Q3 2023 D-Market Elektronik Hizmetler ve Ticaret AS Earnings Call
[music].
Participants will be in a listen only mode and the conference is being recorded at the presentation will be followed by a question and answer session should anyone that assistance. During the conference call you may seek them out and operator facing Stalin's here, we go tell us headwinds.
This time I would like to turn the conference call over to Mr. Sidney <unk> or not just at the King CEO. He said should keep your shallow vice president of strategic Finance and Mrs. Helen <unk> Investor Relations Director Mr. Bilek, you May now proceed.
Thanks, operator, thank you for joining us today for hips, who brought US third quarter 2023 earnings call I'm pleased to be joined on the call today by IPO on August <unk>, and our vice President of strategic Finance Fishkin Cassella, the 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 <unk>.
Supplemental slide deck 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 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 or supplemental.
The slide deck as well as today's press release for a presentation of the most directly comparable <unk> measure and the relevant <unk> reconsolidation.
Minded a replay of this call will be available on our Investor Relations website.
And with that I'll hand, it over to our CEO Tom.
Thank you.
And thank you for joining us I'm pleased to be with you today and to present, our quarterly progress.
In Q3, Andas continued challenging macroeconomic environment that yearly inflation case to 61, 5% the deal with robust financial performance.
<unk> more than doubled by.
The 6% growth year on year adjusted for inflation of <unk> remains solid at 45% year on year.
The operational agility afforded by our strategy, Netherlands outstanding performance that exceeded expectations.
A broader number of salons at several million dollars it was 55% year on year.
Continuous demand for our differentiated services.
You don't need 2.6% gross contribution margin and Opex management already BCA as percentage of Gi and these rules by six Tom just 92 basis points year on year to two 7%.
I think for a long time of income are required from the <unk> guidance was down 2.2 thirds that our system at a.
Premium program with over 2 million members as of November and inline with our expectation. The program continues to play a key muscle role in elevating over order frequency and improving our customary Pasha.
Overall, I'm very pleased to demonstrate sustainable growth and improve profitability.
Maybe I'll take you through our delivery versus Q3 guidance.
Through diligent execution these target our guidance for both G&A and EBITDA, our GMB growth exceeded guidance by 16 percentage points.
This powerful most was the result of our solid strategy that want a loyalty to our platform.
In July the NR.
The increase across all the sensors that go into higher demand for ecolab.
Furthermore, through prudent cost management, our EBITDA is pearsons adult Gee I need to point to first off and just as part of our marketing cost.
Doubling the upper end of our EBITDA guidance can you highlight our operational efficiency.
Over the past four months, maybe they want.
Want to sustainable growth and positions us favorably to achieve a positive full year 73, EBITDA on an unadjusted basis.
Hey, sure at all is the key trusted brands for E. Commerce in line with our pledge to customer Centricity Vietnam pitched, the broader promise initiative as a marketing campaign.
As part of this initiative be promoted key consumer benefits that encompasses next day delivery guarantee Komansky certainly couple of services from consumer doorstep, and then he's sure authenticator products.
Hyatt engagement, we partnered with almost two guests more confidence inspiring style editor for this initiative.
We believe this initiative is the primary concern about Turkish e-commerce consumers, while underscoring our commitment to meet their expectations. This commitment is clearly reflected in our kpis to 9% growth in order frequency 55 first on order growth called ever consumer engage.
And loyalty strategy is clearly working.
In the third quarter with our 1000 active merchant base, our total SKU count climbed to nearly 211 million hours.
Merchant count how can we create coupons, which I am holiday attraction point for customers.
Last minute amount of campaigns coupons, and all advertising to drive higher conversion from standard as part of her much at.
All the Atlanta location with automated inclusion of products in the next day January College.
This benefit was just customers, while freeing up our emergence of a manual process.
Well at least one four and if anything the visibility in vitro our merchants me reintroduce our advertising solutions in them what it takes to form up this quarter.
This initiative underscores our commitment to a different merchant relationships.
Have them grow their volume on his brother.
As always we remain focused on execution excellence and our recently affirmed the effectiveness of our four pillar strategy.
Just to recap briefly our society Congress that on loyalty cultivating over time, they know what differentiates it.
Streamlining of our cost and expanding our b to b it annually in Fintech and logistics.
The next few slides.
This national or progress highlighting our key achievements.
First our hedge to one of the premium program is a key loyalty driver and continues to gain momentum and exceed the 2 million members by end of November.
Probably going to stop that goes beyond music Pasha.
Significantly influencing customer behavior.
Remember small dogs are frequented offer on longhorn eight to $2 six after they joined the program.
