D-Market Electronic Services & Trading

Ladies and gentlemen, thank you for standing by. I'm Poppy, your course call operator. Welcome and thank you for joining the Hepsi Burada conference call and live webcast to present and discuss the first quarter 2022 financial results. All participants will be in a listen-only mode and the conference is being recorded. The presentation will be followed by a question and answer session. Should anyone need assistance during the conference call, you may signal an operator by pressing star and zero on your telephone. At this time, I would like to turn the conference over to Ms. Helin Çelikbilek, Investor Relations Director. Ms. Çelikbilek, you may now proceed.

Thanks, Poppy. Thank you for joining us today for Hexibroda's first quarter 2022 earnings call. I'm pleased to be joined on the call today by our CEO, Murat Emirdağ, and our CFO, Korhan Öz. The following discussion, including responses to your questions, reflects management's views as of today's date only. We do not undertake any obligation to update or revise this information, except as required by law. Certain statements made on today's call are forward-looking statements. Natural 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 same Harvard slide of today's presentation, today's press release, the 6K, our Form 20F filed with the ACC on May 2nd, 2022, and other ACC filings for information about factors which could cause our results to differ materially from these forward-looking statements. Also, we will reference certain non-IFS measures during today's call. Please refer to the appendix of our supplemental slide deck. as well as today's earnings press release for a presentation of the most directly comparable IFRS measure, as well as the relevant IFRS and non-IFRS reconciliations. As a reminder, a replay of this call will be available on the Investor Relations page of HEP2Broadhouse website. And with that, I will hand it over to our CEO, Murat.

