Q2 2021 Ozon Holdings PLC Earnings Call
[music].
Ladies and gentlemen, welcome to <unk> second quarter, 2021 earnings call.
Before I pass the floor to others and 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 and information currently available and are subject to known and unknown risks and uncertainties.
Many of which maybe beyond our control and actual results may differ materially.
We encourage you to refer to the cautionary statements contained in the company's press release issued today and S. E C findings.
During today's call the company will be referring to certain known the I F. R. S financial measures and other metrics reconsideration and definitions of which you can find in companies' press release published today.
And I will pass the floor to CEO of Arizona Alexandre shooting Sugar. Please go ahead.
Thank you Hello, everyone and welcome to our second quarter is when you think about it is all school before I go into our Q2 results. Let me remind you that onset of COVID-19 for much of 2020.
Well thats extraordinary challenges as a business buzzword managed to step up to the challenge.
<unk> and deliver goods to millions of customers across Russia in a safe manner.
The result of that shift.
<unk> growth of 188% in the second quarter of claims affected by this news that we were.
The extreme that the goal this year.
In the second quarter. This year, our JV grew by 94% year on year, we nearly doubled the size of our business to be up again.
And it is even more impressive is the life of the extended tough comps.
If we try to normalize for the client base effect over the last year and look for example at the two year compound annual growth rate.
Our G&A growth actually accelerated from 124% in Q up to 136% in Q2.
Despite the fixed gradually removed from Q3 'twenty 'twenty. One works, we continue to see strong demand for our services from consumer and no signs of it.
Interest petering out from the merchant side.
Speaking about our user base the number of active customers drive them by 80% and exceeded 18 later this month and it sounds Russia is now using our platform.
And the MAU customer to use our platform the more stricter would account for regional and national nurses.
The number of active sellers more than tripled compared to the second quarter of last year attracted by a large customer base, a wide logistics footprint and our cost improvement proposition for commercials.
Growing Norton base drive greater assortment, which reached <unk> 7 million is to use.
This is more than double compared to the start of the year.
Well, if you watch the volte infrastructure, we expanded our fulfillment and logistics footprint significantly and good luck to them us we operate.
260000 square meters of hope in this space.
Our infrastructure and processes enable us to achieve a great milestone of 1 million partial shifts per day during Q2 of which 97% are steadily delivered on time.
Greater fulfillment and logistics footprint enables us to start was closer to consumers and ship them faster.
We aim to nearly double our fulfillment footprint.
Improving delivery time is one of our key priorities within the faster we deliver goods store consumers with more convenience our source becomes.
The more customers, we will use our platform things that data needs.
We have launched same day delivery in surfaces of Russia in cities, where also as fulfillment centers about 60% of fulfilled by our own orders are delivered same or next day.
But we're only scratching the surface.
The ecommerce market is still quite programmatic the top III last account for less than 30% of the market.
The Russia.
Yes, the Russian retail market exits $450 million.
Ecommerce penetration in Russia at around 9% the market remains highly underpenetrated compared to 15% to 20% of the other markets with similar income penetration.
The opportunities through levels were.
We are focused on building scale cluster and they'll take a market share to enable us to do so we have stepped up investments in fulfillment and delivery infrastructure felt acquisition in particular.
And customer acquisition, but this should help us to cement our position as one of the leaders of the ecommerce in Russia.
While we see what we still see a lot of scope for growth in our core E. Commerce vertical. We're also thrilled about our new verticals.
<unk> is increasingly becoming an important lever.
Awesome platform to gain better traction with consumers and merchants.
Fintech business, we aim to serve as many of the financial needs of our buyers and sellers are treated with ozone as possible after acquisition of a banking license. Our fintech team is focused on creating a comprehensive suite of digital financial services for wireless and for sellers at ballpark less.
Also on our flex of consumer payments product has gained great traction with the customers with over 1 million cars excavator.
At the end of the second quarter. This is more than double compared to 2020 year end.
In Q Awesome card became one of the top three payment methods on the phone.
Tom.
Although cardholders exhibit 60% high frequency of purchases on the platform.
Our financial services products are gaining traction with our sellers.
In Q2, we launched the flexible payment plan for the seller essentially this allows sellers to better manage their working capital and three investing to scale their business faster.