This emphasizes the program's potential to position hits the birthday as customers go through E Commerce platform.
Quarterly net promoter score remained at about eight one points, which as Tom points above our overall MTS veeva.
We remain dedicated to keep this program is a compelling proposition for our members.
No look into one of our key differentiator hedged to pay in todays economic landscape affordability to take center stage and our in house Fintech expertise to deal with it.
Sets us apart leveraging our unique E money payment services license deal for at home to have these people Ayman and affordable solutions. These include our prepaid card by not paying laser solution pop up the waterflood and point of sale chopping block and more recently there has been a prepaid card.
In collaboration with visa we are encouraged by the demand for this cost with Honda B 708000 cards issued in just six months, hence the pay card user cannot keep her son cashback in all their online and in store payments if the premium programming.
Is that a customer who used to top up their prepaid card is their general purpose loan for another partner banks, which can be reached with one solution from overhead this quarter being take rates of Florida major effects hits the table. It gives customers the freedom to spend this wrong every bought.
The physical stores and online combined with the ease of our statement.
We tell our customer centricity.
Our commitment for data were even stronger painters paint when it had an affordable solution remains firm.
Next let's consider our affordability solutions highlighting some performance indicators.
The share of total non card affordable solutions and our <unk>, 5.6% also in five stores acquired for that golf. This increased penetration is that example, our improving comparable incorporation of mankind affordable solution to offer or buy journey.
All of them all came in on the 62000 orders came through it is therefore, a double digit solution.
Our B Antiatom evolution has the world remains the parents, providing alternative e-commerce.
This is the session over to 245000 customers that utilize there'd be MPI minutes instead of toddler. During iPhone 15 launch Veeva orderly platform to offer a solution for this high value items.
I would like to move to novel her next differentiator helps digit head.
The throne M. P. S of eight to 6.2 in Q3 on their scores, it's ecmo lunch surf extra love.
Histogen continue to invest in expanding its geographical coverage by additional amongst abilities total monetary policies colors exceeded 600 by the admiral to Quad.
In Q3 has continued its strong next day delivery platform with eight 2% ratio a more color bump here or there.
Also of the total parcel volume on our platform hipster jets delivered 61% confirming its integral role in our delivery ecosystem.
Totally hedged X plus data about 57% of our oversight Arthur this is confirming greater merchant preference forever pool man handling capability.
In Q3 as a result of all of our actions. We saw continued progress in profitability posting get pool, 0.2% EBITDA S persons adult G. I mean, excluding the bundle but to the.
But it is clear.
Clearly demonstrates the effectiveness of our strategy.
Turning to our core strengths and our diligent cost management.
Now let me take you through the fourth pillar of our strategy, which is generating beef or be it in Europe from fin Tech and logistics.
First let's start with Texas, yet, we continue to expand our external customer base, adding godaddy Taylor and doubling governors customer comp and doubling our volume year on year.
This is confirming our ability to generate b to b. They may use of pillar for a cleaner initial cases, Texas, yet full momentum is an appealing logistics partner.
Now, let's turn our eyes to hedge the pace of the I'll call. It makes fashion, enabling guests to maintain a month expedia.
And it did pay off first embarked league checkout solution.
This helps to pay for other retailers. This solution became amenable Edgar online checkout of five major Turkish retailers in Q3 as seen on the slide.
A leading sorry, Vishal Mehta reliance brand the collar job, leading searches fisherman brand if possible do you think maybe Brad everything is just fuel for example, Moreover, we also offered our lending capabilities as part of a face to face marketing checkout solution.
Did it take off in line with our vision of providing fast reliable versatile payments and lending experience beyond hence the broader platform.
He used to pay features expand beyond one click checkout. The seamless is all paid prepaid cards, both online and in store payments clearly diversify our payment options for consumers.
Oh Boy. This law offer enables users to pull off the revolver to be general purpose loans from multiple customer back. These bonds are then able to spend any of that debt has fixed card payments. In addition to platforms with temps to pay at their checkout and upcoming feature is this.
Integration of shopping malls within the paint in hips the same network.
Before I dive into Q4 outlook, let me take a moment to talk about our November campaign performance.
Our business is characterized by strong Q4 seasonality like all other ecommerce players, meaning they never at higher sales volume during the fourth quarter. All the other preliminary results indicate that this year have been delivered yet another very strong performance in November.
Doubled the G&A compared to the same period last year.
Nominal for the last two times that of the month average of the prior mountain Semanticity other fiasco.
Jakes has almost 500 million Miss it and we sold over 30 million pizza.
