Ladies and gentlemen, thank you for standing by. I'm Constantinos, your Chorus Call operator. Welcome and thank you for joining the Hepsiburada Conference Call and Live Webcast to present and discuss the First Quarter 2024 Financial Results. All participants will be in listen-only more and the conference is being recorded.

The presentation will be followed by a question-and-answer session. [Operator Instructions] At this time, I would like to turn the conference over to Ms. Nilhan Onal Gokcetekin, CEO; Mr. Seckin Koseoglu, CFO; and Ms. Helin Celikbilek, Investor Relations Director. Ms. Celikbilek, you may now proceed..

Thanks, operators. Thank you for joining us today for Hepsiburada first quarter 2024 earnings call. I'm pleased to be joined on the call today by our CEO, Nilhan Onal Gokcetekin and our CFO, Seckin Koseoglu. 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 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 deck, today's press release, the 6-K, our Form 20-F filed with the SEC on April 30th, 2024, 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-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 relevant IFRS to non-IFRS reconciliation.

As a reminder, a replay of this call will be available on our Investor Relations website. And with that, I will hand it over to our CEO, Nilhan..

Thank you, Helin. Welcome, everyone, and thank you for joining us. I'm delighted to be with you today to present our first quarter results. It has been a strong start to the year as reflected on all our results. Notably, we beat our GMV and EBITDA guidance for the quarter.

Good execution, accelerated by the favorable base effect of last year due to a tragic earthquake, drove 138% year-on-year GMV growth. Adjusted for inflation, our GMV growth was a solid 43%. Our gross contribution margin improved by 150 basis points to 12%, marking the highest since our IPO.

Our EBITDA continued its uptrend, rising 120 basis points year-on-year to 2.4% of GMV on an unadjusted basis. Adjusted for inflation, our EBITDA as a percentage of GMV improved by 70 basis points year-on-year to 0.8%. These results are a clear sign of our winning strategy. Now, let's have a look at a few of our operational metrics.

Being Turkey's most recommended e-commerce brand once again with an NPS of 73 is a great source of pride. We are committed to advancing this performance to the next level. Our active customer base was 12.1 million on an additional 171,000 customers.

We are glad to see growing interest in our appealing loyalty program, which has scaled to 2.6 million members by the end of May. We recorded 29.3 million orders with 22% growth during the quarter. Our order frequency over the last 12 months reached 9.8, this is up 30% year-over-year.

With an active merchant base of almost 102,000, we expanded our selection by 38% to nearly 248 million SKUs. Now let me provide a snapshot of our quarterly progress on top four strategic priorities. First is our loyalty program, Hepsiburada Premium. The program's growing customer base signals customer satisfaction with our proposition.

This is also evident by program's strong NPS. Also, premium members' higher frequency significantly contributes to our overall growth. Moving on to second priority, which is differentiation with superior delivery services. Our superior delivery services is realized with our in-house company HepsiJet.

Merchant preference for HepsiJet services has risen significantly this quarter. Jet delivered 68% of total parcels on our platform. This is up by 5.1% point year-on-year. It's 82% next day delivery ratio among retail orders also confirms its integral role in our ecosystem. HepsiJet brings wider satisfaction to the Hepsiburada customer.

Its fast, reliable, and high quality service reflects in our strong customer satisfaction score of 87. Our third differentiator is Hepsipay. It's scaling its offerings with additions to its already comprehensive suite of payments and landing services. Fourth is our strongest muscles -- offering our strongest muscles to off-platform customers.

Let me start with HepsiJet, which has more than doubled its volume year-on-year in Q1. Accordingly, with 3.2 million parcels delivered, its off-platform volume corresponded to nearly 33% of its total Q1. On the next slide, I'll elaborate on Hepsipay, including its off-platform performance.

Let me dive into how we are providing these cutting edge solutions with Hepsipay. In the current economic climate of high interest rates, being able to offer a suite of alternatives is a huge advantage. In January, we took the further step of including our consumer finance loans to this step.

Meanwhile, our BNPL solution is the largest non-bank BNPL solution in the market. Overall, our BNPL and shopping loan were utilized in over 1.1 million orders over the last 12 months. On a broader scale, over the last 12 months, total landing volume through our platform tripled compared to the same period of last year and it reached TRY8.1 billion.

