Q2 2024 D-Market Elektronik Hizmetler ve Ticaret AS Earnings Call
<unk> conference call and live webcast to present and discuss our second quarter 2020 for financial results.
MS. Walton: 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 seek out and operate so my pressing star then zero on your telephone at this time I would like to turn the conference over to MS. Walton detect became CEO Mr. Shaw.
Speaker Change: Stinker show Blue CFO, Mrs. Helen Jake Black Investor Relations Director Mr. Bilek, you May now proceed.
Thanks, operator, thank you for joining us today for <unk> second quarter, and first off 2024 earnings call I'm pleased to be joined on the call today by our CEO need hang on I'll give to thinking and our CFO <unk> <unk>.
Speaker Change: 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 todays <unk>.
Speaker Change: Earnings release as well as the risk factors described in the Safe Harbor slide of today's supplemental slide deck. Today's press release. The 6K, our form 20-F filed with the SEC on April 32024, and other SEC filings for informational factors that could cause our actual results to differ materially from these forward looking statements.
So 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 relevance of <unk> to noninterest reconciliation as a reminder, a replay of this call will be available on our investor.
Tom turnkey: <unk> website with that I will hand, it over to our CEO Tom turnkey.
Tom turnkey: Tanking and welcome everyone and thank you for joining us I'm delighted to be with you today to present, our second quarter and first half results.
Tom turnkey: We delivered another solid set of results in Q2 to them too far exceeding our guidance for both <unk> growth and EBITDA as percent of G. On the <unk> got this is all despite the prevailing macroeconomic headwinds in the first half of the year, although <unk> doubled compared to the first half of previous.
Tom turnkey: And our EBITDA reached two 4% of G M. The unadjusted for inflation.
Tom turnkey: Adjusted for the inflation via recorded nearly 72% <unk> growth and 1% EBITDA as firsthand of G&A.
Due to consumer demand coming forward to Cuba, we argue the prudence of considering doubled overall first thoughts biopharma.
Tom turnkey: Moreover, in the first six months, we delivered the highest first half free cash flow ever since our IPO.
Tom turnkey: This results confirmed it strategically speaking we remain on the right path.
Tom turnkey: Now, let's look at a few of our operational metrics.
Speaker Change: Exceptional customer experience topnotch logistics services and diverse affordability solutions, our NPS metrics, yet again confirmed to be Turkey, plus Chico Mendes ecommerce Brett our active customer continued to increase and reached 1.1 million.
Speaker Change: Customer loyalty and retention are central to our strategy and hips, where that premium has played a key role in strengthening these relationships.
Speaker Change: Just for thought that at launch it's hugely encouraging to see that helps the pyramid schemes to 3 million subscriber mark.
Speaker Change: Returning to the second quarter, we recorded a 36.7 million orders on 33% year on year growth Oh, the order frequency over last 12 months reached two powerpoints picks up by <unk>, 3% with the Onboarding of additional brands, particularly in the fashion.
Speaker Change: <unk> and lifestyle categories by end of the quarter. Our signature platform reached 264 million S scale deals that are offered by an active merchant base of around 101000.
Speaker Change: Now, let me provide a snapshot of the quarterly progress on our four strategic priorities.
Speaker Change: First let's look into her loyalty program features over key to being this loyalty strategy.
Speaker Change: The program right to 3 million members is a testament to the attractiveness of the program's value proposition.
Speaker Change: Our program has an NPS of 84, which is the highest among loyalty programs in Turkey sheet Commerce briefly.
Speaker Change: Next the trust and appreciation of its members.
Speaker Change: The numbers tend to prefer hits the brother as they go to shopping platform.
Speaker Change: The old that they generate 36% higher for it because the after joining the program.
Speaker Change: This is strongly contributes to overall order growth our local streaming partner Blue TV was acquired by vulnerable of discovery in December to Atlantic City. Accordingly, a broad range of best International series and shows from Warner Bros. Will soon be available as.
Speaker Change: Part of the premium program benefits.
Reaching the exclusive experience enjoyed by this remember we remain dedicated to retaining satisfied customers, while welcoming new off into the fall.