2000 sellers already adopt a disservice within just two months after the launch.
This service has increased loyalty of the seller so our platform in my view.
Well I don't express is our quick service.
<unk> share of plasma collection with some of the scale of the business from from last year.
After launching multiple over the course of 2020 in Q2. This year, we launched was on express operations in St. Petersburg.
The former currently offers or 25 skus of 50% of which is good.
As I mentioned, the Russian retail market is more of a $400 billion and growth is the single largest category within the consumer retail accounted for around half of the total retail sales within the fee growth represents a huge opportunity on a standalone basis. However for US. It is also an additional benefit grocery and.
The Panthers you categorized generate traffic to the platform and increased customer order frequency and loyalty secondly, eight horizontal become a top online breath assistant with the customer acquisition.
As of the end of Q2, we operated over 35000 square meters of the dark store fulfillment space.
In the coming quarters, we will continue to scale or don't expressed quite aggressively as we push into higher frequency model.
Now I will pass the floor to Daniel toward Europe, who will talk about our operational performance and dynamics in our marketplace.
Thank you Alexander the Doctor and another one I will provide you with a few comments on the performance of follow marketplace, which is the core parts of our business.
Although marketplace is the biggest driver of the team here at this stage.
We demonstrated this stellar growth of 155% year on year boosting growth for the group overall as a result of the contribution from therapy continued to climb higher revenue share reached 62% up from 47% plus here.
The growth in <unk> was augmented by the acceleration in growth of our merchant base and the number of active sellers on our platform exceeded 60000.
Approximately doubled since the beginning of the year and increase of more than three fold.
Year on year.
There's still a lot of sidetracked by logistics analytics in financial services that we offer and most importantly will provide <unk> with access to a large user base of over 18, one 8 million customers, which means that the merchants can generate more sales now platform.
I would like to point out that we have been gaining a substantial traction with the merchants outside of Moscow, and Moscow region, and it passed over 50% of our active sellers on our marketplace platform from regions outside of the law School.
I believe that this demonstrates that our expansion of fulfillment sorts and facilities as well as delivery infrastructure, which is a better approach.
The New Commissioner Scott you introduced in February of this year and centralized sellers to utilize and engage with our regional infrastructure more this should lead to faster delivery time for the customers which was.
Which as we can see drives greater engagement on the platform and high frequency.
Although a wide suite of services, Paul with Telus.
Have a wide suite of services for.
So we're in the best position to cater for the needs of the new businesses.
Example, will for Azure in SBS as well as store for our global.
In addition, we're constantly launching new analytical and advertising tools as well as well.
Ron seminars and big events for sellers.
And business development.
Our marketplace performance was driven by powerful network effects from our favorite large customer base, which is now growing by nearly $1 million a month and a constantly expanding the merchant base. The lesser resulted in us being able to offer the widest selection on the market with $27 million Skus.
This coupled with faster delivering great user experience that supports an hour 80% growth in active customers.
As I mentioned as I mentioned, the larger customer base attract small merchants further propelling the flywheel effect.
The growth in annual order frequency, if I put the percent is something that we have.
I'm very proud of it all.
We are not being complacent to acknowledge that there is a significant upside and room for growth.
This is an interesting slide.
As you can see from the data on this slide.
Is that the new cohort a comfortable over one third quarters.
What is even more interesting is that those new cohorts show higher repetitious right.
Which combined with improvement in the order frequency.
Yeah.
In the order cohorts resulted in 40% increase in the overall order frequency and contribute massively to the tremendous 180% growth here.
We increased fulfillment footprint and launched new fulfillment center in <unk>.
<unk>.
We've made tremendous progress in building out certain half footprint as well and there is a high correlation between open and fulfillment center in the region and accelerating order growth rate.
Since the close of the goods are located to the consumer the parts that we can deliver which result in higher rates of conversion and better order frequencies.
The next slides and our presentation speaks to the same point.
We expanded Italo logistics aggressively this year.
And Brexit pickup points, we exhibit.
<unk> 5000 by the end of second quarter, 50% increase versus 10000, which we had integration by the end of last year.
If we compare it to our network a year ago at actual expanded thoughtful.
