Q2 2023 D-Market Elektronik Hizmetler ve Ticaret AS Earnings Call
[music], ladies and gentlemen, thank you for it.
The conference.
[music].
Welcome and thank you for joining the Hep C put at that conference call and webcast to present and discuss our second quarter 2023 financial results all participants will be in listen only mode and the conference is being recorded.
<unk> 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 Mr. Neil Hunn group genetic gain CEO , Mr. Hans <unk>, CFO and Mr. <unk>, Philippe like Investor Relations director.
Mr. <unk> you May now proceed.
Thanks, operator thank.
Thank you for joining us today for <unk> second quarter 2023 earnings call I'm pleased to be joined on the call today by our CEO Nihon <unk> and our CFO Carl Hunt.
Following discussion, including responses to your questions reflects management's views as of todays 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 may differ materially from these forward looking statements.
Please refer to today's earnings release as well as the risk factors described in the Safe Harbor slide of today's supplemental slide take today's press release. The 6K, our form 20-F filed with the FCC on May one 2023, and other SEC filings for information on factors that could cause our actual results to differ materially from these forward looking.
Statements also we will reference certain non <unk> 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 <unk> measure and the relevant if I suddenly nine phase III conciliation as a reminder, a replay of this call will be available.
Our Investor Relations website with that I will hand, it over to our CEO Neil.
Thank you Hey, Matt back on maybe the mom and thank you so much for joining us I'm really pleased to be with you today and to present, our quarterly progress.
In a collateral continued tough macroeconomic condition in all certainty throughout the election process. The doubled other G&A year over year and improve our profitability margin of a robust our former exceeded our quarterly guidance. Thanks, Pavel operational agility.
Figuring salon to $7 5 million orders on in mind to 4.61st time thrive over Q2, two anti Tau resulted in strong G&A growth. This was achieved through our attractive customer and merchant value proposition and containing started with it.
Our focus on profitability led to a notable powerpoint, 4% gross contribution margin, which is 210 bit still over yet.
This metric underscores our strategic actions of lowering promotion spending growing the share of non electronics and marketplace operations in the Gi anemic.
Furthermore, although EBITDA as a percentage of G. Amit reached an impressive 2% is plus 470 basis points year over year. This is achieved through effective Opex management.
Excluding the one off provision reversal bottom 0.51st time, EBITDA still exceeded our quarterly guidance.
Meanwhile, we remain turkeys for most e-commerce players in N P S Vida.
Our exceptional customer service top notch logistics services and diverse affordable to fill those ships.
The total or bottom point 3 million members hits the breadth of opinion is on track to contribute to order frequency and customer retention.
Overall, our second quarter results are characterized by solid growth and higher profitability.
It is worth spending another minute on this quarter's guidance platform.
Our G&A growth of one on just one person outpaced our guidance of around minus two 5%.
Strong growth coupled with diligent cost management resulted in an EBITDA percentage of G&A at 2%. This all 0.5 sources and touch points higher than the upper end of the guidance excluding the bundle.
Their power former David David the effectiveness of our strategy for driving sustained profitable growth.
Okay.
Our active customer base reached 10000 million, which more than 300000 thrives during the quarter.
Mr. Saran to say $1 5 million orders the order frequency reached 8.1 marching 50% growth year on year for the quarter.
We continue to invest in our technology, coupled with our outstanding service quality does suggest the potential for higher customer engagement on our platform.
Next slide please.
The great value of our device merchant space, they benefit from our full array of services, including fulfillment logistics and advertising solutions and enjoy great efficiency why is working with us.
In the second quarter other active merchant base exceeded 101000 merchant and totally skews rose by 50% year on year to nearly 195 million.
We continue to invest in our inhouse merchant application that fucking states proxy campaign in Edmonton demand and customer communication among many other capabilities other merchant and as I saw it right and get the store and its ease of use increases the merchant appreciation or tests that were at that next.
I sleep.