Speaker Change: Next slide please.
Speaker Change: Moving on to other strategic priority, which is differentiation with our superior delivery services.
Speaker Change: Faster to achieving this is our hipsters yet continued penetration on our platform head Sujit, which is our last mile services company data was 73 per sample total parcels dispatched during the Quad Tech. This is up by six eight percentage points year on year. It's.
Speaker Change: Volume expansion and oversized parcel delivery is also very impressive in Q2, 68% of all oversized parcels on the Buda were delivered by Hep Sujit extra touch this smart pen 8.9 percentage points year on year increase.
Hey, Hi, MTS confirms its commitment to differentiation with service excellence, our commitment fueled by flexible and call me and say the way option.
Speaker Change: Being a new generation logistics company committed to sustainable practices in a pilot project hits is it added to that the one electric vans to its fleet in the quarter.
Speaker Change: With a target to increase this number to 50 by year end. This initiative master small step towards addressing the bigger environmental issue. In this context is the first ecommerce player to publish a sustainability report in Turkey, I'm delighted to announce that we recently published a report for transatlantic.
Speaker Change: Great.
Speaker Change: Our third priority is kept to liza or another clear differentiation with affordability and lending solutions.
Speaker Change: It's the pace comprehensive suite of payment and landing services gained further significant in a continued environmental type liquidity.
Speaker Change: Although the affordability solutions, which include our in house buy now pay later solution consumer Finance law and shopping lost from partner banks have gained more traction.
Speaker Change: The quiet clearly shaved off these affordability solutions in <unk>, two six points, 1% from 4.9% acquired today goal, we set out to that 2% increase the consumer tendency to use general purpose loans for shopping on our platform has also increased its touch include.
Speaker Change: The impact of doors, the pant and the platform G. I V penetration of our overall affordability solutions rose to eight 1% in Q2 from five 8% acquired for that go head.
Speaker Change: <unk> is the largest nonbank b M. P S solution provider in Turkish market.
Speaker Change: Or will it be MPI volume more than tripled year on year. During Q2, our overall b M P and in shopping law through our utilized nearly one 3 million orders over the last 11 months.
Speaker Change: These diligently manage credit risk in our B M P at better cost of risk at our two 6% in August on a broader scale over the last 12 months total lending volume on our platform reached interim point 2 billion cnida become incremental off around 3 billion over the last quarter.
Speaker Change: Nearly half of this ruling was issued through our partner banks.
Speaker Change: Shopping related credit receivables create limited balance sheet blood with average duration of three seven and four two months off beyond Piet and consumer Finance law solutions, respectively. We aim to grow this business line Brocatelle Blaine by continuing to leverage helps to pay solutions and goes up.
Speaker Change: Our partner banks, thereby growing our ecommerce business nicely.
Speaker Change: Aside from there for the literature that helps the pace skilled upon the payment fraud.
Speaker Change: It's what they've lost a 16.7 million covering $19 5 million forecast by Endo Pogos head to take her to the enhanced customer experience with the recently launched off a pop up feature in the wallet.
Speaker Change: Has the pain remains committed to becoming toolkit primary digital wallet in both physical and online retail.
Speaker Change: Our fourth key priority is offering our strongest muscles to off platform customers and let me start with Texas, yet with over 9 million parcels delivered hip sujit doubled its external customer volume year on year.
Speaker Change: Accordingly in Q2 to 94 is off platform shares rose by 11 points, one percentage point year on year to nearly 36% of its total tanks to doubling its volume with many trusting customers off platform.
Speaker Change: As an appealing logistics partner has to jet continues to expand its customer portfolio through several key accounts.
Speaker Change: Nick is taped the pace one click checkout, so those ship paviour types the pit.
Speaker Change: We continue to expand this conium solution to many other retailers have to pay is now integrated with 50, leading retailers thought Turkey, having almost triple the total payment volume in Q2 compared to Q1 has to pay aim to continue being a key accounts by also law.
Speaker Change: Switching is proposition in the SME market.
Speaker Change: Yes.