The affordable into Solutia fan loyalty program their particular inflection points, 46% of G on lead generation through Santa Fe's connected cars came through installments that.
The most significant serviced in orders compared to the same period of last year minimum clothing, and fly them Palm Garden and FMC J B.
Great about how the consumer appreciation of our superior services solutions and campaigns in the Pisa Mount of November that hits, the word that clearly puts its name to divert legend that it will.
Each was created by us.
Oh.
And now I want to close my presentation with our guidance. So we need another robot legendary November behind US, we expect to deliver a solid and profitable growth all things fourth quarter. Accordingly, we expect to deliver a G&A growth within the range of minus <unk> three from nine to five sources.
I'm paying for the same period last year and EBITDA as a percentage of G. I mean within the range of <unk> five to one Thursday. This figures are adjusted for inflation, Consequently, and for the full year to that to treat the expect to double over geography year on year on an unadjusted basis and delivery be disbursed until.
D M D. At 1.5 stars that this figures are also unadjusted for inflation.
I. Thank you for listening and leave the floor to say chicken our forthcoming CFO for a more color on our Q3 financial performance then I'll do my closing remarks.
Thank you and welcome everyone.
It's a pleasure to meet with all of you today for the first time as I embark on my new role as CFO I look forward to many more such occasions.
Despite the prevailing macroeconomic challenges I am pleased to say that we continued our trend across all metrics during the third quarters.
Unadjusted for inflation or a gym bureaus, hundreds and 26% in quarter three on a yearly basis to $24 3 billion.
Similarly, our Ias 29, unadjusted revenue growth was at 127 on a yearly basis.
When adjusted for inflation G M here in revenue rose, 45% and 52% respectively.
Strong orders growth, coupled with faster than inflation rate and the average order value and a strong e-commerce market growth in July on the vessels.
This resulted in a 126% gms growth.
The gross contribution margin came in at.
11, 6% on a 1.8 percentage points improvement on the same quarter of last year.
Adjusted for inflation dismiss Rick rose to nine 4% on a one percentage point improvement.
Quarter, three was the third consecutive quarter of positive EBITDA and adjusted for inflation.
Accordingly.
As a percentage of <unk> reached two 7% on a six nine percentage points year over year.
Excluding the impact of a one off income item, our EBITDA as a percentage of CME was at two 2%.
Also when adjusted for inflation this metric was it.
3% six two percentage point improvement year over year.
The next slide let's elaborate on our GMB growth for homes.
45% of Gms growth came through 'twenty 7 million orders in quarter. Two this performance results from our building solutions supported by the historical opinion lived program and our affordable solutions.
Our digital products contributed to the order frequency of participating customers segments.
Excluding these orders are all those rules was still strong at almost 18%.
During the third quarter, we sold two seven percentage points shifting mix towards one Pete.
While we continue our growth in money twenties. During this quarter. We also leveraged our strong lumpy model to meet the demand in the electronics market.
On the next slide I will discuss our revenue and gross contribution purple lines.
First I would like to give some color on revenues.
Revenue growth of around 52% was achieved mainly by a 50% rise in retail revenue and 61% growth in marketplace revenue.
Our retail and marketplace operations comprised 87% of our revenues.
Our delivery service revenue comprising 10% of total revenue rose, 43% compared to quarter three 2020 to.
Meanwhile, other revenue, which mainly consist so far advertising services fulfillment services and loyalty programs subscription fees grew by 116% compared to quarter three 2022.
Our reported gross contribution margin was nine 4% on a one percentage point improvement on the same quarter last year.
This was mainly attributable to a higher rediscount impact on cost of inventory sold due to purchases on credit.
A change in the <unk> category mix towards higher margin products.
The higher other revenue stream.
Faster inventory turnover, partially compensated for the margin deteriorating impact of significantly higher quarterly inflation that we have missed this.
In quarter two.
Let's move on to the EBITDA performance on the next slide.
Together with strong top line growth, our focus on costs and marketing spend optimization enabled us to deliver positive EBITDA for yet another part of this.
The six two percentage points year over year improvement in EBITDA as a percentage of <unk>, mainly due to.
A one percentage point rise in gross contribution margin.
1.1 percentage point decline in advertising expenses.
So 0.1 percentage point decline in shipping and packaging expenses.
<unk>, 6% decline in payrolls and outsource staff expenses.
And 3.3 percentage improvement in other Opex items, which includes the settlement contribution from Tudor Commerce in the course of this year.
And the provision expense related to the same litigation in quarter two offline.
Opex as a percentage of G. M. B was nine one percentage in this quarters.
$5, 1% points.
Lower compared to 14.2 percentage in the third quarter of softness.