That's roughly equivalent to $290 million. Hepsipay aims to grow this business line in a profitable manner and take a sizable share in Turkey's $34 billion consumer loan market. In this capacity, we will continue to leverage Hepsipay solutions, as well as those of our partner banks to grow our e-commerce business.

Aside from affordability aspect, our financial services also encompasses the payments business. In offline retail, Hepsipay leads the market with its 15.7 million wallet base covering 18 million store cards. Our one-click checkout solution, Pay with Hepsipay, is also live at 28 key retailers just within less than a year of its launch.

Hepsipay aims to capture a substantial share both in key accounts as well as in Turkey's sizable online SME market. And now, I'll add my part with our guidance. As we lead through the second quarter, we observe the continuation of challenging macroeconomic conjecture, cooling of consumer demand to a certain extent.

And yet, our platform preserves our relevance for consumer purchases as their trusted household brand. Accordingly, we expect to deliver growth around 75% year-on-year in Q2 2024. With that, GMV growth in the first half is expected to double year-on-year.

With continued prudent cost management in place, we foresee an EBITDA within the range of 1.8% to 2% of GMV. As a reminder, our GMV in Q2 last year was 1.5%. So we expect to deliver a year-on-year improvement in our profitability in Q2. In these figures, I refer to are unadjusted for inflation.

With this, I thank you very much for listening and leave the floor to Seckin, our dear CFO, to provide further insights to our financial performance..

Thank you, Nilhan, and welcome everyone. I'm glad to share that we had a robust start to the year with solid performance across all metrics. Adjusted for inflation, GMV grew by 43% in quarter one. Strong GMV growth was through 17% average order value growth and a 22% increase in total orders.

Given the tragic earthquake in February last year and its inevitable impact on our business, last year's low rate also has a positive impact on this growth performance. Gross contribution margin continued its improvement trend and reached 10.5%. Higher margins coupled with disciplined OpEx management resulted in TRY289 million EBITDA at 0.8% of GMV.

For more color on each of these, let's move on to the next slide. First, our GMV performance. 43% of GMV growth came through 29.3 million orders in quarter one. Last 12-month order frequency also increased by 30% to 9.8. Our marketplace operations corresponded to 68% of our business in quarter one 2024, at around the same level of quarter one last year.

There was nearly 1.4 percentage points shift towards non-electronics within GMV this quarter, in line with our strategy. Let's have a look at our revenue growth dynamic. 45% revenue growth in the first quarter was achieved mainly through 38% retail and 32% marketplace operations revenue growth.

Delivery service revenues, which correspond to 14% of total revenues, nearly doubled year-on-year. This was mainly due to the solid momentum in our off-platform business, coupled with annual rises in unit delivery service charges above inflation. Our advertising services revenues doubled during this period as well.

Meanwhile, other revenue lines grew by 148%. Such performance was mainly through fourfold growth in loyalty subscription revenues and higher fulfillment service revenues compared to quarter one 2023. On the margin side, adjusted for inflation, we recorded 1.2 percentage points rise in the gross contribution margin, reaching 10.5%.

Margin improvement was mainly attributable to higher contribution of delivery service revenues from off-platform, as well as advertising revenues. Let's move on to our EBITDA performance on the next slide. We recorded 0.8% EBITDA as a percentage of GMV in quarter one, 2024, with 75 basis points improvement on a yearly basis.

This was mainly through 1.2 percentage point rise in gross contribution margin, partially offset by 0.5% rise in shipping and packaging expenses. And now let's look at our cash flow dynamics in the next slide. The cash generated from operations was TRY1.5 billion in quarter one, 2024, up from TRY102 million a year ago.

TRY778 million improvements in the change in networking capital year-on-year accounts for more than half of the increase. Others include TRY277 million increase in EBITDA, TRY137 million increase in the change in operating monetary gain, TRY136 million increase in other non-cash items, and TRY26 million increase in realized FX gains.

With TRY426 million in CapEx, our free cash flow was around TRY1 billion in quarter one, 2024. Let's move on to the next slide and let's take a look at our key takeaways. We would like to leave you with the following from today's presentation. Our robust topline growth in the first quarter exceeded our guidance.

Adjusted for inflation, we recorded 42.5% GMV growth on a year-on-year basis. Our gross contribution margin continues to improve by 1.2 percentage points and reach 10.5%. We recorded TRY289 million EBITDA corresponding to a 0.75% rise in EBITDA as a percentage of GMV. With this performance, we generated a strong free cash flow of TRY1 billion.

