D-Market Elektronik Hizmetler ve Ticaret A.S. Q1 2023 Earnings Call
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Speaker 2: joining the Habsi Buda conference call and live webcast to present and discuss the first quarter of the 2023 financial results.
Speaker 2: All participants will be in a listen-only mode and the conference is being recorded. The presentation will be followed by a question-and-answer session. Should anyone need assistance during the conference call, you may signal an operator by pressing star and zero on your telephone. At this time, I would like to turn the conference over to Mrs. Milihan Onal-Kyoksek.
Speaker 3: on the call today by our CEO Nihan Onal Gokcetekin and our CFO Korhan Oz. The following discussion, including responses to your questions, reflects management's views as of today's date only. We undertake no obligation to update or revise this information except as required by law. Certain statements made on today's call are forward-looking statements, and actual results made for material from these forward-looking...
Speaker 3: Please forward the King statement.
Speaker 3: Also, we will reference certain non-IFRS measures during today's call. Please refer to the appendix of our supplemental slide deck, as well as today's press release for a presentation of the most directly comparable IFRS measure and the relevant IFRS and non-IFRS affiliations.
Speaker 3: As a reminder, a replay of this call will be available on our investor relations website.
Speaker 3: With that, I will hand it over to our CEO , Neetang.
Speaker 3: Thank you, Hayden. Welcome everyone and thank you so much for joining us. I'm pleased to be with you on my second result announcement call today and present you our progress during the first quarter.
Speaker 3: The obvious highlight of this quarter that I am particularly proud of is our guidance beat in EBCA as well as in the three-amney growth. This EBCA level marked the highest since our IPO in July 2021. It's worth noting here that we achieved this despite the unfortunate range of challenges faced by EBCA in the last quarter.
Speaker 3: 4.1 million orders on the deck of our
Speaker 3: This growth exceeded average inflation of 70% over the past 12 months.
Speaker 3: First quarter GMD growth was at 15% when sexy Indian inflation.
Speaker 3: Continued GMD growth and our strict prioritization of profitability enabled us to surface our breakeven EVTA guidance.
Speaker 3: This resulted from our focus on loyalty in optimizing marketing spending, growing non-electronics and marketplace operations, and over-reducing operating expenses.
Speaker 3: This milestone represents a 4.8 percentage point rise in EVIC-CA as a percentage of GMV over the same period of last year.
Speaker 3: This performance was reflected in our sustained leadership of NPS in the e-commerce market in Turkey, where our high quality services and solutions continue to win customer appreciation.
Speaker 3: Marking another milestone, the appeal of our value proposition, led to a significant surge in the enrollment of the Kepstborough premium program which surfaced 1 million members.
Speaker 3: We are proud to note that our program is the first membership-based loyalty initiative locally developed and implemented in the market.
Speaker 3: It's worth spending another minute on our guidance week this quarter. Our GME growth of 78% surfaced our guidance by 8 points, and we delivered a strong positive EBITDA of 176 million L. This performance confirms the strength of our strategy.
Speaker 3: This quarter, our 12-month active customer base remains nearly flat 11.9 million, mainly due to earthquake impact, given its scale impacting over 14 million people in Turkey. We have seen signals of a return to pre-earthquake levels in March.
Speaker 3: Meanwhile, total orders at around 24 million on 61% growth year-on-year. Excluding the order of our digital products such as sweets, steaks and lotteries, the order growth in Q1 was still around 9% year-on-year. Our order frequency rose from 4.9 to 7.5, marking a 52% growth year-on-year.
Speaker 2: solutions and enhanced loyalty programs.
Speaker 3: On a yearly rise of 21%, the number of merchants who chose to capitalize on our platform had exceeded 100,000 by end of Q1. Consequently, our selection reached 180 million scales with a continued expansion of non-electronic categories.
Speaker 3: Our merchants welcome our end-to-end value proposition from logistics services to advertising solutions, in addition to our toolset that enables better merchant lifecycle management.