Thank you, Helin. Welcome, everyone, and thank you for joining us today. Before diving into the first quarter dynamics and our actions in more detail, Let me quickly refresh our memory on the operating environment in Q1 2022. Challenging macro dynamics continue to shape the operating environment, including the rising inflation in Turkey and global markets, continuous devaluation of Turkish Lira, ongoing challenges on the global supply chain, and headwinds from the tragic war in Ukraine. India's operating environments are solid performance underlying the strength of our business model as well as the soundness of our customer and merchant value proposition. Accordingly, we delivered 8.3 billion GMB, corresponding to 84% year-on-year growth in line with our expectations. A strong order growth of 63% year-on-year was mainly instrumental in this performance, driven by tons of growth of active customers and order frequency, which I will discuss on the next slide. Similarly, we had a strong revenue growth of 82% on a yearly basis, mainly driven by the increased share of 1P operations, which grew by 92% in revenue. Our gross contribution margin was at 8.3%, lowered by 1 percentage point on a year-on-year comparison, while a continuous sequential margin improvement was achieved by 1.2 percentage points on top of previous quarters. in line with efforts for our path to profitability. Our best-in-class customer experience, powered by our robot logistics and technology infrastructure, was once again confirmed with our NPS leadership in the sector, with a significant improvement by 4 points compared to Q4 2021. We strongly believe that customer experience is a long-term success factor for our business, and we are keen to continue building on our strengths. We are grateful to our customers for their trust in our brand. As diverse set of affordability options becomes more important in customers' eyes, Haxley Brothers stands out with its innovative payment solutions and services such as multi-credit card payments, payment in installments, instant customer loans, store credits such as buy now, pay later, and charge-to-billing ability with a telco partner. Within this context, Pepsi Pay continues its expansion in our customer base, reaching 7.1 million open wallets by the end of the first quarter, up from 5.2 million just a quarter ago. We are excited about our financial services as they continue to progress towards evolving into best-in-class fintech solutions across online and offline channels. Now let's take a closer look at the first quarter dynamics and our actions in more detail. We took a firm step into the year despite several challenges, as I already mentioned. We are glad to share that all of our four growth drivers continued their healthy lives, which is one of the key building blocks of our strategy. Our active customer base grew by 27%, reaching 12 million. Our order frequency reached 4.9 this quarter, up from 4.1 a year ago. Our strong performance in customer experience enhanced by our nationwide logistics network and data-driven marketing has played an important role in the consistent increase in both of these indicators. We achieved a broader active merchant base and wider selection resulting in improved availability across long-tail products and services. With nearly 83,000 active merchants, We now have over 110 million SKUs on our platform. Compared to the first quarter of last year, our selection has particularly increased in fashion and supermarket domain. Our unique 1P3P hybrid model helped us quickly adapt to the changing operating environment where our robust 1P operations have provided us greater flexibility with product availability and pricing in a rising inflationary environment. Last but not least, it is important to reiterate that we believe our affordability solutions complement our customer value proposition quite well, especially in the current macroeconomic environment. Therefore, in February 2022, we launched a new store credit solution called Buying Our Pay Later, marking a first in Turkish e-commerce. While the early demand for this new store credit solution has been encouraging, We plan to scale our offering cautiously and roll out new features gradually in the remainder of 2022. Next slide, please. Let's take a deeper dive on our progress with respect to our value propositions for our customers, as well as our merchants. We design our customer journeys to provide peace of mind to our customers with compelling experiences, including frictionless return, next day delivery, and convenient two-man handling cargo service, all enabled by our robust logistics and technology infrastructure. As a result, based on future bright market research, we continued our MPS leadership in the market in Q1 with an MPS of 72. Likewise, we remain focused on enhancing the end-to-end customer journey for HEPSA Express, our on-demand delivery service, including grocery, water, and flour. By monitoring our perfect order ratio performance and constantly exploring different service models, we aim to achieve a more sustainable business model in the long term. Our comprehensive merchant value proposition and our progress in enhancing merchant lifecycle management helped us increase our active merchant base to around 83,000 in Q1 2022, up by 55% compared to a year ago. As a result, the number of SKUs reached roughly 111 million with continued expansion in non-electronic and long-tail products, up by 110% compared to last year. In parallel, the penetration of our value-added services amongst our merchants continued to grow. Wire have suggested delivered around 53% of total marketplace parcels in Q1, the number of merchants using Hepsi Logistics' fulfillment services reached 330, up from 191 at the end of previous quarter. Moreover, over 9,000 merchants used AdTech solution, HepsiAd, in Q1 2022, compared to 6,000 a year ago. At Hepsi Global, the number of active SKUs reached 2.7 million with over 1,400 participating merchants. With our cross-border capabilities, we aim to enable our merchants to export their products through our convenience model. Following this pilot phase, we began enabling export to the Azerbaijan market in the first quarter of 2022, which we aim to scale gradually with strong focus on customer experience and asset-like business models. We are committed to standing by our customers and merchants as a reliable companion as we continue to enhance experiences for both. Let me now elaborate on a strategic asset in our portfolio, EPSI Pay, and our progress in financial services at EPSI Buada. Next slide. At EPSI Buada, our innovative payment solutions and services play an instrumental role in our customer value proposition. We offer a wide range of solutions such as one-click checkout, payment installments, multi-credit card payments, instant customer loans, store credits such as buy now, pay later, and charge-to-billing ability with a telco partner. Within that context, our wallet solution, PepsiPay Wallet, continues its strong momentum by reaching 7.1 million in Q1 2022. In the first quarter of 2022, around 40% of total GMV passed through HepsiPay wallet. In February 2022, we also launched a new store credit solution called Buy Now, Pay Later for purchases at our HepsiBrothers store, marking a first in Turkish e-commerce. Buy Now, Pay Later limits are defined based on the financial history of our consumers, combining their track record at the Credit Bureau of Turkey and their shopping history at FC Brother. While the early demand has been encouraging, we remain focused on closely monitoring the credit risk behavior, including early delinquency and default rates, before scaling the offer further. In the current customer experience, the credit limit are up to 5,000 Turkish Lira and up to six installments with minimal exceptions. The installments are charged to the users' credit cards on the platform. Also in February 2022, we made progress to enter the consumer finance sector by completing the acquisition of a consumer finance company. Once fully implemented, we expect to be able to offer our customers consumer financing solutions matching their needs, in addition to those already offered by leading banks on our platform. At Eftiburada, as we keep expanding our capabilities and offering innovative payment solutions, we aspire to evolve into a best-in-class fintech player across online and offline. In line with this, I am glad to welcome one of the prominent figures in the banking and fintech sector in Turkey to our leadership team to lead our financial services under a unified vision. Next slide. Before I end my presentation, I would like to remind you of our strategy as we pursue our path to profitability. Our strategy is built on three key executional priorities. Accelerate growth drivers, differentiate and monetize via logistics and technology, and expand strategic assets to offer a diversified ecosystem. Let me quickly provide brief insights on each. Attracting more customers, driving further order frequency, expanding our merchant base, and increasing our selection are of strategic importance to us. In particular, we are focused on executing segment-based customer initiatives, primarily addressing women, running targeted marketing campaigns, scaling our automated growth engine journeys, and customizing lifecycle management along each stage of the lifecycle for our customers and merchants. Second, We have a nationwide logistics network and footprint, which we will continue to couple with our technological capabilities to further differentiate in both customer and merchant experiences while adding monetization opportunities. Last but not least, we will continue to diligently build a diversified and coherent ecosystem with select strategic assets such as EPSI Pay, EPSI Express, and EPSI Global. As we deliver on these executional priorities, our disciplined cash and cost management remains as the core guiding principle on our path to profitability. As we wrap up, we have started the year with a solid growth performance in line with our plan, driven by strong order growth, fueled by healthy momentum in our growth drivers. Considering the current dynamic, the limited visibility on the inflation trajectory, and its impact on consumer behavior for the remainder of the year, we are not making any adjustments to our GMV growth guidance at this time and keeping it around 50%. Powered by our disciplined cash and cost management, we move forward on our tax profitability and commit to not raise capital for another 18 months from the end of Q1 onwards. I will now hand over to our CFO, Korhan, to give more call on our financial performance. Thank you for listening.