If they were diligently execute on our priorities our results confirmed a solid execution of our strategy the maintainable competitive edge growth sustainably and profitably as seen in our numbers.
So let me recap on our strategy, which I shared earlier this year, Firstly hipster brother premium program, the key to increasing customer loyalty.
Advancing gets blocked the welcome the rising share of program members in our total orders.
Secondly, we cultivate sustainable differentiators, such as affordability solutions excellent platform and delivery services that effectively the benefit our customers.
Currently all of our efforts to streamline costs and fine tune core operations are well on track. This is reinforced by other progress in the quarter last but not least our logistics services and Fintech solutions for third parties continue to generate additional revenue streams while support.
The growth of Turkey's total retail market.
Next is a closer look at the fundamentals of our hips the brand the premium program, which marked its first anniversary in July two.
Two and this additional 500000 in the first half of the year total program members each 1.3 million.
All of our initiatives is Atlanta customer loyalty, providing operational efficiency and optimizing our marketing spend.
Premium program members generate small 0.4 times the molecule order frequency after joining the program confirming us as their go to E Commerce platform.
This quarter the furniture to enrich the program still free which has already been more advantage. It compares to other competitors as shown on the right side of the slide side by side.
By including somewhere special deal an exclusive campaign, the program's value proposition has become even more attractive.
As the program strong NPS scores the confidence and appreciation of its members.
It is clear that affordability has gained significant in the current macroeconomic climates in Turkey.
Therefore, setting us apart is our in house syntex drink that redefines the affordability in the corner sector.
The neighborhood of a unique E money and payment services license to offer this type of payment solutions.
These include our own debit cards buy now pay later solution is minute pop up towards us and point of sale shopping globe. This taken our customers unable to check their buy now pay later limit complete their purchases at their convenience.
Collaboration is that other caught the integrated strategic banking partner B enables seamless transaction and that all Utah auctions means call Nance and freedom of choice for our customers.
We will continue to tailor our solution such as the upcoming launch of in house consumer financing, they feel better respond to the customer needs in Turkey.
Now, let's take a look at the metrics of our affordability solutions and wallet penetration only quarterly additional seven I'm just caused them the hips the pay wallet based shape Tomorrow <unk> 5 million in Q2. These users accounted for eight to six stores out of our geography.
And therefore, they wouldn't get blown the shade of total noncore affordability solutions day number Jeremy reached five Thursday. This is slightly down due to tight liquidity in market, but starting in July we started to see already a recovery in <unk>.
Bank lending appetite co.
Colored in debt ratio other B M. P. I solution had been utilized by over 207000 users by end of Q2, only quad turned their eyes off the 97000 in the first six months other calculations prune that other beyond P&L freeing contributed positively also to all of our net income.
Now moving onto our next throw myself, it's tapes digit hip sujit is almost a leading last mile delivery companies in Turkey, which is an asset light business model had suggest continued offering its corn purchase of services, including oversized anybody that differentiates us into.
Market and time to delivery is that core customer expectation and so it is at eight 3% next day delivery ratio M. A lumpy orders confirm other commitments so that.
Meanwhile, hip Sujit continued its penetration of other merchant space. They never didn't get on 66% of total parcels or number of platform in Q2 to that entity.
According to our internal reporting based on the survey conducted in the second quarter hits. The jet also maintained it could eat N P. S. Neither ship.
Okay.
In personally felt profitability the Dana with yet another quarter of positive EBITDA fueled by Evercore strength and cost management, our fundamental building blocks for sustainable and profitable growth has translated into my approval results multiply our EBITDA at first in the draft <unk>.
<unk> continued to improve from one point supersonic watching ago unadjusted for inflation, we remain committed to this spot given its promising trajectory salt Fox.
As you'll note offering of a best in class last mile delivery services and other payment and landing services. The other retailer is the fourth enlarged killer pillar of our strategy hipster.
Hip Sujit and logistic Pablo lies at the heart of the same David.
And the share of external consume customer volume in hip suggests operations increased by 20.