Speaker 3: As shown on the slide, the Tabular Quakes detects a 6,500 merchants on our platform which almost 1.3 temporarily suspended their business.
Speaker 3: We have taken immediate action to help and support them leveraging our tech logistics capabilities. In addition, we launched a two-year program to continue our support. Ultimately, we are in Turkey for the long haul. We are dedicated to leveraging all our capabilities to foster merchants and womanized entrepreneurs' e-commerce abilities in the region.
Speaker 3: As you will recall, in early March, I outlined our defined strategies to win an achieved profitable growth.
Speaker 3: Before diving into the progress achieved on our priorities, let me summarize this.
Speaker 3: Number one is winning by customer loyalty through Hepstburg premium. Our current estimated volunteer within our own consumers signals strong growth potential here and we believe we'll be able to optimize our marketing stats. Number two
Speaker 3: We will focus on sustainable differentiators that include our affordability solutions, high quality service levels on the platform and our superior delivery services.
Speaker 3: Number three, we'll pursue profitability by focusing on core operations and cost optimization. And number four, we'll offer our best-in-class payments, landing and last-mile delivery services to other retailers.
Speaker 4: These are our strong methods that we believe will expect to deliver us very strongly to be in count, now and in the upcoming years.
Speaker 4: These strategies are pivotal in driving customer retention, securing our competitive positions while we pursue sustainable growth and profitability.
Speaker 4: Now let's have a look at our progress in
Speaker 4: Achieving 1 million member milestone in 10 months highlights the value for money for our loyal C-Program. The continuously look to improve this program's benefits to best serve our customers.
Speaker 4: Program numbers generate higher monthly order frequency than non-number which has thus to optimize our marketing and advertising effort.
Speaker 4: Growing our membership page remains the key objective for this year's while we ensure retention.
Speaker 4: Since July we have been offering extra premium and a great value for our customers.
Speaker 4: For only 14.9 euro per month, program members are offered free shipments, cash back on each transaction, an on-demand streaming TV subscription, and several other service plan discounts.
Speaker 4: The independent analysts show that the MPS of tips to grow the premium was 12 points above the companies overall MPS.
Speaker 4: This the core of 8-7 indicates that strong satisfaction level from the program number.
Speaker 4: Now let me share some highlights on one of our key other differentiators, HEPP. On our platform, we are very quick with payment capabilities, such as payment with multi-graded cards, payment in installments and instant shopping loans. And through HEPP, we are the only commerce player holding payments and consumer finance licenses and accordingly we operate. France.
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Speaker 4: Here are some highlights of the Q1 performance of Hebsite. The business continued growth of Hebsite paywall of users to 11.8 million. This was a remarkable 66% rise on Q1 to 22 and 7% rise on previous quarter.
Speaker 4: It all is 87% to favor DM me, but generated by an FCP customer.
Speaker 4: The share of total non-card affordability solutions in our GRME now more than doubled and reached 5.8% in Q1 on year-on-year basis.
Speaker 4: Around 60% of detachment came through shopping loans provided by banks with competitive rates for our customers.
Speaker 4: Meanwhile, our unique products in the e-commerce market buy now, pay later solution had been utilized by over 180,000 customers this quarter.
Speaker 4: on a quarterly rise of 30,000 people.
Speaker 4: Some hundred and fifty two thousand orders generated by using affordable solutions during this quarter. We are diligently managing the credit risk also associated with this solution. And with our expanding range of affordable solutions, we continue to offer relevant, accessible options that meet our customer needs.
Speaker 4: in aimed tough macroeconomic conditions.
Speaker 4: Now, let's move on to Hepsseget, which is another clear differentiator for Hepssebra. Hepsseget is one of the leading last my delivery companies in Turkey. Our customers enjoy the flexible delivery options and evaluate the services of Hepsseget.