Speaker Change: And now I will end my part with our guidance for Q3 for the second half of the year, we remain cautiously optimistic about market conditions and yet we are truly confident in our ability to execute on our strategic initiatives for the.
PV of that.
Speaker Change: Accordingly in the third quarter, we expect to deliver a new growth within the range or if they wanted to 75% year on year.
Fetching: We continued our prudent cost management in place and we foresee an EBITDA of around 2.2 per cent of G. Amit. This figures I've referred to are in adjusted for inflation with this I. Thank you for listening and I leave the floor to fetch king our CFO to provide further insight into our strong tie.
Fetching: Financial platform.
Fetching: Thank you and welcome everyone.
Speaker Change: I am delighted to be with you today to present, our second quarter and first half results.
Fetching: We delivered a solid performance across all metrics both in quarter, two and the first half in a still challenging macroeconomic environment.
Amit: Here, it's worth taking a minute to recap what nuances regarding consumer demand dynamics of the two quarters of the first half, which consequently impacted our quarterly growth performance.
Amit: Total quarter, one consumer demand was high due to widespread expectation of price increases.
Speaker Change: March 31st local elections.
Speaker Change: Which both consumer demand forward from April to March.
Speaker Change: Therefore, we see the merit in considering our overall first of all Jeremy growth performance, which came in at 21, 6% adjusted for inflation.
Speaker Change: On the profitability side, we recorded an 11.2% gross contribution margin and 1.0% EBITDA as a percentage of <unk> in the first six months of the year.
Let me now go over the details of the second quarter performance.
Speaker Change: Yeah.
Speaker Change: In the second quarters around 4% real GMB growth, mainly through order growth.
Speaker Change: Higher VA series also contributed to this growth indices.
Speaker Change: We achieved the highest gross contribution margin since our IPO at 12% with a solid two six percentage point improvement on a yearly basis equal to $2 24.
Speaker Change: Our EBITDA as a percentage of <unk> continuous uptrend, reaching one one person with a 0.9 percentage points rise year on year when the one off provision reversal for the competition Board and mitigation concluded in July 2023 is considered.
Speaker Change: Let's move on to the next slide to look at our GMB breakdown.
Speaker Change: In quarter, two with a four percentage point shift compared to quarter two last year.
Speaker Change: Marketplace operations corresponded to around 71% of our business.
Speaker Change: This shift came as a result of a five one percentage point shift towards non electronics, which is in line with our broader strategy.
Speaker Change: Change in market dynamics with a slowdown in electronics market also has an impact in the chip.
Speaker Change: Let's have a look at our revenue and gross contribution dynamics in the next slide.
Speaker Change: Wild quarter, two revenue growth was nearly flat our revenues grew by 25% in the first half.
Speaker Change: Flat revenue performance in quarter, 224 was mainly due to a.
13% decrease in our <unk>.
Speaker Change: <unk> revenue compared to quarter 223.
Speaker Change: First by the strong growth in our delivery services and other revenue, including advertising services revenue and loyalty program.
Speaker Change: The 13% decline in lumpy revenue was mainly due to the four percentage points shifting <unk> towards <unk>.
Speaker Change: Our strategic priority to expand our services offered to third parties and scaling our advertising services as well as our loyalty program were instrumental in this quarters gross contribution margin expansion by two six percentage points.
Speaker Change: Let's move on to our EBITDA performance on the next slide.
Speaker Change: We recorded 1.1% EBITDA as a percentage of <unk> to $2 24.9 percentage improvement on a yearly basis, excluding the one off item last year.
Speaker Change: This improvement was driven by a two 6% raising gross contribution margin.
Speaker Change: Partially offset by a <unk> nine percentage rise in shipping and packaging expenses.
Speaker Change: A <unk>, 5% RASM is tightening expenses and the 0.4% rise in payroll and outsourced staff expense.
Speaker Change: The increase in shipping and packaging expenses as a percentage of G. M b, but mainly driven by higher order volume on our platform and rising Baltimore Pittsburgh <unk> third party business.