The scale the scaling of the pickup points network.
It was enabled by our franchise model.
Today, we estimate that about 85 million consumers are able to get goods delivered with walking distance now.
Now I will pass the floor to <unk>, who will discuss our financial results in more detail.
Thank you Danielle.
Good afternoon, everyone I will comment on the financial performance.
Let me recap the grub generated eight to 9 million <unk> in the second quarter as.
As an example, and Daniel mentioned, we delivered strong 94% JV, yes.
On the back of that 180% orders growth.
Although the average order value decreased this has been driven by our customers' volume on our platform more frequently.
The strong order growth marks the beginning of our transition to a high frequency of shopping model and becoming a go to destination for shoppers online.
Both cohorts and order rates have improved which means small traction for the entire platform.
Increase in the number of customers and higher frequency demonstrates that our strategy is working.
Our marketplace Commission revenue increased by 178% as a result of the marketplace sellers.
<unk> now accounts for 62% of JV.
Our advertising revenue showed strong growth of 135%.
Sell us in bras.
And increasing their usage of our advertising platform and leverage has a marketplace strong brand awareness, so cromwell and gross sales.
Our advertising platform now offers of up 30 tools for promotion and average seller users our advertising tools.
That should allow us to increase monetization of the platform going forward and we see significant potential in that revenue.
Now moving onto operating expenses.
Although our fulfillment and delivery expense increased by 108% year over year. They remained largely flat Q on Q as a percentage of JV on the back of higher utilization of our existing fulfillment and logistics facilities offset by a ramp up effects of our usual launch months intra.
<unk> expansion is instrumental for us about frequency and Jamie growth going forward.
Sales and marketing expenses increased mainly due to a depressed base of marketing costs in Q2, 2020, when COVID-19, Robert <unk> in terms of customer acquisition costs.
In addition in Q4 this year, what's my targeted digital advertising instruments that contributed 8% increase in the client base.
But I would like to turn notes VAT on cost per order basis, the sale and marketing costs slightly declined year over year.
On technology, and G&A costs were accelerated talent acquisition, especially in Nike Dawson.
Those investments.
Essential in order to continue accelerating growth and support growing scale of our platform and it infrastructure.
This is important as native backhaul together with our logistics footprint allows us to process and deliver three times.
More quarters compared to the second quarter, 2020, and seven times more compared to the second quarter 2019.
We are also building teams in order to scale, our new verticals, such as Fintech and express.
Adjusted EBITDA as a percentage of JV was negative two 3% in second quarter 22, one compared to a negative $3 nine in second quarter of 2020 and negative $6 class in the first quarter 2021.
Vicki, but I also.
First of all a full quarter of the new marketplace conditions. After the adjustments, which were introduced in February 2021.
Going forward and growing share of marketplace.
Will it become a more pronounced than I ever over the gross profit recovery from the second quarter 'twenty to 'twenty one levels.
Secondly, our target type investments.
So a selected number of high frequency categories I'll follow on Pbms.
In the second quarter were have been testing various pricing strategies.
The growth of <unk> business and drive increase in the frequency of photos.
And I like the efficiency or the investments, we make and we will be optimizing them over the course of several quarters and stick to those which are most efficient over.
Over the next couple of quarters, we expect to see some improvement in the gross profit profile of our <unk> business.
Yes.
Our EBITDA loss attributable so express model scaling up which will remain one of our strategic priorities from our.
Well accelerated investments into express and rapid development of high frequency model, because that drives higher customer value and it is more sustainable in the long run.
As we accelerated investments into marketing talent acquisition to support future growth of core in your verticals.
We believe it should be dilutive over time, as we grow scale across our platform.
Now moving to our cash flow metrics performance.
Cash flow was in flat to negative territory, mainly as a result of EBITDA loss offset by healthy working capital dynamics.
Working capital profile of our Commerce Division continues to fire well.
<unk> cash flow generation space in fact and positive for ozone growth performance.
Marketplace Shankpiece on once Youre working capital currently widening some stock investments.
Of the high season, but we expect better performance in the Europe.
We invested $3.9 billion in capital expenditures and second quarter, and we expect higher capex in the second half of the year.
I'll finish up with our guidance.
Our core platform Q3 performance and our operating performance in Q3, as well express model grow.