Speaker 4: These include next day delivery, schedule same day and next day delivery, return pick up from customers' address, delivery scheduling, part of life-seeking during delivery, and even address change or cancellation while on-root in delivery for your neighbor. To the best of our knowledge, it's the only logistic company in Turkey to provide all of these convenience delivery options.
Speaker 4: 3% to 8 to 4% of your own year.
Speaker 4: This performance underscores our commitment to providing a fast and reliable service, particularly through Habsigest.
Speaker 4: Hepstige continue the penetration on our platform, delivering 63% of total quarterly parcel volume up to 58% last year, Q1s, event at all. Moreover, our X large arm dedicated to oversized parcels, delivered 60% of such shipment.
Speaker 4: I find it very encouraging. Heftigex performance highlights our commitment to enhancing customer communes and strengthening our market position.
Speaker 4: Continue the growth of our primary focus remained on driving profitability. With this commitment, the prioritized our core commerce operations and adaptive company-wise through girls standing for the set.
Speaker 4: We already initiated a robust review of all cost sensors to identify all improvement opportunities in cost management and operational effectiveness.
Speaker 4: This strategic approach has enhanced and will continue to enhance our financial performance and contribute to our long-term sustainable growth.
Speaker 4: Positive EBT-A mask on Incubantha Vantri was mainly through a stronger growth contribution, optimized advertising standing and the prudent of extra-te-G despite the continued high inflation in the environment and earthquake in Turkey.
Speaker 4: We are glad to see this promising trend in our pursuit of sustainable growth and profitability in ourheric strategy.
Speaker 4: As all the dimensions, offering our logistic services and FinTech solutions to third parties is a key strategic priority. By externalizing this strong method, we unlock new revenue streams and hands our own localization latency and rainports takes to broad as position in the respective sectors.
Speaker 4: This strategic priority strengthens our brand while fostering valuable partnerships and creating a dynamic ecosystem for cross-selling opportunities.
Speaker 4: With this approach, we are well positioned to deliver sustainable results while shaping the future of e-commerce.
Speaker 4: Our first strong muscle, HEPT-J, recorded at 3 percentage points rising to 1, reaching 22% of its total volume from off-platform customers.
Speaker 4: Total partial volume delivered of third parties shows a solid increase by nearly 40% in units compared to same quarter last year.
Speaker 4: As a new service, Hetcejet initiated acceptance of payment at the door, which is also known in cash on delivery. Hetcejet is analyzing the possibility of making this service available for all of its customer portfolio. And by delivering exceptional value to all of our partners, we anticipate future experience like Z in American Party Karen Beck, helping to get stealth while
Speaker 4: capabilities of platform. Recently, we launched the HEPS-TB DavidCart for using both physical and online retail transactions, providing another convenience options for users. HEPS-TB DavidCart is also linked to the QR payment features, a loving customer to use their DavidCart at any retailer which accepts QR payments.
Speaker 4: In addition, we introduced a new customer loan feature, offering our customers even greater flexibility and freedom in their financial decisions.
Speaker 4: With this offering, our customers will gain access to the funds that can be utilized for any purpose they desire. Providing them with financial support is a mandate required.
Speaker 4: These developments, combined with our ongoing efforts to expand our product portfolio, consolidate payment options and improve the user experience, will help us to meet our target of becoming leading fintech player in surgery.
Speaker 4: I end my presentation with a few words on our Q2 guidance.
Speaker 4: Our robust first quarter performance confirms our successful navigation of challenging market conditions.
Speaker 4: We entered the second quarter in a similarly top macroeconomic environment, also compounded by election uncertainty. And yet, we remain cautious the optimistic based on our quarter the performance today and strength of our strategy. Accordingly, we expect to generate around 95% Euro.
Speaker 4: delivered as the first instance of GMD within the range of 0.5 to 1%. These figures are an adjusted for inflation. With this, I thank you for listening and leave the floor to our CFO Corp Honours to give more color to our financial performance in the first quarter. Thank you Neil Am and welcome everyone.