Speaker Change: Ryzen delivery fees per unit outpacing the average inflation in quarter $2 24 compared to quarter. Two 223 also had an impact.
Speaker Change: Next let's have a look at our cash flow diamond.
Speaker Change: In quarter 224 cash used in operations improved by 503 million TL compared to a year ago.
Speaker Change: This improvement resulted from 121 million TL increase in EBITDA.
Speaker Change: 448 million TL decrease in realized it's exclusive.
Speaker Change: $73 million increase in the change in operating monetary gain.
Speaker Change: <unk> hundred 7 million decrease in the change in networking capital and towards the 2 million decrease in other noncash items.
Speaker Change: With 407 million TL in Capex, our free cash flow was around negative 645 million TL in quarter two 2024.
Speaker Change: Considering the first six months.
Speaker Change: The highest first half free cash flow since our IPO.
Speaker Change: We can move onto the next slide.
Speaker Change: And I would like to leave you with the following takeaways from today's presentation.
Speaker Change: Despite quarter two's continued macroeconomic headwind.
Speaker Change: <unk> growth on a year on year basis, contributing to 21, 6% growth in the first half.
Speaker Change: Building on our strategic priorities, we recorded the highest gross contribution margin since our IPO at 12% in quarter 224.
Speaker Change: The uptrend in EBITDA continued in step with our sustained cost optimization effort.
Speaker Change: Reaching one 1% of <unk> in quarter two 2004.
Speaker Change: Our control cash management enabled us to record 472 million free cash flow in the first half of two us.
Speaker Change: 2024th which marks the highest first half FCA since IPO.
Is it reflects good results in the first half of the year, we are committed to growing sustainably and profitably going forward.
Speaker Change: Thank you for listening we can now open the line for questions.
Speaker Change: Ladies and gentlemen at this time well begin the question and answer session anyone who wishes to ask a question. My first iPhone on my end one on the telephone if you wish to remove yourself from the question queue. Then you May press star and to those participating via webcast you may type your questions via the live feed.
Speaker Change: Box below the presentation.
Speaker Change: For those participating via audio questions and answer session. Please use your Hansen when asking your question for better quality and anyone who has a question that's very high and one at this time one moment for the first question. Please.
Speaker Change: Okay.
Speaker Change: As a reminder, haynesville would like to ask a question. Please press Star then one on your telephone.
Speaker Change: Okay.
Speaker Change: Yeah.
Yes.
Once again to register for a question. Please first I don't Wanna go telephone are tied to your question on the other question box.
Speaker Change: Okay.
Speaker Change: Ladies and gentlemen, there are no audio questions. At this time, we will not proceed with questions from our webcast participants.
Thanks, Operator. The first question is your <unk> guidance implies a bigger premium to inflation in Q3 than in Q2, what's driving that delta.
Speaker Change: There are few driver.
Speaker Change: That is going to deliver higher growth in Q3 versus inflation number one is the impact of our strategic initiatives.
Speaker Change: <unk>, which is driving higher loyalty our investments they taped project, which already doubled volume.
Speaker Change: In off platform, our improvement in X and premium revenues on top of this we are also going to get the seasonality positive seasonality impact of back to school period, and hence we are expecting.
Speaker Change: Solid growth in Q3 AD of inflation.
Speaker Change: The second question is what was the impact of the second quarter holidays on Jeremy.
Speaker Change: We will.
Speaker Change: Probably have roughly an additional 6% real growth on top of our existing growth, bringing our real growth to 10%.
Speaker Change: Yes.
Speaker Change: Thank you.
Speaker Change: Third question is on the seasonality of cash flow for the second half of 2024 would you expect a return would you expect to return to positive free cash flow like in 2023.
Speaker Change: Yes definitely.
Speaker Change: I'm confident that we will have a positive free cash flow and on a full year basis.
Speaker Change: We will definitely continue to improve our EBITDA.
Speaker Change: And manage the working capital diligently in the second half of the year.
Speaker Change: On the flip side, we had a sizable realized gain last year, which may not necessarily be the same this year, depending on the Turkish lira devaluation.