Two 6% year over year in unit.
It reached to nine to 10 month or sample thoughtful Xtra jet business in this classic.
Hipster Jetstar nearly 1600 external customers with some of the name international local leading brands you see on the chart I believe pips does it is the best positioned to build on this momentum and grow with chairs in the logistics market.
Now let me elaborate on the mix effect, which is hipster pack types debate is on route to become leading Fintech player in Turkey in Q2 be released Teradata not versus a new services, including has to pay debit card, which provides frictionless physical and online.
On a section.
It starts with the payment gets too hot for slip off platform transaction N V launch wallet top up with more financial flexibility this capability adheres to our old wasteful bullets motto.
Additionally, we introduced one can be checkouts integration on another retailer towards building the pay the tips. The pay proposition then visits growth in one click checkout integrations will become instrumental in hips are based off the thus far makes sense ships.
In addition hits that they have taken strategic steps towards solidifying its position in the Fintech I N V.
<unk> built our five year strategic collaboration with visa in relation to its pretty pissed koskey being lifted and they're leaving came on for castration platform in Turkey Cross Gate technology craft gates have equal nurse company easily integrate and manage the virtual point of sale of banks and E money Institute.
<unk> from a single platform.
Over in this month in cross Gate is in line with our vision of leaving the financial technology markets in Turkey, and we believe that it will further foster the growth of our E. Commerce partners overall helps the paid for it to about <unk> 5 million the wallet space and most diverse affordable religious solution is so low.
It broke down fast and reliable one colleague check off the old first to other sellers and their strategic alliance with creates huge competitive advantage and this is enabling us to become the leading fintech players in Turkey.
I'll end my presentation not recovered guidance.
Despite the ongoing macroeconomic challenges, we expect continued solid <unk> growth of around Honda than 10% year on year compared the same quarter of last year unadjusted for inflation.
This expectation will another service quality affordable health care solution and over at six am loyalty program.
We're positive EBITDA, so that will continue and we expect to deliver EBITDA as a percentage of G. Amit neither in the range of 1.521%. These figures are in adjusted for inflation.
Looking ahead, we are poised to bring full year positive unadjusted EBITDA into vantage suite. This is underscoring our commitment to sustainable and profitable growth.
With this I. Thank you for listening and leave the floor to our CFO carvana to give more color Paul or financial performance in the second class. It. Thank you.
Thank you Anita and welcome everyone.
We gave a robust performance across all metrics during the second quarters. This performance was achieved despite the election, all sorts of knitting nanna older and ongoing macroeconomic challenges and adjustments for inflation Pao G. M b more than doubled in Q2, when they usually basis to 18, four and five P. M Tee up.
Similarly, our Ias 29, unadjusted revenue also more than doubled on a yearly basis when adjusted for inflation geography and revenue growth are both at 43%.
G M D growth resulted from over 27 5 million orders, marking around 95% year over year growth.
Gross contribution margin came in at 10, 4% adjusted.
Adjusted for inflation this metric rose nine 3% on their fourth 0.4 percentage point improvement on a yearly basis.
Q2 was the second consecutive quarters for positive EBITDA and adjusted for inflation Accordingly.
<unk> as a percentage of <unk> reached 2% went up four seven percentage points rise year over year.
Excluding the positive impact of 105 million TL competition, both investigation provision reversal, our EBITDA as a percentage of G. M. D was at 1.5% also adjusted for inflation. This metric was at 0.3% or near 6.5.
Tentage point the improvement.
In the first six months, our revenue growth and gross contribution margin, whereas 29% and nine 3% respectively adjusted for inflation.
EBITDA as a percentage of G. M D, 0.2% adjusted for both the bundle and inflation.
We generated 881 million T. Our net income this quarter up from a net loss of 783 million in Q2 2022.
This resulted from 975 million improvement in EBITDA 583, new MTO increasing net.
Financial income and 107 Chameleon T S. Monitory gain in Q2, 2023, again to 64 million increase in depreciation and amortization on.