Speaker 5: Despite factors that affected market sentiment, we demonstrated consistent and strong progress during the first quarter. Unadjusted for inflation, our GNV growth was 78% in Q1, on a yearly basis reaching 14.8 billion T.
Speaker 5: GMB growth resulted from over 24 million orders, marking around 61% year-over-year growth fueled by the continued momentum in order frequency.
Speaker 5: On adjusted foreinflation, revenue growth by 79% on a yearly basis. We delivered a 10.5% gross contribution margin and this represents a 2.2% percentage point year-on-year improvement.
Speaker 5: I must highlight here that EBITDA unadjusted for inflation at 176 million TL was the highest level since our IPO. We achieved this through our unwavering focus on optimizing customer discounts and operating expenses, plus delivering on our compelling value proposition.
Speaker 5: Let's move on to the next slide to adjust the foreinflation figures. In the first quarter on an adjusted foreinflation basis, our GMV and revenue growth were 15% and 16% respectively.
Speaker 5: In the same period, gross contribution margin increased to 9.3% with a 5.6% percentage point improvement compared to the same quarter of last year.
Speaker 5: Again, the key highlight in Q1 is the positive EBT-8 at 7 million T-AV also been adjusted for inflation.
Speaker 5: Let's move on the next slide to tie this quarter's performance to our pursuit of profitability. Following the improvement trend of previous quarters, we maintained consistent progress on our path to profitability in Q1 2023 as well.
Our performance confirms the effectiveness of execution on our priorities.
We navigated through the challenges successfully with our hybrid 1P3P business model, strong customer experience, and data-driven marketing as well as diverse accessibility solutions. Continue G&D and top-line growth are focused on course and customer discount optimization.
enabled us to generate positive EBT-8. This milestone represented an 8.3% point rise in EBT-8 as a percentage of G-NV over the same period of last year.
On the next slide, let's look into details of our G&E performance. 15% of G&E growth came through 24 million orders in Q1. This performance was attributable to our value proposition.
supported by the appeal of our Hepsibro. The premium loyalty program are attractive affordability solutions and data driven marketing campaigns.
1% of our GMB in Q1 2023. We value the repeat interaction that enabled us with the participating customer segments.
During the first quarter, the share of Marketplace GMB reached 68% compared to 65% in Q1-22. We continue to see strategic advantages of 3P in our business in the long term, facilitating a wider selection.
Avagability and the competitive pricing. With that said, 1P operations remain one of our competitive advantages in the market.
Meanwhile, the share of non-electronics in the GMB split rose 1.6% points to 43% in the first quarter compared to a year ago.
On the next slide, I would like to discuss our revenue and gross contribution performance. First, I would like to give some color on our revenues.
Around 16% revenue growth was achieved mainly by 72% growth in our marketplace revenue, 51% increase in our other revenue that includes advertising and fulfillment services revenue streams, third party delivery service revenue and subscription revenues.
and 5% increase in Bump EOperation's revenue.
Our gross contribution margin in the first quarter was 9.3% with a remarkable improvement of 5.6% at each point compared to the same quarter of last year and 1.3% at each point's schedule. We are now in the first quarter of last year and 1.3% at each point's schedule.
This was mainly attributable to lower customer discounts both in marketplace and retail operations. Better inventory management and the slowdown in the monthly inflation rates.
Let's move to the EVTA performance on the next slide.
The 8.3% point year-over-year improvement in EBD8 as a percentage of GMB was mainly due to 5.6% point rise in gross contribution margin, 2% point decline in advertising expenses, 0.7% point decline in shipping and packing expenses,
The Army was 9.3% in this quarter, thus 2.7% lower compared to 12% in the first quarter of last year.
EBTA as a percentage of G&E continued its improvement sequentially by 1.3 percentage points from the previous quarters.
Our win-through, loyal strategy, data driven marketing and marketing channel optimization supported overall efficiency in the marketing spending.
