Allegro shares drop as capex rises, free cash flow falls despite in-line result

Investing.com -- Allegro (WA:ALEP) shares fell on Thursday after the company reported higher capital expenditures and a sharp drop in free cash flow for the first quarter, despite broadly meeting expectations on revenue and gross merchandise value.

Polish GMV rose 8.9% year over year to PLN 14.8 billion, in line with consensus estimates. 

Revenue in the segment increased 15% to PLN 2.39 billion, exceeding forecasts by 1%. The take rate rose 40 basis points to 12.6%. Adjusted EBITDA in Poland reached PLN 859 million, 1.8% below consensus.

International operations posted GMV growth of 82% year over year to PLN 480 million. The growth reflected easier year-over-year comparisons following the 2024 launches in Slovakia and Hungary. 

The number of active users in Czechia, Slovakia and Hungary reached 3.7 million. GMV from local merchants rose 57% year over year and 10% quarter over quarter. Adjusted EBITDA in international markets came in at PLN -110 million, better than expected.

Allegro continued to scale back the Mall segment. GMV fell 53% year over year in the first quarter, and declines accelerated to between 60% and 65% in the second quarter to date, according to Barclays (LON:BARC).

The company decommissioned legacy platforms in Czechia and Slovakia and redirected traffic to its main marketplaces. Allegro is targeting the Mall segment to be cash-positive in 2026.

Group-level GMV totaled PLN 15.45 billion, flat against consensus. Group revenue reached PLN 2.62 billion, 1% above expectations, and adjusted EBITDA was PLN 749 million, 1% below. 

Barclays said group EBITDA came in 0.5% above its forecast, while the company’s net debt-to-EBITDA ratio increased to 0.84 from 0.77 at the end of the fourth quarter, driven by seasonal working capital shifts, higher capital spending, and an increase in consumer loans held on the balance sheet.

Free cash flow dropped to PLN -87 million, compared with PLN 544 million a year earlier. 

Morgan Stanley (NYSE:MS) attributed the decline to changes in working capital and a PLN 326 million increase in consumer loans held on the balance sheet. Net operating cash fell 85% year over year.

Capital expenditures rose 64% in the quarter. Allegro expanded its delivery infrastructure, adding 1,500 One Box lockers to exceed 5,000 APMs. 

It also onboarded 6,000 lockers from DHL and signed three new depot agreements to support fulfilment. 

Allegro Delivery accounted for 9% of deliveries in Poland, up from 8.5% in the previous quarter.

The company maintained its full-year guidance. Polish GMV is expected to grow 9% to 11%, international GMV by 40% to 50%, and Mall GMV is forecast to decline 55% to 65%. 

Revenue growth is projected at 7% to 11% for the group, with adjusted EBITDA expected to rise 10% to 17%.

A PLN 1.4 billion share buyback proposal is scheduled for a shareholder vote at the June 26 annual general meeting.