Speaker Change: Okay.
Speaker Change: Thank you.
Speaker Change: Fourth question is shifting Jeremy towards marketplace <unk> is that a seasonal shift or is it strategy.
Speaker Change: Yeah.
Speaker Change: The definitely have a strong strategy to improve our mix for higher non electronics tanks dollar premium and loyalty program.
Has this shift to non electronics is.
Speaker Change: Coming toward three P. Because passion all this non electronic categories has a much higher rate of marketplace to another platform. This is a strategic part on the other side the slowdown in electronic markets in Turkey is also bringing.
Speaker Change: King and a higher mix shift for money electronics, almost beyond our control as land that is coming as a tailwind to our platform.
Speaker Change: Thank you our first and last question and this question said is as inflation subsides. However, Ias 29 accounting impact evolve as we go into 2025 on revenue EBITDA and free cash flow specifically sure.
Speaker Change: On a revenue on an unadjusted basis.
Growth will be lower as price increases will be lower in the markets.
Speaker Change: Lower inflation.
Speaker Change: Got it.
Speaker Change: On adjusted basis.
Speaker Change: There'll be no real change on real growth.
Speaker Change: <unk> EBITDA is this is going to have a positive impact.
Speaker Change: If inflation goes down the impact on cost of inventory.
Speaker Change: So this is definitely positive.
Speaker Change: FCS adjusted and Unadjusted FTF will be almost the same so it's going to have a limited impact on that but as EBITDA improves.
This positive impact.
Speaker Change: The impact of <unk> as well.
Speaker Change: Okay.
Speaker Change: So back to your Mena.
Speaker Change: Thank you we will now move on to further our original questions. The first one is from team and I show with Antara capital was and I quote Hi could you. Please talk about measures being taken to address a rise in finance costs due to higher rates.
Speaker Change: As interest rates have gone up and stayed the same.
Speaker Change: For quite some time.
Speaker Change: We have adjusted.
Our credit card policy.
Adjusting the thresholds that we give.
Speaker Change: The interest free installment for our consumers.
One of the mitigating impact.
We continue to increase our affordable solution.
Which is helping us.
Speaker Change: To manage the overall cost of financing.
Speaker Change: And we are on a very positive trend.
Speaker Change: <unk> explained so we will continue to focus on these measures.
Speaker Change: And make sure that the.
Speaker Change: Credit cards, and the overall financing costs are manageable going forward.
Speaker Change: Our next webcast question is from Maxim Nekrasov with safety and I quote. Thank you for the presentation can you comment on the consumer environment in Turkey.
Speaker Change: Absolutely. So thanks for the question I think there are two parts to this question. The one part is the macro environment by government has been taking actions being very decisive to fight inflation, which has accelerated in early Q2 high interest rate environment at 50%.
Speaker Change: Last year. This time is around eight five first that created the tandem citrus safe credit environment has been tougher for some of the discretionary category, Andy I think that the demand is contracting.
Speaker Change: On the flip side, there is a definite strong inter solar solution, which I explained in our results by affordability.
Speaker Change: Our innovative competitive prices and also that is going to be seasonality impact coming with back to school and Q4 Black Friday that is gonna Flores. The demand. We are also expecting innovation from recent MPI from Apple.
Speaker Change: Innovation is also going to bring some tailwind.
Speaker Change: Electronics market, and we expect to build scale and consumer demand with our strategic differentiates it.
Speaker Change: Our next question comes from Hassan they can't get out of with JP Morgan and I quote. Thank you very much for the presentation and congratulations on strong results. My question is on your guidance, which seems a bit optimistic versus the inflation and expect a slow down in the consumption can you. Please ask.
Speaker Change: Blame the main revenue drivers for the growth and why do you think Hep C may statements, they lend against lower consumption across all sectors in the remainder of the year. Thank you present day.
Speaker Change: As I mentioned in the previous question.
Speaker Change: Our guidance is.
Speaker Change: Based on the back to school period value, we are going to have it.
Speaker Change: Our Hyatt <unk> and.
Speaker Change: In line with that at a higher revenue.
