Financial Data and Key Metrics - Gross Merchandise Value (GMV) grew by 43% in Q1 2024, adjusted for inflation, driven by a 17% increase in average order value and a 22% rise in total orders [16][36] - EBITDA improved by 120 basis points year-on-year to 2.4% of GMV on an unadjusted basis, and by 70 basis points to 0.8% when adjusted for inflation [32] - Gross contribution margin improved by 1.2 percentage points to 10.5%, supported by higher delivery service and advertising revenues [8][38] - Free cash flow was TRY1 billion in Q1 2024, up from TRY102 million a year ago, driven by improved EBITDA and working capital management [18][30] Business Line Performance - Marketplace operations accounted for 68% of total business in Q1 2024, with a 38% growth in retail and 32% growth in marketplace operations revenue [8][17] - Delivery service revenues nearly doubled year-on-year, contributing 14% of total revenues, driven by off-platform business momentum and higher delivery charges [8] - Advertising services revenues doubled, while other revenue lines grew by 148%, supported by a fourfold increase in loyalty subscription revenues [8] - Hepsipay, the company's BNPL and consumer finance solution, facilitated over 1.1 million orders in the last 12 months, with total lending volume tripling to TRY8.1 billion ($290 million) [5] Market Performance - Active customer base grew to 12.1 million, with 171,000 new customers added in Q1 2024 [13] - Order frequency over the last 12 months increased by 30%, reaching 9.8 orders per customer [4][36] - HepsiJet, the company's delivery service, delivered 3.2 million parcels in Q1, with off-platform volume accounting for 33% of total deliveries [14] Strategic Direction and Industry Competition - The company is focused on expanding its loyalty program, Hepsiburada Premium, which has 2.6 million members, and leveraging its superior delivery services through HepsiJet [13][33] - Hepsipay aims to capture a significant share of Turkey's $34 billion consumer loan market by growing its BNPL and shopping loan offerings [5] - The company is building cross-border capabilities, including a partnership with Jumia, to expand its reach beyond Turkey [28][65] - Regulatory changes in 2025, such as license fees and restrictions on private labels, are expected to constrain larger competitors like Amazon and Alibaba in Turkey [29][52] Management Commentary on Operating Environment and Outlook - Management expects Q2 2024 GMV growth of around 75% year-on-year, with EBITDA margins improving to 1.8%-2% of GMV [15] - The company anticipates continued challenges in the macroeconomic environment, including cooling consumer demand, but remains confident in its ability to grow sustainably [15][52] - Management highlighted the importance of affordability and payment solutions in Turkey, where Hepsipay holds a competitive advantage [51] Other Key Information - The company does not expect to pay corporate taxes in 2024 due to R&D tax incentives, with tax payments likely starting in 2026 [46] - A potential dual listing in Turkey's Borsa Istanbul is under evaluation, but no concrete decision has been made [50] Q&A Session Summary Question: Impact of the eighth holiday on Q2 GMV growth - The impact of the eighth holiday is already incorporated in Q2 guidance, with offline sales typically increasing during holidays, potentially reducing online sales growth by 1-2% [39][40][41] Question: Market share and competition with Amazon in Turkey - The company does not report exact online market share but claims to be gaining significant share in key categories like electronics, home, and mom & baby products [21][22][63] Question: Categories experiencing slowdowns in Q1 2024 - Slower demand was observed in discretionary categories like computers and TVs, with consumers trading down and deferring purchases rather than reducing online shopping frequency [23][60] Question: Plans to expand services in developed markets like North America - The company has no immediate plans to expand into North America but is exploring cross-border opportunities through partnerships and integrations with other marketplaces [25][61] Question: Expected incremental GMV from the Jumia partnership - Significant GMV impact from the Jumia partnership is expected in 2025 as the integration progresses, with minimal impact anticipated in 2024 [49][65] Question: Free cash flow generation outlook for 2024 - The company expects to improve free cash flow generation in 2024 through higher EBITDA and continued negative working capital management [30][59]
D-MARKET Electronic Services & Trading(HEPS) - 2024 Q1 - Earnings Call Transcript