because we're looking at these categories as a marketing rather category and will measure with terms.
We work on that right now actually to start measuring it.
The economic efficiency of these categories from marketing perspective on how much.
Ltvs do this catch a grouping so overall I mean, we really shouldnt be breakeven, but even if it's slightly negative it should be okay.
<unk> on a static for all categories.
And then day.
No.
Corporation with any offline player in the grocery segment on that that's something that could make sense from you.
Yeah on purchasing scale.
Yeah, I mean difficult to imagine how that would happen I mean, we welcome all of this all day.
Offline and online this is a matter of like all the retailers are very welcome to join our platform as a marketplace.
As a seller on our marketplace and what was a very welcome.
We want to join.
Any partnerships or is it just.
Difficult to imagine how we could you know.
Utilize this I mean, we will would likely any weighted pay for that right nobody will give it for free.
If we pay for that so it doesn't matter.
There is some equity partnerships with no or maybe it's better to use cash rather than equity.
And so difficult just so I think marketplace.
Corporation should be possible and book was boots are very welcome.
<unk> them to join because we believe that our.
As the marketplace, we would really.
Toward growth.
Growth together with with our sellers.
We do not look at this as a competition, we actually ready to embrace everyone.
Hi.
Yes.
On those so if your question is related to <unk>.
On the planet with endless potential M&A targets for us.
The answer would be April renewal book.
Yes.
Among the things, we should make them offering complements our business net of some of the purchase power from purchase power is.
Accessible with the scale.
Other than that I mean, there is very little we share.
<unk>, it's our core business, which can complement our core business. This is our thinking at this stage.
Okay. Thank you and I have a few other questions sorry for the background noise. So we noticed that your <unk> business actually did very well in Q4 much better than we thought.
Does that reflect expansion on they also on express business and maybe you can comment on the profitability of foreign operations, which improved slightly in Q4 and give us an idea on what to expect in 2021 are you keeping margins slow there or potentially increasing a bit.
Yeah. It's a good question, let me address that first of all you're right part of that was was on express.
But nevertheless, we.
We actually with the non plans to rifle. So you know the ideal for developing one day there are several categories, where one fees essential.
They will.
Most likely would be essential tomorrow.
Because there is any way a very big brands, who many of many of them prefer to work in one day model, which as you know and the per K plus I mean.
So for this year, we actually plan to continue to grow with our lumpy business. So.
We believe and we plan to share with marketplace will continue growing but nevertheless, one day will continue demonstrates in a very good growth.
On partially that was driven by express, but even without express should be growth.
Profitability expresses an investments H, so built on large stores.
A lot of ramp up there.
Without the express.
Well, we are working to continue improving our per system.
And because the developing marketplace, where we can narrow down our assortment focus on on procurement focusing on better efficiency.
Focus on an hour.
First in terms, which are materially significantly materially below that.
Over the Pearson day markets look like and is used to it.
Say bigger players from the market. So we see huge potential actually there to improve margins and we will continue doing that parts of that will be will go on to prices, but overall profitability on it should be improving.
Yeah, that's what I would've hoped was 160% <unk> growth.
And if you ask a question section on your working capital on payable days first and foremost if that's related to mainly tier one or tier CP business.
Well, you mean tables.
Yes, yes, the tables.
I think yes look I mean, if you look at our reporting so inventory is basically <unk> payables would be related to both <unk> and given that the marketplace is bigger than lumpy in Q4 most of that.
Parts of it that would be marketplace rather than lumpy.
So from the accounting perspective, the Threep business effectively when you receive the money from the buyer that goes into your payables before we get paid to the merchant or the money belongs to the 19th straight away. How old you are counting how does your accounting Mark. So the first is the first of all on that for the first is growth.
On the payables.
Understood and I had a final question on the Capex and the corn and kind of day, resulting gene being growth. So I understand on the big Capex, let's say they'll be clean tended not only to drive 90% GP growth into 'twenty, one but the.
Foundation for strong growth in the future if I'm on.
Not mistaken on the kind of IPO day expectation on the market wasn't that you can do something around 50, 60% CAGR over the next five years.
And with that I'll Miss from Capex do you think that the midterm gene the growth expectation can actually be higher.
It's a tricky question.
From that.
Work rolling off.
I wouldn't guarantee it.
Longer term growth guidance on this season.
In 2020, so indeed, we see.
Participants it so.
Well eventually accelerate the beats and plus please keep in mind that part of the Capex increase is attributable to higher steel prices.
On the relevance of our Zone Express initiative with share.
It also requires additional spending.
Yes.
That helps I can tell you that the growth that you mentioned, so if we choose them.
Wouldn't be very happening.
So this is just the maximum that you can see.
Yeah.
Thank you that's very clear.
Thank you I will now hand, the floor back over to Alexander from <unk>.
From remarks.
Okay.
Thank you for joining us today on this call on the prior questions to sum up despite challenges of the pandemic.
This past year was a very successful year for us on the core engine of our business the marketplace, which now accounts for over 50% of Jamie So on disciplined growth with improving cohort performance on the meter so biased on those books.
Joining the platform.
Following our IPO and recently on the north of a bond issue our balance sheet.
Position is strong.
We're encouraged but encouraged by our results, but we're not complacent.
We will stay focused on building scale and growing market share in our core ecommerce market as.
As well as on the adjacent verticals book forward to updating you on non progress and our performance.
On our Q1 earnings call in May.
Thank you and have a good afternoon.
Thank you that does conclude our conference for today. Thank you all for participating you may all.
Disconnect.
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