Financial Data and Key Metrics Changes - In Q2 2022, the company reported a 57% GMV growth and a 63% revenue growth on an unadjusted basis, while adjusted for inflation, GMV and revenue declined by 10% and 6% respectively compared to the same quarter last year [17][40] - The gross contribution margin was 5% in Q2, reflecting a 2.8-percentage-point decline year-on-year but a 1.7-percentage-point improvement compared to Q1 2022 [18][47] - Positive free cash flow of TRY185 million was generated in Q2, a significant improvement from negative TRY1.8 billion in Q1 [18][54] Business Line Data and Key Metrics Changes - Active customer base grew by 18% to 11.7 million, and order frequency increased by 23% to 5.2% year-on-year [19] - The active merchant base increased to nearly 89,000, contributing to a doubling of SKUs to 130 million [20] - Revenue from advertising solutions (HepsiAd) grew by approximately 54% [43] Market Data and Key Metrics Changes - The Consumer Confidence Index was at an all-time low of 63% in June but showed signs of recovery, rising to 72% in August [9] - The annual inflation rate reached 79% by the end of June, with inflation accounting impacting financial reporting [10][11] Company Strategy and Development Direction - The company aims to enhance its ecosystem beyond e-commerce, focusing on logistics, financial services, and cross-border operations [8] - The introduction of Hepsiburada Smart Store and Hepsiburada Premium reflects the company's commitment to innovation and customer-centric solutions [22][23] - The company is focused on improving cash flow and profitability through disciplined cost management and operational efficiency [60][62] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenging macroeconomic environment, emphasizing the need for effective inventory management and cost control [71][72] - The company raised its GMV growth guidance for the full year from around 50% to approximately 60% [34][64] - Management expressed confidence in the path to profitability, expecting EBITDA to improve from negative 6.5% last year to a range of negative 2.5% to negative 3% this year [34][65] Other Important Information - The implementation of IAS 29 for inflation accounting has become mandatory, affecting financial reporting [36] - The company is expanding its fintech services, with HepsiPay Wallet reaching 8 million users and a Buy Now Pay Later solution being launched [32] Q&A Session Summary Question: Free cash flow comparison to Q2 2021 - Management explained that seasonality affects cash flow, with higher inventory purchases in Q4 leading to negative cash flow in Q1, but they are working to improve cash flow performance [69][70] Question: EBITDA guidance clarification - Management stated that they cannot provide adjusted EBITDA guidance due to various factors affecting inflation accounting [76] Question: GMV guidance and competitive dynamics - Management noted that consumer behavior is shifting towards more affordable products due to inflation, impacting average order value and GMV growth [81][90] Question: Free delivery share and Hepsiburada Premium pricing - Management indicated that around 65% to 67% of GMV is covered by 3P cargo costs, and Hepsiburada Premium is priced at TRY9.9 per month [103][106] Question: Impact of new e-commerce law - Management mentioned it is too early to assess the impact of the new e-commerce law but anticipates a more favorable operating environment over time [116][119]
D-MARKET Electronic Services & Trading(HEPS) - 2022 Q2 - Earnings Call Transcript