D-MARKET Electronic Services & Trading(HEPS) - 2022 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - In Q4 2022, the company generated positive free cash flow of TRY 1.1 billion compared to negative TRY 191 million a year ago, attributed to better working capital management and improved EBITDA [3][4] - For the full year 2022, free cash flow was nearly flat at negative TRY 416 million, with higher cash provided by operating activities [4] - The company achieved a negative 2.1% EBITDA as a percentage of GMV in 2022, marking a 4.4 percentage point year-on-year improvement [66] Business Line Data and Key Metrics Changes - The adjusted GMV grew by 104% in Q4 2022 compared to Q4 2021, with a full year GMV growth of around 4% [17][20] - Marketplace revenue grew by approximately 41%, while 1P revenue increased by 3% and other revenues, including advertising and fulfillment services, surged by 86% [24] - The share of non-electronics in GMV rose to 42% in 2022, reflecting the expansion of long-tail products [20] Market Data and Key Metrics Changes - E-commerce penetration in Turkey remains low at 15%, indicating significant growth potential [12] - The company reported a 39% increase in order frequency, reaching 6.6 orders per customer in 2022 [67] - The active customer base grew by over 900,000, totaling 12.2 million by year-end [42] Company Strategy and Development Direction - The company aims to focus on customer loyalty through its Hepsi Premium program, which has already attracted 840,000 members [54] - Plans to externalize payment services and logistics to other online retailers are in place, leveraging HepsiPay and HepsiJet for additional revenue streams [53][59] - The strategic focus includes improving profitability through a prioritized approach to core commerce and cost optimization [60] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving adjusted EBITDA breakeven in Q1 2023, despite challenges posed by recent earthquakes [64] - The company anticipates GMV growth of around 70% in Q1 2023 compared to Q1 2022, which is expected to exceed inflation [64] - Management highlighted the importance of digitalization in Turkish e-commerce and the potential for sustainable profitability [37] Other Important Information - The company has initiated a two-year program to support small and medium-sized enterprises in earthquake-affected regions, aiming to generate TRY 10 billion in GMV during this period [63] - HepsiJet's operational footprint expanded significantly, delivering 65% of Hepsiburada parcels in 2022, up from 50% in 2021 [58] Q&A Session Summary Question: Impact of new e-commerce regulation on revenue and marketing costs - Management welcomed the new regulation, expecting a reduction in marketing investment aligned with improved performance marketing and customer retention strategies [9][10] Question: CapEx guidance for 2023 - Management indicated that CapEx for 2023 would be similar to 2022, primarily focused on R&D and technology investments [11][12] Question: Competitive environment and customer acquisition - Management noted that Hepsiburada's local agility and resources provide a competitive advantage over global players like Amazon, emphasizing a strong market position [34][35]