Our solid overall performance confirms our sharp focus on winning with loyalty, cultivating our sustainable differentiators, and expanding our B2B services as a turnkey e-com solution partner for merchants. As we reflect on the good start to 2024, we are committed to growing on a sustainable and profitable manner going forward.

Thank you for listening. We can now open the line for questions..

Ladies and gentlemen, at this time, we'll begin the question and answer session. [Operator Instructions] The first question comes from the line of with Gulsever Muharrem with Kona Capital. Please go ahead..

Thank you very much for the presentation. My question will be regarding the eighth holiday that's moving from 3Q to second Q in this year. What would be the impact on the GMV for the second quarter in your view? Thank you..

The impact of the eighth holiday is actually incorporated in our quarter two guidance. We -- as you know, we had two eight holidays in quarter two, both of which are already incorporated in our top line guidance..

I understand that, but my question is, if the eighth holiday would stay in the third quarter, what would be the GMV growth for this quarter?.

This typically impacts our business. During holidays, offline sales go up and online sales are impacted. So probably if one was in July, we would have at least a percentage or two upwards in the growth trajectory..

Okay, thank you very much..

[Operator Instructions] Ladies and gentlemen, there are no further audio questions at this time. We will now proceed with the written questions from our webcast participants.

The first webcast question comes from [Asif Sattar] (ph), who's a private investor, and I quote, “What is our market share in the online retailing in Turkey we operate in the category in the market? How is our performance versus strong competition Amazon in Turkey?” Thank you..

Dear Asif, thank you so much for your question. So for Amazon, they are not publishing their results for Turkey. We will not be able to give a conclusive comment, but from the public data, like if any active customer usage, we are seeing that they are still staying as a very small player in Turkey. That's number one.

Number two is, how we are looking into different segments that we have right to win. Obviously, number one is electronics. We get [GFK] (ph) data in Q1. We have significant share growth. We are already around 32%. On top of this, we gained share in all of our key categories. The other data source we look into is Nielsen for non-electronics categories.

As you guys know, home and mom and baby are very critical segments for us. The needs of the females, households, we have right to win that. We are winning share there. For home products, other home products, we are also triangulating different data sources and we are seeing that we are gaining significant shares there as well.

So overall, we have a strong quarter. We are not able to share exact online share in Turkey because it's not reported. But we are clearly beating our competitors with the share win..

The next webcast question comes from Maxim Nekrasov with Citi and I quote “In what categories do you see higher slowdowns starting quarter 2024? Do you see consumers trading down or decreasing frequency?”.

Maxim, thank you so much. So generally the slowdown, we can say it started. The critical part is endurable. And endurable is when you dive deeper, number one category I would call out is computer. As you know, computer is more discretionary. And there is some deferral of the demand, delayed demand.

The other one has been TV among our categories, which we are expecting some recovery with Euro Cup and Olympics demands in Q3 as well. The trend we are seeing is trading down and deferral of the demand rather than significantly decreasing frequency of online shopping. Thank you, Maxim..

The next webcast question is a follow-up question from Maxim Nekrasov, and I quote, “When do you expect to start booking tax expenses?”.

Sure, I'll take this question. We do not expect to pay corporate taxes in 2024 as we have tax incentives and these are typically R&D [indiscernible] tax incentives without any time constraints. And most likely we will start paying taxes in 2026..

Next webcast question is again a follow-up question from Asif Sattar, who is a private investor, and I quote, “What is our EBITDA margin on US GAAP basis in this quarter and what is expected EBITDA on US GAAP basis forecasted for the next quarter”. Thank you..

We do not report our financials in US GAAP basis..

The next webcast question is from Badar Shamim with Generation PMCA Corporation, and I quote, “Any plans to grow your services in developed markets including North America?”.

We don't have plans at the moment for that to expand Hepsiburada and launch in North America. Having said that, Turkish collections is very, very popular in different parts of the world. We started doing some tests with integrations to other marketplaces to do facilitate micro exports from Turkey.

So if you go to Walmart today, you can see our private label June already being sold in those stores. And we will continue to expand our cross-border services with smart integrations versus large investments to this new market..

The next webcast question is a follow-up question from Asif Sattar, and I quote, “What is the expected incremental GMV increase due to Jumia partnership in this year?” Thank you..