So far gives us confidence that our ability to deliver higher growth and increased market share.
We expect our autograph settlement strong for the remainder for the remainder of the year.
And therefore, what is our dream via growth guidance, so 110% for the full year.
We also reiterate our capital expenditure guidance of 20 to 25 billion rubles for 'twenty to 'twenty one.
This concludes our presentation and operate that suggest we're not talking right now.
Thank you, ladies and gentlemen, if you would like to ask a question. Please press star one on your telephone keypad and wait for your name to be announced.
If you would like to cancel that request please press the husky.
Once again, if you'd like to ask a question. Please press star one on your telephone keypad.
And your first question comes from the line of.
Sure.
Comes from Morgan Stanley. Please go ahead. Your line is now open.
Thanks Sachin.
Question first one just on the gross margin contraction, sorry, I missed some of the commentary you made could you just go over again the.
The drivers for that contraction and perhaps if you could sort of breakdown.
Sweet.
Contraction between the different drive it what was the biggest ones and how should we think about what that looks like in the second half.
And then secondly on the marketing cost as well you saw I think about hunting 20 bps sequential increase there as well so to what extent was this driven by some of the customer acquisition that you mentioned for express.
Was this a result of competitive pressures have you seen any increase in advertising costs.
And then that would be if you could just comment on the epic 10 billion people now needs to come in August because clearly the cash balance is pretty solid too. If you could just explain what that is.
Useful thank you.
Sure.
So on the gross profit margins to give you some more granularity.
As you probably remember in February.
21, <unk> introduced the new conditions production and therefore second quarter of 2021 is the first full quarter. When we operate on the New Commission structure.
Well they are not see any deterioration or weakening of our commission structure.
Therefore, we expect it to remain relatively stable going forward.
The other thing to note here.
But we're growing share.
Marketplace operations in our JV.
We should see an uptick in our gross profit margins going forward as well.
Simply because of how fees are structured.
The biggest contributor so the decline in gross profit margins Q on Q, while our pricing strategies and investments targeted at the growth of our lumpy business.
We are on.
Let them efficiency of the investments, which we have been making over the course of the second quarter 2021 and will receive that they were paying off with higher frequency of photos.
And the hygiene Eagle bulk.
Both Europe and on a year over year, which is.
Actually.
Which looks especially strong in.
<unk> com the high base of the second quarter of 2020.
Going forward. However, we expect the bulk of the investments will be optimized.
And therefore gross profit profile I'll follow up one thing business will be blips up versus the second quarter of 2021.
On your question about marketing.
We saw that our cohort performance is improving.
The market basis, and therefore, we have been making investments.
Customer acquisition and with managed.
Significantly more new commerce platform versus first quarter of 'twenty or 'twenty one.
And we're such cohort performance from our standpoint, it is a relatively safe investment, so Mike bts with growing frequency and improving retention.
Evidently Bryn Mawr.
Nevertheless.
As we see from our trading updates share of marketing spending as a percentage of <unk> will be celebrating the second half of 2021.
On.
The Robo law so.
We're basically just leverage and opportunity to get a loan at very decent rates. So it is just the personal touch points above the Q&A of the central Bank.
And therefore, we just decided to use it for another.
Our capital structure.
And that will be used mainly to finance our working capital.
And next up mostly covenant free.
It's a one year facility yet.
Which provides us with SEC you shouldn't degree of flexibility so much liquidity on the rational that traditional companies level.
Great. Thank you just a follow up on the first one could you give any color on the categories that you are making that investment.
Sure.
Let's now walk.
Main liver.
We haven't been targeting so categories, which I thought most of the traffic in most of the cost.
And those categories nationally our electronic center from Sujit electronics is an important.
Good at Virginia, but Asics and <unk> is a very important vertical but I think it's important for us we ship driving frequency and create.
Long run and stimulate the growth of the oil adoption of E Commerce shopping.
That's great. Thank you.
Right.
Yeah.
Thank you and your next question comes from the line of Nelson Victress Goldman Sachs. Please go ahead. Your line is open.
Yes. Thank you very much for the presentation a couple of questions. Firstly the product question on costs.