On the next slide let's elaborate on our progress towards profitability.
43% of G&A growth came through 'twenty seven five chameleon orders in Q2. This performance is a result of our value proposition supported by the hips. It brought the premium loyalty program and our affordability solutions.
Our digital digital products contributes to the oldest few clear itself put spacing customer segments, yet excluding these orders or order grow above 20%.
During the second quarter, we sold 3.1 percentage point shift in <unk> mix towards three P. 267% monkey operations remain amongst the key competitive advantages.
On the next slide I will discuss our revenue and gross contribution performance.
First some details on our revenues at.
Around 63% revenue growth was achieved mainly by 32% increase in retail revenue and then 87% growth in marketplace revenue at retail and marketplace operations comprised 88% of our revenues.
Our delivery service revenue comprising 92% of total revenue rose six 7% compared to Q2 2022.
Meanwhile.
Which mainly consists of our advertising services fulfillment services and loyalty programs subscription piece three boats compared to Q2 2022.
Gross contribution margin in the second quarters. It was 9.3 person with a remarkable improvement.
<unk> four percentage points compared to the same quarter last year.
This was mainly attributable to lower quarterly inflation impact on the cost of inventory sold and better inventory management and change in G&A category mix.
Let's move to EBITDA performance on the next slide.
Continued G M D and topline growth our focus on cost and marketing campaign optimization enabled us to deliver positive EBITDA for another courses.
<unk> seven percentage points year over year improvement in EBITDA as a percentage of G. M. D was mainly due to a four points four percentage points rise in gross contribution margin.
<unk> six percentage point decline in advertising expenses.
<unk> percentage points improvements in other opex items, which includes the 0.5 percentage points post tax impact of the provision reversal.
Opex as a percentage of G. M D about 8.5% and this quarters up two six percentage points lower compared to 11.1% in the second quarter of last year is.
Overall efficiency in marketing spent was achieved through our win through loyalty strategy data driven marketing and co marketing partnerships.
Next if you go to some of our cash flow dynamics.
Compared to Q2 2022, the bounty of M. T. As excuse me cash flow from operating activities, mainly resulted from 782 million T has decreased and change in inventories. In addition, we made the 283 million MTR payment to settle the litigation case.
We continue to operate with negative net working capital during the second quarters. The one 7 billion TL change in negative net working capital was mainly driven by a decrease in trade payables due to payments in Q2, as a result of higher inventory procurement and for some this shortlist.
Payment terms.
An increase in inventories due to planned procurements in Q2, and a decrease in provisions due to payment to an escrow account in relation to U S litigation settlements and the closure of the competition Authority investigation.
Capex was around 176 million TL overall, our free cash flow was negative 607 million TL in Q2 2023.
Before we end our call I would like to highlight the five main points of our presentation today.
We delivered better than expected EBITDA through stronger topline growth and diligent cost management.
We continue executing on our well defined strategic priorities for sustainable and profitable growth.
Powerpoint full percentage points improvement in our gross contribution margin and seven percentage points rise in EBITDA as a percentage of G. M. D has given us confidence for the second half.
We generated a net income at 881 million MTS through improved EBITDA strong financial income and monetary gain.
Our strong muscles, including logistics and Fintech services, such as additional revenue streams for our company.
In the second half of the year, we will continue to work diligently to deliver the best possible results, creating long term value for all our stakeholders.
Thank you for listening we can now open the line for questions.
Yeah.
Ladies and gentlemen at this time, we will begin the question and answer session anyone who wishes to ask a question press star followed by one on their telephone.
If you wish to remove yourself from the question queue. Then you May press star and two please.
Please use your handset when asking your question for better quality.
Anyone who has a question my press star and one at this time.
One moment for the first question please.
The first question comes from the line of killing it on how does that then with JP Morgan. Please go ahead.
And Hello, Thank you very much for the presentation and congratulations for a very strong numbers.