Look Asif, we are very, very excited about Jumia partnership. First let me tell that, MENA is the region for Turkish collections. We are winning in home category in Turkey. Small domestic appliances that are exportable. And Jumia has been a huge potential in building this partnership with us. We are still in the building phase.

I am expecting most of the impact to come -- starting to come next year, Asif, because we are entering fulfilled by Jumia. So we are doing the first shipment. It will take some time for this product to be inbound. We are selecting very, very cost efficient methods to be in Jumia and with relevant customers.

So nothing significant this year, but definitely watch this space for improvements next year as we complete our integration and leverage their existing traffic of different partners..

The next webcast question comes from [Grant Felgenhauer] (ph), who's a private investor, and I quote, “Are you considering a local equity listing in Turkey?” Thank you..

So we recognize the potential benefits that a dual listing could bring very well and we are actively exploring various options to determine the best course of action for our stakeholders. As part of this process, we are evaluating market conditions, as well as regulatory requirements involved in a dual listing.

At this point, we haven't made a concrete decision regarding a potential listing in Borsa, Istanbul, but we will keep the market informed as we progress and make any definitive decision. In the meantime, we appreciate your continued support..

The next webcast question comes from [Sinan Chin] (ph) with Amber Road Investors, and I quote, “What drives management's confidence that it will continue to grow share as global cross-border e-commerce platforms consider entering the Turkey's market?” Thank you..

Thank you, Sinan. I think there are a couple of things that gives us confidence that we will sustain and continue to grow shares despite global cross-border platforms. Number one, Turkey has a very, very competitive supplier base.

As you look into this global cross border success stories, absolutely they have strong playbooks, but they don't have competition like Turkish fashion and home, very, very economical. Second, affordability is critical solution for Turkey.

We are the only online company which has a payment license, which can do installment in categories like cosmetics, FMCG, mobile phone, third quality metal sell-out. In Turkey, this is still number one purchasing [indiscernible] driver for Turkish online shopping. And as you know, we are winning with all of our quality metrics.

We are year-over-year NPS champion in Turkey. So we are up for competition. We appreciate the new entrance that will continue to raise the bar for Turkish customers. We have strong rights to win.

And finally, we are also building cross-border capabilities, which is helping us, so we just launched our first product in a test environment in [indiscernible]. We signed some partnership with Jumia to build some business together. So we will also grow our cross-border business as we grow our Turkish business as well..

The next webcast question is from James Hayes with Lucerna Global Capital, and it's a series of questions, and I quote, “Thank you all for doing the call.

Can you please provide an update on the various regulatory initiatives which may constrain the activities of the larger competitor in the market? Second question is, which are the items which have only kicked in early 2025? And are there any additional regulations to take effect later this year? Third and final question is, finally, the free cash flow in the quarter was quite impressive, can you provide any medium term thoughts around free cash flow generation capacity or for the full year of 2024?” Thank you..

Thank you, James. Very good question. So 2025, there will be various regulatory initiatives that will constrain the activities of the larger competitor in Turkey. Multiple things, number one is license fee is kicking in in Turkey.

So for the large, larger online players, which has this proportion of shares, there will be significant amount of payment to make as license fee to the government. The second that is, as you know, private label, which was a stronghold of Alibaba in Turkey is banned. We are expecting that there will be continued impact as of 2025.

The continued impact of advertising promotion reduction will also have an impact. So these are the three I would say that with a much more democratic environment in Turkey that is supporting small, medium-sized enterprises could continue to make an impact on the large competitors in the market.

And for your cash related questions, I’m going to turn the floor to Seckin..

Thank you so much for the question. As you know, there are two components for the free cash flow generation. One is EBITDA and the other one is net working capital management. We will continue to grow our EBITDA year-over-year on a full-year basis as well. So definitely, we will be improving on the key pillars of the cash flow for the full year.

On the networking capital side, what I can say that, as the higher interest rates and the government actions to minimize the inflation has started to take a bigger impact in the market. All companies will be looking into their working capital requirements with increased focus. But we will always continue to be a negative networking capital business.

So as our business continues to grow in the top line, this will also be the second layer and the key pillar to increase our free cash flow. So there can be some seasonality impact from one quarter to another, but on a full year basis, we will continue to improve our free cash flow position in 2024..

Ladies and gentlemen, the conference is now concluded and you may disconnect your telephone. Thank you for calling, have a good afternoon..