Most of the cost items as a percentage of GMP increased in Q2 compared to the last year, which is obviously effect on all the high base effect of 2020, but also the increase Q on Q that's percentage of JMP.
How much of that was driven by the deliberate decision to invest into their long term growth and that will basically flattened that GMP deceleration curve in the long run and how much was driven by Arthur maybe certain non controllable factors like that competition or maybe non controllable factors like inflation.
Like an average wages et cetera.
And secondly.
You did not change them.
Guidance for the full year, but that's for the medium term and did you see more challenges in rolling out their fulfillment capacity and given the high demand in the market basically either for you or for the competition.
And do you think that the market is ready to absorb hundreds of thousands of the fulfillment capacity construction per annum to deal there'll be deals out in Russia over the next couple of years. Thank you.
Sure.
For your questions. So the growth in year over year, Clemencies, mainly attributable to the class a assets in the first half of 2021, which has been making deliberate investments in expansion of the infrastructure, both last mile infrastructure and infrastructure powerful human samples there.
Naturally there is a significant ramp up components as opposed to the second quarter for 2020.
Because with the growth of 180% in JV plus yet our fulfillment, we're overly utilized I meet the spike of quota.
This year I mean, mainly it is a reflection of the ramp up as the first signs that show, Jamie fulfillment and delivery costs to remain relatively stable.
Q on Q.
They came in stock comp.
In Europe, and a lot of the infrastructure I wouldn't say that any of.
The cost items as a percentage of G. D has been affected by competition or things like complicate that put a lot of the infrastructure is just a reflection of our ambition to support the growth frequency of bank and making sure that we're able to improve our dig.
Every promise.
And we're a swimming pool speak of our deliberate in second half of the year plus fulfillment and delivery component also campaigns.
Thanks, Brett that's included.
Therefore, it is one of the items.
Not that evident from our accounts.
Which is also a contributing so that opex as a percentage of GDP.
You have also.
About the difficulties in rolling out our fulfillment infrastructure going forward.
Keith that most of our fulfillment facilities.
Therefore, there has been a contractor well in Nevada, therefore, basically where have been expanding market.
Paul ourselves for a couple of years already and.
And we will seek to.
Because when they have a salt that's existing craft.
Supply of this space on the market like Houston, So I'll come Monday, our demand and our novel technology political islands as well.
Okay that answers your question.
Yeah, maybe just.
A clarification would you envisage setup by chemicals. This was what you thought before given certain inflationary trend on their fulfillment rollout or maybe certain bottlenecks that you didn't get a chance.
I wouldn't say that any.
Spike or change on the market transitions.
I might typically affect us in the long run potentially tactically if there might be some spikes, although with another <unk> that put a milestone out being that low cost structure right now.
Okay. Thank you.
Thank you and your next question comes from Kirill Panarin.
This capital. Please go ahead your line is now.
Thanks, Hi, everyone.
Two questions. Please firstly any comment on current GMP trends quarter to date.
Secondly on competitive dynamics in Moscow. Some of your peers seem to have made material progress in this weekend. So I just wonder if there's any impact on those loans growth in margin in Moscow in particular any color on the trends here versus regions would be helpful. And lastly, just to follow up on one P. Gross.
<unk>.
I am Super Bowl everything you said I just wanted to.
Two to ask do you have sort of a sustainable longer term target for one P gross margin.
That's it thank you.
Okay. So the first one yes.
Yes.
Give you trends I think.
The way, we look at JV internally because of the volatility of the previous over the last year.
The two year CAGR.
And we see a two year CAGR basis, the trends are quite stable. So.
Like I think the trends.
We indicated in the second quarter, they continue into the third quarter.
Talking about Moscow and Moscow region.
I would say that.
No we don't see any.
Any issues there it's continued growing our regional.
<unk> is growing faster because we will roll out to a lot of infrastructure, but at the same time, we will say that the pharmacist healthier the special in tobacco Rollouts of our express service.
And as.
As for the comments.
From some of the players we see them rather controversial and is a bit surprising.
I would say that.
So I would say that's almost glad <unk> is quite similar to that.
Biggest Jamie number they report overall for the poll.
The whole business, so we'll see.
Yeah.
Sure Yes.