Our continued efficiencies in marketing spend was achieved through our focus on customer retention and loyalty strategy.
Marketing and co marketing partnerships.
Net if you were on our cash flow dynamics.
Compared to the quarter three 2022, our cash flow from operating activities increased by almost one 4 billion to $2 2 billion in quarter 323.
This increase in cash flow from operating activities, mainly resulted from a.
1.1 billion NPL improvement in EBITDA.
$1 2 billion decrease in change in net working capital mainly due to increase in other receivables and an increase in inventory in anticipation of high demand in quarter four.
0.7 billion increase in operating monetary gains due to inflation accounting and other items.
And finally 0.8 billion increase due to realized FX gains.
Capex was around 234 million CN 0.9 percentage points of G. M D.
Overall, our free cash flow was a positive 2 billion TL in quarter three 2023.
Before we end our call I would like to leave the word back to minimum.
To highlight the key takeaways from today's presentation.
Tank cars that Chicken, Inc.
In Q3, we delivered a strong top line growth and EBITDA through diligent cost me in German exceeding our guidance.
Our I S.
Cause I'm Tonight Unadjusted G&A growth marked the highest quarterly growth since our IPO on the margin side, we improved our gross contribution margin by 1.8 percentage points and EBITDA pearsons off geography by six nine percentage points.
The generation desktop actually improvement in free cash flow on a unit basis, thanks to our improvement in operating profitability.
We are committed to creating long term value for all of our stakeholders and we work diligently to deliver our best festival resolved with our whole team.
And finally I take this opportunity to wish everyone sees the mitigating tank.
Thank you for listening we can now open the line for questions.
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 the telephone.
If you wish to remove yourself from the question queue Van you May Press Star two.
Those participating via webcast you may type your question via that live feedback box below the presentation for.
For those participating in the audio question and answer session. Please use your Hansen when asking your question for better quality and anyone who has a question press star one at this time one moment for the first question. Please.
The first one.
I am so sorry, there was a question, but it wasn't with Cowen.
As a reminder, if you would like to ask a question. Please press Star then one on go telephone.
Once again to register for a question first I don't want to go tell the phone all tied to your question on the lifeboat box below the presentation.
As a final reminder to ask a question. Please press star one on your telephone or talk to your question or the question box on the webcast page.
Ladies and gentlemen, there are no questions. At this time, we will now proceed with the webcast questions from all participants.
The first question is from Maxime Makashov with C T and.
I quote what drives growth deceleration in Q4 2015 compared to the third.
Third quarter 2023, thank you.
This is Nihon speaking, we have a couple of factors one of them is our base.
In Q4 of antitumor the extremely strong there.
Number one driver number two driver is in Q3 marketing we had the vap change as I explained in July.
Adjusted net income growth and he couldnt fill out forms which won't be repeated.
Jerome over expectations in Q4, and lastly, with the rising interest rates. We are expecting also some minor limited to the demand in Turkish market.
Is this to be our expectation is and the G&A graph the ship.
Yeah.
Once again to read so far a webcast question. Please type in the West Coast box. Thank you.
The next webcast question is from had them son with T Rowe price and I quote any thoughts on possible local listings to improve the liquidity upstairs.
Okay.
And locally as.
It's possible they think in Istanbul stock exchange is one of the ideas that we are always evaluating and like other auction. There are pros and cons. We are investigating <unk> as we crystallize our thinking if that is true.
Something to shares even obviously come back but this is one of the things we are.
Obviously looking into Aegon the feedback we received today.
Once again to ask a question. Please press Star then one on your telephone or type your question or the question tab.
The next web question is from team Rasnake, Lisa from Tyra capital and I quote hi.
Could you please.
Excuse me.
Could you provide any color on September sales and how the land today don't remember event relative to your expectations. Thank you.
It was almost tripled versus seller expectations in November.
We have done couple of assumptions for November growth.
<unk> increased at <unk>.
Increased uptake from our premium consumer board to her premium membership increased and the frequency increase from premium consumers has been in line with our expectation.
Non electronic.
New categories that we have been driving has been strong that has also been in line with expectation and in terms of our marketing plan.
Gross efficiently planned for lithium during November also was in line with our expectations. So I would say.
In advance of January November seven years ago, and since then we have been getting stronger and stronger in our execution and in line with our planned fleet data, where there's strong November campaign.
Our next question is from Christian <unk> with from third eye capital and I quote digital orders represented a significant portion of order growth could you expand on what are these or does it relate to and what their contribution to revenue growth be similar.
Okay.
