Financial Reporting and Accounting - The company's consolidated financial statements are presented in Turkish Lira, reflecting a restatement pursuant to IAS 29 due to hyperinflation, with a conversion factor of 1.00 for December 31, 2024, and 1.44 for December 31, 2023[24]. - The company applies IAS 29 for financial statements due to a cumulative inflation rate exceeding 100% in Türkiye as of February 28, 2022[23]. - The company has implemented IAS 29 inflation accounting since 2022, significantly impacting gross contribution levels due to inflation adjustments[58]. - The company's financial performance is impacted by inflation rates, as it factors monthly inflation into its financial reporting under IAS 29[97]. - The company has identified material weaknesses in its internal control over financial reporting, which could impair its ability to accurately report results and meet reporting obligations[209]. - Material weaknesses in internal control over financial reporting were identified, particularly in IT general controls, which remain unremediated as of December 31, 2024[200][202]. Revenue and Profitability - In 2024, the company incurred a net loss of TRY 1,604.9 million compared to a net income of TRY 109.1 million in 2023 and a net loss of TRY 6,916.7 million in 2022, primarily due to investments in core business expansion and strategic assets[58]. - The company's net income generation in 2023 was mainly driven by monetary gains from a net monetary position, where monetary liabilities exceeded monetary assets[58]. - The company anticipates continued net losses in the near term due to a challenging macroeconomic environment affecting customer purchasing power and ongoing capital expenditures[58]. - The company may not achieve or maintain operational profitability in the near term due to various challenges[61]. - The company needs to generate and sustain increased revenue and gross contribution levels to outpace growing operating expenses and capital expenditures to achieve operational profitability[58]. Customer and Merchant Metrics - Active Customers are defined as users who have purchased at least one item within the last 12 months, including returns and cancellations[37]. - The Active Customer base as of December 31, 2024, was 12.2 million, showing no growth compared to 2022, while it increased from 11.9 million in 2023[83]. - The company reported a significant increase in the number of Active Merchants, who sold at least one item within the last 12 months[37]. - The number of Active Merchants as of December 31, 2024, was 100.2 thousand, a decrease from 101.5 thousand in 2023 and an increase from 99.7 thousand in 2022[85]. Strategic Initiatives and Growth - The company launched the Hepsiburada Premium loyalty program on July 1, 2022, replacing the previous Loyalty Club program[25]. - The Hepsipay Wallet was launched in June 2021 as part of the company's strategic asset[25]. - The company is focused on expanding its logistics operations and financial services operations as part of its growth strategy[58]. - Significant investments are required for expanding the company's platform, workforce, and fulfillment infrastructure to support growth in new products and services[63]. - The company anticipates continued growth in its market position and customer base, despite the risks associated with hyperinflation and market volatility[39]. Regulatory and Compliance Risks - The company is subject to various legal and regulatory risks that could materially affect its business operations and financial condition[54]. - The company faces uncertainties regarding the growth and profitability of the e-commerce industry in its region, which could adversely affect its business[143]. - The company anticipates significant operational and financial resources will be required to comply with existing and new regulations, which may adversely impact its business and financial condition[176]. - The company is currently undergoing tax audits for the financial year 2022, which may result in additional tax liabilities[150]. - The introduction of a withholding tax of 1% on merchants selling through the company's platform will take effect from January 1, 2025, increasing compliance risks[153]. Competition and Market Environment - The company operates in competitive markets and may struggle to compete effectively in the future[51]. - The competitive landscape is intensifying, with challenges from both online and offline retailers, which may hinder the company's growth and market position[76]. - The company’s revenue growth may slow down or decline due to various factors, including competition and changes in consumer behavior[96]. - Inflation trends and changes in monetary policy in Turkey are expected to adversely affect consumer demand and order growth, potentially leading to negative real GMV growth[60]. Cybersecurity and Data Protection - The company experienced a cybersecurity incident in February 2024, affecting approximately 673 merchant accounts, which is less than 0.7% of Active Merchants as of December 31, 2023[104]. - Customer data was downloaded from merchant accounts for approximately 7,200 customers, representing about 0.06% of Active Customers as of December 31, 2023[104]. - The Turkish Personal Data Protection Authority imposed an administrative fine of TRY 3,453,775 due to the company's failure to prevent data breaches[105]. - The company has implemented measures to enhance security protocols following the cybersecurity incident, including suspending and resetting passwords for compromised accounts[104]. Financial Services and Payment Solutions - Hepsipay processed over 90% of all card payments in December 2024, highlighting its dominance as a payment service provider[115]. - The company launched a "Buy-Now-Pay-Later" solution and expanded its consumer finance offering in early 2024, which may expose it to credit risk from borrowers[116]. - Hepsipay faces increasing competition from established companies and fintech firms, impacting its market penetration and profitability[117]. - Hepsipay's creditworthiness assessment may fail to accurately represent borrowers' financial conditions, increasing the risk of loan impairments[118]. Legal and Litigation Matters - Hepsiburada paid $13.9 million to resolve class action lawsuits related to its ADSs, with TurkCommerce B.V. contributing $3,975,000 towards the settlement[190]. - The Turkish Capital Markets Board imposed a "board registration fee" exceeding TRY 60.1 million on Hepsiburada, which was contested in court but ultimately upheld[191]. - The company has incurred significant management time and costs in addressing compliance with Sarbanes-Oxley Act requirements, impacting operational efficiency[204]. - Ongoing litigation may increase as the company expands its business, potentially leading to higher exposure to claims and lawsuits[189]. Economic and Political Risks - Political instability in Türkiye has led to a depreciation of the Turkish Lira, which may adversely impact the company's financial condition and results of operations[214]. - The company derives substantially all of its revenue from operations in Türkiye, making it significantly affected by the economic activity and political stability in the region[213]. - Political protests and boycotts in Türkiye may directly and indirectly affect the company's business operations and revenue[214]. - The company faces risks associated with doing business in an emerging market, which could adversely affect capital flows to Türkiye and its stock price[213].
D-MARKET Electronic Services & Trading(HEPS) - 2024 Q4 - Annual Report