Had a question on the one <unk> gross profit margin and the long cut off I mean, it's quite hospital guidance on that relative metric because it is affected by the mix and we're now focusing on an outdoor categories, which have completely different profile gross profit margins. In fact, and then if projects net revenue gross profit margins are much lower because.
One of the highest average item value while in the pharmacy gross profit margins traditionally our hi, Jeff take a look at the gross margin of offline if it looks like expired.
Therefore, it's hard to tell where we'll end up because its a subject of a sales mix, but obviously that's safe to assume that.
We will be working on a significant improvement of our purchasing power and bargaining sets.
Okay. That's great. Thank you very much.
Thank you and your next question is from the line of Ivan Kim.
And from external capital. Please go ahead. Your line is now open.
Yes, hi.
And just maybe three questions from me please.
Firstly on sell on boarding.
Looks like you accelerated sell on boarding in the second quarter versus the first quarter.
Do you expect that to continue and what was the driver.
For that that's the first question. The second question on a zone Express maybe.
You gave them.
It useful stat on average daily order number but.
But can you maybe share whats I was on the express S share of Moscow, Jamie you're right now.
And on.
On the margin side, how long do you think it will take for you to approach a purchase in terms of bigger.
Grocery retailers.
We then export routes unexpressed business.
And then thirdly, just on the fulfillment. So you said you want to double the fulfillment of the CR rate.
Which means.
My quick calculation. So it's about 170000 additional square meters in the second half I just wanted to reconfirm that's correct. Thank you.
Okay. So on the first one on them on the.
The increased number of sellers.
Thank.
I kind of said not something dramatic that I would highlight three things.
First we started.
During the much more public events, we've had a major event in June.
For sellers to where it was basically it.
Embraced the wholesalers, new sellers are calling sellers and someone who is thinking about marketplace and what would you need one and say beta just several weeks ago. So that's one.
So I think we just became a bit more active publicly.
Second I will say that there was quite.
Quite some significant.
Improvements in product.
In.
And also an onboarding process so.
The time was onboard and actually accelerated on average for sellers, especially in that model.
And that has helped basically though little funnel and third I would say that with the development of infrastructure.
It will open up a marketplace for original sell it or send a lot of astellas without twin platform during the second quarter of virtual agents.
That's just because we have fulfillment.
Fulfillment right, appearing in the regions and also a drop off points for Rps sellers. So I think overall to answer quite healthy.
Well of course want to continue.
An increasing number of sellers accelerated some processes.
Oregon Onboarding time.
So probably it.
She'd rather than team, but I think here we will.
It's also important is to develop sellers to make sure that it's not just the platform growing with each telus is growing and <unk>.
In developing this business.
And on your other question.
So far is on express and the latest month, we see that trail off as an expressed as a total JV in Moscow quarter growth is over 10% right now.
It is becoming quite considerable.
On the purchasing power.
I mean, that's.
It's a function of several things.
Yes.
We're trying to cross border growth forget I mean in the skies are great. Therefore, part of the impact, which you saw that even by pure investments.
More consumers and love them on our platform.
Thanks, Steve.
It is a bit different story, but I guess it's.
I mean, they're all of Barclays.
<unk>.
At least year over year in the hearts of yield sufficient scale in that category, but even then it will be what I am.
In terms of the sales mix, yeah, because you need to build.
Our best sales on that single escrow your basis.
With every single supplier.
Yeah.
Hum.
Yeah.
Once all of your questions.
Yeah whole films.
Fulfillment side that we've got a speaker we plan to finish the year was approximately 500000 square meters of total marketplace yeah.
This means that they have.
Yeah, I mean, not only creates a buffer already in that direction.
Alright, Thank you very much.
Thank you and your next question comes from the line of Ana <unk>.
I'll have bank. Please go ahead. Your line is now open.
Yes, good afternoon, and thank you very much for the call also I have one question.
So your Capex guidance.
<unk> milestones.
How for them.
Number like I'm almost.
Almost a 6 billion ruble, who most of us expected.
In the second half you will between 33 billion rubles. So that my third question would be.
These are different the range.
Hum.
He did it splits youre kind of flexibility in terms of projects.
So commissioning.
Commissioning.
We're in a in some parts of it may be a flip for some cost inflation that you might be.
