D-MARKET Electronic Services & Trading(HEPS) - 2023 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company achieved a positive EBITDA of TRY 176 million, marking the highest level since its IPO in July 2021, with a year-on-year EBITDA as a percentage of GMV rising by 4.8 percentage points [3][21][28] - Revenue growth was reported at 16% year-on-year, with adjusted for inflation GMV growth at 78%, reaching TRY 14.8 billion [51][55] - The gross contribution margin improved to 9.3%, reflecting a 5.6 percentage point increase compared to the same quarter last year [25][56] Business Line Data and Key Metrics Changes - The share of marketplace GMV reached 68%, up from 65% in Q1 2022, indicating a strategic advantage in third-party operations [24] - Non-electronics categories in GMV split rose by 1.6 percentage points to 43% year-on-year, showcasing diversification in product offerings [24] - HepsiPay Wallet users increased to 11.8 million, a 66% rise year-on-year, with 87% of GMV generated by HepsiPay customers [41] Market Data and Key Metrics Changes - The number of merchants on the platform exceeded 100,000, reflecting a 21% year-on-year increase, with total orders around 74 million, marking a 61% growth [9][37] - The company reported a significant improvement in next-day delivery capabilities, rising to 84% year-on-year [15] - The active customer base remained nearly TRY 11.9 million, with signs of recovery post-earthquake [37] Company Strategy and Development Direction - The company aims to focus on sustainable differentiators, including affordability solutions and superior delivery services, to enhance customer retention and competitive positioning [5][10] - A strategic priority is to offer logistics and fintech solutions to third parties, unlocking new revenue streams and enhancing operational efficiency [46] - The company is committed to profitability through core operations and cost optimization, with a focus on customer loyalty via the Hepsiburada Premium program [10][38] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism for the second quarter, expecting continued strong growth driven by improved merchant onboarding and a focus on non-electronics [60][62] - The company acknowledged the impact of the February earthquake but noted a return to pre-earthquake levels in customer engagement by March [37][49] - Management emphasized the importance of optimizing discounts and operational expenditures to maintain profitability [70][72] Other Important Information - The company launched the HepsiPay debit card and introduced new customer loan features to enhance financial flexibility for users [48] - HepsiJet's performance in logistics showed a solid increase in third-party delivery services, contributing to overall growth [17][44] - The company reported a negative free cash flow of TRY 154 million in Q1 2023, an improvement from negative TRY 2.3 billion in Q1 2022, due to better working capital management [27] Q&A Session Summary Question: What are the main drivers behind the robust growth expected in the second quarter? - Management indicated that the growth rate in Q1 was significantly hampered by the earthquake, and excluding this factor, stronger growth was observed, leading to confidence in future performance [60] Question: Do you expect a positive trend to continue in the rest of the year? - Management expressed optimism about maintaining a positive trend, particularly with the onboarding of new merchants and a focus on non-electronics, which are expected to enhance margins [62] Question: How is the company managing discounts and operational expenditures? - Management confirmed ongoing optimization of customer discounts and operational expenditures to ensure profitability moving forward [70][72]