The digital order, yes, they represent a significant portion of order growth, but in terms of G&A, it's immaterial less than 1.7% of our Virginia.
So we come talk about any related contribution.
G on the graph it is progressing.
If the right frequency it drives consumers to comtech creates loyalty of expansion. So we'll continue on driving that.
Thank you Oh, we also have a question from Mr. Hasan by a hunt and I quote how do you invest in the U S. Cash that you have what is the return on that.
Okay.
Hi.
Typically use time deposit.
Banks and I think.
Yield is the question if you had a close to <unk>.
5% on our.
On our yield for USD deposits.
Thank you. The next question is from Mr. Maxime, Nick Raza with Citi and I quote what are your expectation regarding consumer demand in 2024, considering recent interest hikes.
Other progress and results clearly prove that our strategy of Earth into labs that today and as we look forward to the coming year.
Although the interest rate increases could diminish consumer demand assumption can also impact Turkish economic growth, we have several key initiatives reinforcing of our position.
I maintain a her commitment from strategic priority affordable shopping get.
Options.
It is from premium program and also E. Com is in this place very sweetest of serving consumers in this type of environment.
Our next webcast question is a follow up from Mr. Adam So with T Rowe price and I quote what is the outlook for a b D. A margin in 2024 also where would you like to see the margin over the longer term.
Okay.
So and so forth and.
We are going to talk about our guidance our expectations as part of our Q4 earnings, but what I can say we are.
Extremely core makes us for sustainable profitable growth.
<unk> built a very strong initiative pipeline product line before and also upcoming gear in line with the presentation. We have bond that is including kept advertising platform, including non electronics in our mix.
That is including incremental margin for our mobile services and B to B is it a new stadium continues to enhance our margin situation.
Granular details than expectations they'll come back in Q4.
Thank you. Our next webcast question is from Christian anxiously put Antara capital and I quote Hep C premium rates 2 million members could you. Please speak a bit about any targets for the program is there a target number of members is this program break even to get Oh, Nick Casale.
Databases.
In terms of the premium program. Obviously, we are quite bullish about creating a great amazing program that will be sticky part of our consumers.
We are not changing game specific number we are looking into sustainable profitability of the company for sustainable profitable growth using loyalty and retention initiatives in our mix that also includes pretty New York.
I'm not going to share a specific number that we are chasing for next year, but even look onto to enhance both the benefits of the program and also numbers are in the program in terms of.
Premium profitability, we don't share the details for asbestos consumer segment in the future.
We could look into giving different costs in our profit was about four five we are only shave Inc. A consolidated view.
Our next question is an audio question from the line of Kelly kiosk I thought they would say be Morgan. Please go ahead.
And we know.
It can be and I apologize I forgot it.
Sure I can think off.
Initially.
I would like to follow up on the gross contribution margin.
Robots in promo.
Would it be reasonable to say that.
A large part of this expansion in the gross margin contribution.
Contribution come from the inventory gains because they're they're high or placeholder Church Clark.
So I totally sounds like ours.
It's a one off.
No.
And or otherwise ideal.
There are some structural changes in your business like a fire.
Our shuttle clothing.
Corey.
All of that good take rates that they continued to support the margins going forward.
And the second question is is it possible to provide some sort of uptake or the rest of the competition.
The investigation.
All right.
<unk> got a negative outcome mitigation. Thank you.
Okay.
Yes.
I mentioned in my presentation.
Is that one quarter of inventory sold due to purchases on crazy.
In fact.
The improvement in.
Gross contribution but.
Is that true.
Improvement.
Making.
The Liza phase.
CPE gym category.
Towards higher margin products and this is going to continue.
The future as well.
The other revenue stream is something that.
Continuing to expand.
Especially worth of note our premium fees are hits, the Ed and this is very important for our future profitability.
Yes.
Expansion of our delivery services. So these are structural.
The key interventions that we will be continuing to head in the coming quarters as well.
Let me come back on the second question because the complexity of all sorts of investigation that has been an investigation in Turkey.
Our price recommendations for our merchants.
<unk> E Commerce platform, we have been one of the.
Companies that competition motoric and wanted to better understand the logic and we have been sharing all the data. We have this is our system capability veeva vault in order to enhance.
Merchant competitiveness in order to enhance competitive prices with rice ambition. This right mix area. So we are very comfortable in terms of the potential of that.
<unk> could be a situation that in the worst case scenario. The competition. Most of it is you could say we would like platforms to hold this application.
But nothing beyond that so even the worst case scenario, obviously either for desktop we wouldn't.
He will then they come out of that.
And thank you very much.
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.
[music].
Okay.
[music].
Yes.
[music].