Like Oh for.
<unk> question, yes, so until the end of the year.
Could you tell us more or less you have oh like.
Thanks, Oh fulfill the fulfillment capacity.
So until we get them.
So it would be great.
Great to understand like the <unk> and the nature of this capex range for the second half. Thank you.
Sure I'll try to explain.
So our capex guidance remains intact and indeed, we're in suspense most of their pumps in the second half of the year, especially before the high season and also before the holidays. So when you sort of make sure that infrastructure in place in order to support the gym you grow.
And on the road I real Itchy and guidance, they think east west and suddenly we're thinking in terms of commitments and for.
For us it is crucial to sign legal obligations will follow that path to ensure that they can trust structure and those projects will go up and that should appeal, but context as a cash expenditure is a bit different to think big gifts.
You need so actually but this cost can you quantify today needs to be able to meet the deadlines and plus you might renegotiate topic and postpone the payments and therefore actual cash expenditure.
Cash from the commitments for sure.
We'll have already gave.
They execute the football content products.
This is where they are but I agree with your comment comes from so therefore for us it's not.
The bigger for drama you for some of the Capex will be expense.
Corpus of data for instance, it is crucial to look.
The bandwidth and it is crucial to lock the developers.
Legal contracts with five so make sure that your infrastructure will be built and launch and launched on time.
Thank you very much and as a kind of a follow up on this could you speak a bit more about your negotiation process.
Your conducted.
Conduct themselves.
Construction contractors so during the year.
You start negotiating of course, then the volume or for new capacity to be built in the second call by the end of the year. So how does that develop.
As soon as you finish them the comments.
Our approach it sounds there, albeit fulfill months objects.
Lindsay in your schedule, what's the mix.
Next please.
What's sort of it when should we expect dealer.
Updated capex.
Hum.
Hum like target so well for the next tier.
So understanding and junior to all of this process, how you work with them well they.
That's helpful. Thank you.
Sure.
Hi on the citizens of speaking.
Our next year Capex guidance will be provided to the all the football.
On the process of.
Infrastructure. So it depends on the lead time of the infrastructure objects with large fulfillment centers.
24 months, we have a long term plan.
Mike.
How we see our G&A growth.
Good point.
Negotiate.
Most of the gift set in advance to make sure we kept capacity available.
The balance of their high season of the future.
Smaller dark stores and sorting facilities typically.
<unk> and available right at it from different suppliers. So it's a much shorter period of time that the bus.
The revenue.
Uh huh.
Christian.
Yes. Thanks, that's clear thank you very much.
Thank you and your next question comes from the line of Jimmy Choo Masa.
Please go ahead your line is open.
Alright, thank you for the opportunity.
My first question would be.
Adjusted EBITDA, so give them.
Hi, again.
Expect a more systems second quarter, maybe you can comment I'll provide.
Some clarity on.
Adjusted EBITDA margin of the potential can be do you expect in the full year.
Versus last year.
First question second question on the <unk> contribution so maybe you can provide some more.
Hello, and what is the current shape below as Jamie the call centers with total and maybe.
Provide some color.
Hello, all guidance wed expect to see.
Yeah gene B to B has the potential total might be in the next couple of years. Thank you.
Sure. So on your first question, we're not providing explicit guidance on EBITDA.
Therefore.
Why.
We will not occur when you give precise bucket, but it's a reasonable so assume.
An improvement by the ankle, but yeah.
Because of the scale effect, which will help us familiar with the <unk>.
Part of that on top of that you need to restructure.
Let's take the next I'll cover the things, which I have been communicated previously about gross profit margin.
Cost of marketing.
Well I'm not sure of.
Well I would say in Kazakhstan as a percentage of total JV, it's still low single digits.
Revenue space shows a developments in those markets.
Okay. Thank you.
Thank you and your next question comes from the line.
And <unk> J P. Morgan. Please go ahead your line is open.
Yes, good evening, Thank you very much.
First question is about the pricing strategy in the one P assortment.
It's actually work I understand that you would target the two categories, but.
In terms of prices you target that what you're trying to price match your key competitors or you actually aims to bring prices below competition.
Sure.
So.
Basic strategy was as follows Europe select an umbrella first guidance, which I can say that the west tellus and those categories across.