I wanted to follow up with your guidance go to church car says it is a very strong grocers to expect taking place Nike that around 65%. So I'm trying to understand the drivers behind days and accelerated Jeremy a.
I can quote to coach Cortez.
And also are you seeing it.
The substantial increase in the share of non electronics in the Caribbean mix also in the church glad too.
The second question I really appreciate if you can comment at all on the competitive environment and in the third quarter.
But clearly from the perspective of the discounts in the market.
And finally around the numbers.
How would you guide to there can capture a program called the Tony Carr to after the buildup of inventory in the second quarter. Thank you very much.
Tank and saw my towns are then that's my answer to the first three and let's call it home to give some.
Color for all of our working capital expectation for touch Clarke to fill in.
In terms of guidance, we are expecting overall growth momentum to continue to innovate behind our four strategy.
The number one it helps the world of premium program. This program has been quite strong as we celebrated its first anniversary the more we build the membership of the program to more of a frequency increase and it's been like I said at eighth momentum include Citic Best Mamba to walk the second is the need for affordability solution.
And the inflation in the macroeconomic context evolved possibly inflation figures consumption, but partly.
It also has an impact on the need for more affordable. It just solution. So we also believe that we have a strategic advantage with a variety of solutions, we provide support to conceal me.
I also believe that other b to B business, which is the bigger block being kept in fintech.
<unk> is also going to continue that.
Mountain side, and I think all in all and we feel comfortable in August they had anything to grow its momentum.
In terms of your second question Monday next rolling Snake.
It is.
Not specifically.
Growth aspiration, and our growth guidance doesn't rely on just one electronic mix, if it's prompting BPM clients that they took about <unk> built more loyalty program. We are adding more non electronic thing to the mixed box Q3 specific these back to school season.
It would be an impactful epsilon player a lot of electronics purchases with laptops.
Both for our school says that the we don't specifically expected jump a poor Q3, but we will continue the momentum we have built.
I think your first question was on the context to them environment. So call. It two environment has always believed in Turkey and that are at the head strong competition global competition from Amazon and Alibaba to triangle in Turkey. We also have now in the Netherlands.
Just coming back.
And some furniture and emphasis on Turkish market for them get to that drop.
I think it's gonna be cool pool, it's going to be continue to be competitive.
E Commerce market in Turkey initial don't forget it only hit them onto firsthand penetration and it is significant momentum to still improve and create category creation for ecommerce and despite the content to them more than once I believe the number of strength, which is quite different and unique.
From Turkey, we are very agile beyond this time the values. Our four pillar strategy does resonate better back. So I think they'll continue to deliver value for our customers than dollar share at holiday.
Nobody will now handover to call it home for Atlantic, but thank you.
Hans I there as you know from history that says.
Another thing in our business and especially in the second half with back to school period, There's a campaign period, starting continuous with the Black Friday and decembers.
Period, So we will continue generating more G M ease in the second half and consequently, this will improve our net working capital and as usual and we will continue to generate better as networking capital in the second half and improve our free cash flow going forward.
And thank you very much.
Maybe a follow up on the competition side and so the market is still very competitive but it does.
Put some social controlling our commission rates are in the.
It's hard to quantify because they all saw substantial improvement on the gross contribution I just wonder if that's still continuing to so it's quiet.
Our expectation hamzah, they're seeing the trends in Turkey is that I think our plan is to throng. That's why the I gaming is still a strong guidance or maybe David just between all point to one to one person.
We don't have percher expectation beyond what's just happening today and I feel comfortable in the guidance we have given.
Okay. Thank you very much.
Thank you.
As a reminder, if you would like to ask a question. Please press star and one on your telephone.
As a final reminder to register for a question. Please press star and one on your telephone.
Ladies and gentlemen, there are no further questions at this time. The conference has now concluded and you may disconnect. Your telephone. Thank you for calling and have a good afternoon.
Okay.
[music].
Uh huh.
[music].
Hum.
Uh huh.
[music].