D-MARKET Electronic Services & Trading(HEPS) - 2023 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - In Q3, the company achieved a GMV growth of 126% year-on-year, with an adjusted growth of 45% when accounting for inflation [22][70] - The EBITDA as a percentage of GMV rose by 690 basis points year-on-year to 2.7%, while adjusted for one-time income, it was at 2.2% [23][71] - The gross contribution margin improved to 11.6%, reflecting a 1.8 percentage point increase compared to the same quarter last year [43][72] Business Line Data and Key Metrics Changes - The retail revenue increased by 50% and marketplace revenue grew by 61%, contributing to a total revenue growth of around 52% [72] - The share of total non-card affordability solutions in GMV rose to 5.6%, up from 5% in the previous quarter [35] - Hepsipay issued 708,000 prepaid cards in six months, indicating strong demand for this product [10] Market Data and Key Metrics Changes - The company reported a significant increase in order frequency, with a 59% growth in order frequency and a 55% increase in order volume [32][59] - The HepsiJet service achieved an 82% next-day delivery ratio among 1P orders, confirming its importance in the delivery ecosystem [65] Company Strategy and Development Direction - The company focuses on a four-pillar strategy: loyalty, sustainable differentiation, cost streamlining, and expanding B2B revenue in fintech and logistics [33] - The Hepsiburada Premium program has over 2 million members, significantly influencing customer behavior and retention [62] - The company is committed to enhancing its advertising platform and expanding its non-electronics product mix to drive future growth [54] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenging macroeconomic environment, with inflation reaching 61.5%, but emphasized the company's robust performance [22] - The company expects GMV growth in Q4 to be between 93% to 95% compared to the same period last year, with an EBITDA margin of 0.5% to 1% [40] - Management expressed confidence in the sustainability of profitable growth despite potential consumer demand impacts from interest rate hikes [53] Other Important Information - The company reported a free cash flow of TRY 2 billion in Q3 2023, reflecting a significant improvement in operating profitability [74] - The Hepsipay wallet allows customers to use loans from partner banks for payments, enhancing the payment experience [63] Q&A Session Summary Question: What drives growth deceleration in Q4 2023 compared to Q3 2023? - Management indicated that the strong base in Q4 '22 and the VAT change in Q3 are key factors for expected deceleration [49] Question: Could you provide color on September sales and how the Legendary November event was relative to your expectations? - Management confirmed that the November campaign met expectations, driven by increased uptake from Premium consumers and strong performance in non-electronic categories [51][78] Question: What is the outlook for EBITDA margin in 2024? - Management stated that they are focused on sustainable profitability rather than a specific margin target for 2024 [82] Question: Can you provide an update on the recent competition authority investigation? - Management shared that they are cooperating with the investigation regarding price recommendations and are confident about the potential outcomes [96]