Across the whole competition and you need to make sure that your pricing Congo, Cisco use east, but on the market in Europe.
I'm pleased with the promise.
What else.
Marketing tools and instruments.
See how is paying off and how it ultimately ends up in your forecast.
What we have been seeing internally is that our pricing strategy and a subsidiary of Florida has yielded improvement in copper, but that particular category.
When you attract people traffic Assortments you, obviously hope that they will seek will be a platform and buy more of the other stuff because this assortment work is it some sort of.
Acquisition channel.
Similar strategy, which I'm sure you're all familiar with.
As of yesterday more clarity.
Yes understood that thank you and then the second.
Second question can you share with us what was the churn in your second quarter 'twenty customer cohort.
Yeah.
We're kind of fill up with you offline because.
Im not whether or not there might be to kind of constantly.
And yes, I'm told by my team that we're going to disclose the effects.
[laughter].
But another question please.
Can you share with us what was the your GMB growth for the two categories. You mentioned in particular electronics understand Hickey.
Or maybe just if I understand it was higher than the average you report that but by how much.
Yeah, I mean, I would say.
So I want to be there for you.
So.
And then electronics digital has been low.
100% in surgery.
It's a blend that affects.
Sure.
Apple upon the marketplace in other categories, but the cost has been above 100%.
Okay understood.
Then I have two more questions and one of them is again on the EBITDA loss, but.
For the full year I know you don't guide, but it sounds like consensus. According to Bloomberg is expecting 20 billion.
EBITDA loss this year.
Sure.
When do you think about this number does that sound realistic too or no.
Uh huh.
Well once again it wasn't a guy on the exact EBITDA levels I guess consensus also affected different different Jamie therefore, probably.
Did you need to adjust them to come up with your target for the full year, but the trends, which I have communicated.
You will see them in the following quarters, but a good idea of what I'm puzzled that infrastructure, especially in the fourth quarter gradual improvement gross profit margins and gradual reduction of marketing spend.
What I don't understand really is.
The infrastructure is ramping up I think on Europe.
Adding more infrastructure and your infrastructure you add it still is dilutive so wouldn't one effectively.
Yeah.
It depends on the pace of openings I mean, if Europe aim for higher growth spending to support higher growth Europe needs to be adding more objects.
Ensure that big box plus infrastructure in our case, there's not a simple process the Williams.
Our <unk>.
Pick up points for instance, junior JV by themselves engineering at high frequency for US. So it's also important to support the copper to grow because generally when did you become closer to the customer.
You will see improvements in the retention and the interactions with the broader platform.
Okay.
And our final question sorry, the most important one actually so why do you plan on your pricing strategy in one P and the third quarter and what factors will be driving Europe take rates in the second half. If we can just summarize all the factors again, thank you Chad.
Grateful to north expect again.
But I'm watching changes versus the second quarter, the other take backups, which might be impacting that would be the mix of business models within the marketplace, but still it for sure going to be done.
I think for the bottom line because for instance, ABF business model, but assumes several spent less.
It is fair because we're back less operational expense, especially.
But I, but opex is being safe because of your process list.
But other than that.
All things being equal with enough expect then yet, but I'll watch the changes there.
On the gross profit margins won't be where we'll be looking at what has been the most efficient in terms of their customer acquisition and retention.
We will be optimizing institutional strategies overall I guess.
Worship improve the gross profit margin on the blended level in the coming quarters.
So if we see opportunity.
So.
And so our customer acquisition audit function effectively I guess, we will pursue it as well plus our advertising revenue for the second half of the year.
It should be going up because some of our marketplace here has been working on a number of tools and all the same tools that monetization of it.
Thank you.
Thank you there are no further questions. Please continue.
Okay.
So let me give some closing remarks.
Before the end of the skull to sum up our results demonstrate that we're making great strides to realize our mission to transform Russian economy by providing wider selection and greater convenience because there are some consumers.
And then federal opportunities for businesses, although the operating all migrating all lines.
We want to thank everyone for joining our quarterly conference call and for your questions today.
We look forward to updating you on the progress we make.
Earnings call in November.
And have a good day.
That does conclude the conference for today. Thank you for participating you may all disconnect.
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