Next, I would like to say a few words on our cash flow dynamics. Compared to Q1 2022, the 2.2 billion TL increase in cash flow from operating activities mainly resulted from a 1.4 billion TL decrease in change in trade receivables.
and payables to merchants and around 270 million TL increase in change in trade receivables.
Better in-mensry management resulted in testers turnover days, which significantly helped us improve our working capital position compared to Q1220.
We continue to operate with negative networking capital during the first quarter. The change in networking capital in Q1 was 725 million TL. CapEx was around 214 million TL, the bulk of which comprise of cost of tech related employees who are employed mainly for the development of web and mobile platforms.
Over all, R3 cash flow was a negative 154 million TL in Q123 compared to negative 2.3 billion TL in Q122.
This was due to positive cash generation from our operating activities, a combined result of better working capital management and significantly improved EBTI.
Now I leave the floor to Nihan for final remarks before opening the floor for questions.
Before we end our call, I would like to highlight the five main points of our presentation today.
We delivered the highest CBTA since our ICO of 176 million and with this we exceeded our breakeven guidance.
We clearly defined our strategic priorities, and I'm glad to see this is delivering robust performance. 5.6% of the points in growth contribution margins, and 8.3% of the points rising at the age, have given us confidence for the remainder of the year.
Generating positive cash from operations and improved working capital positions resulted in a substantially improved in our free cash flow. Our strong methods in logistics and FinTech services suggest additional revenue streams for our core company.
To sum up, we have a refined strategy and a strong execution capability as evident in our results. As a team, we will continue to work diligently with ensured citizens with passion to deliver best possible results. We'll create long-term value for all our stakeholders. Thank you for listening. We can now open the line for questions.
Anyone who has a question may press star and one at this time. One moment for the first question please. The first question is from the line of Kirikiran Hazande with Zebi Morgan. Please go ahead. Thank you very much. Nelenam Korambi, congratulations for a very good set of results. I have a few questions but I just want to ask only three now.
You have been building up commission rates from very low and you already reached the level of 2018. I think this was the highest level shared since the IPO. So is there any room to improve this going forward? I know you are managing this through discounts but I don't know if you can cut the discounts further and what could be the sustainable level that we should assume in our models.
Maybe I should stop. I'm going to answer the first one and I'm going to let Korhan to add color on the take rate. Thank you so much, Hansade. High level of growth guidance we are giving is based on a couple of factors. First of all, in Q1 the growth rate is tempered significantly by the earthquake.
Excluding earthquake, we have shown much stronger growth, so we have confidence. The second is our strong value proposition, affordability solutions and premium is resonating well with our customers. And the third one is our revenue generation from HEPT-JET.
is also ramping up. We are getting stronger attention from our merchants, partner customers. And I think, fourthly, we are building stronger and stronger confidence in our strategy, delivering strong results and customer appeal. So that's why I feel very confident in reaching our guidance for Q2.
I believe in our strategy, Hans Ade. I think it's working well, it's resonating with Turkish customers. I am cautiously optimistic in Turkey that we'll be able to deliver a strong set of results in the remainder of the year as well. So my expectation is continuation of our strong trend.
Thank you. Thank you, Anzadeh, for the question. Like five, six quarters ago, we promised that we would optimize our discounts given to our customers. And since then, we have been optimizing all the discounts given in the market. And...
Margin to our platform so we will continue those those actions going forward and also on the platform and not only the The margin but on the opaque side as well. We are trying to optimize all the spendings and cross components to
become profitable going forward. So all of our efforts will continue going forward. I think the other addition I wanna do, Hans-Ade, on the take rate is the non-electronics take rate in marketplace is higher, and with the increase in our mix towards non-electronics, I don't think we are anywhere near the ceiling, so I think the momentum will continue in the balance of the unit.
Ladies and gentlemen, there are no further questions at this time. The conference is now concluded and you may disconnect your telephone. Thank you for calling and have a good afternoon.
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