Speaker Change: We expect that.
Speaker Change: Quarter, three electronics markets.
Speaker Change: We'll be in a much better position versus quarter two in terms of growth and this is going to impact are lumpy.
Speaker Change: The.
Speaker Change: Business is.
Speaker Change: It is lumpy.
Speaker Change: Part of the business.
Speaker Change: It goes back it's going to have a positive impact on the revenue and definitely our ads.
Speaker Change: Business will continue to flourish together with <unk>.
Speaker Change: Increased trade with back to school.
And on top of our premium.
Speaker Change: Revenues will continue to deliver.
<unk> increased our premium user base.
Speaker Change: Our next webcast question me something not seen with Amber road to investors and I quote have you detected any system behavior from consumers has that cross border taxes have changed as of August 2024.
Sundar: Sundar and I would say this is like the early to speak because the change hasn't been effective end of August. So the only had fewer trading days, but I promise to comment on this in the next quarter's call.
Speaker Change: Albeit the I also want to underline.
Speaker Change: If anything this will have a tailwind impact will have the breadth of demand because we have it.
Speaker Change: Minimal.
Speaker Change: Global inbound share of its around 1% of our business. So we would expect such a change to impact global competitors, which has a heavily relying on imports. So this could bring a tailwind to our business, but I would like to wait and see the real impact.
Speaker Change: Before we give an estimation there.
Maxim Makassar: The next question is a follow up question from Maxim Makassar with Sandy and I quote to follow up do you see material pressure on consumer or trading down would you expect competition to be tougher in the second half to start sometime before and 25 as a result of higher promotional activity.
Speaker Change: So the pressure.
Speaker Change: There's definitely a pressure on the consumer because credit environment is more tough.
Speaker Change: Interest rate is Tim Hi.
Speaker Change: And number of installments available for consumer I'm getting more limited soar.
Speaker Change: This is the headwind part of it and in half to be generally expect higher competition because of the seasonality impact as that but yet as.
Speaker Change: You can see in our forecast.
Speaker Change: Our expectation in terms of other all performance thanks to all our affordability and landing amongst of the built tanks to a growing shares in our external platform with our logistics business and with the other strategic measures. We have taken we think we are going to Delaware.
Strong performance in the coming months and into next year.
Speaker Change: Okay.
The next question is a follow up question from things like shelf with Antara capital in my quote as a follow up do you expect to get to bottom line profitability in the second half.
Speaker Change: As I mentioned before we will definitely continue to improve our EBITDA profitability.
Speaker Change: But I think it would be a little bit premature to comment on the bottomline profitability because our.
Speaker Change: The FX gain was.
Speaker Change: The main.
Speaker Change: <unk> last year.
Speaker Change: And it's very hard to predict the dollar rate in <unk>.
Speaker Change: They realized in the market in the coming months until the end of the year. So.
Speaker Change: It would be very hard to comment on the bottom line at this point, but EBITDA will continue to improve for sure.
Speaker Change: Our next question is a follow up question also from financing with Amber Road investors and I quote.
Speaker Change: Are there any limits to funding capacity from your funding partners have balance sheet capacity for affordability solutions and Hep C firms do you plan on doing further asset backed insurance in something thank you.
Speaker Change: Okay.
Speaker Change: We do not have any issues on our bonding are.
Speaker Change: Yes.
Speaker Change: Currently both from our own balance sheet.
Speaker Change: And also using different instruments like asset backed securities.
Speaker Change: Bond issues.
Speaker Change: <unk> devote.
Shortly initiate the second tranche of our asset backed security program.
Speaker Change: And this will continue so.
Speaker Change: As the business grows in affordability solutions.
Speaker Change: Has the right tools for funding.
Speaker Change: Healthily.
Ladies and gentlemen, there are no further questions at this time I will now turn the conference over to management for any closing comments. Thank you.
Speaker Change: Thank you so much for listening us we appreciate your time and questions. Thank you.
Speaker Change: Ladies and gentlemen, the conference has now concluded and you may disconnect. Your telephone. Thank you for calling and have a good afternoon.
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