D-Market Electronic Services & Trading

Ladies and gentlemen, thank you for standing by. I am Sabrina, your course co-operator. Welcome and thank you for joining the EBSI Burada conference call and live webcast to present and discuss the fourth quarter and full year 2023 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. Nilan Onal, CEO, Mr. Seshkin, CFO, Ms. Helene Selik-Vilek, Investor Relations Director. Ms. Selik-Vilek, you may now proceed.

Thanks, Operator. Thank you for joining us today for Hipsy Brothers' fourth quarter and full year 2023 earnings calls. I'm pleased to be joined on the call today by our CEO Nihan Onal Gökçetekin and our CFO Seçkin Köseoğlu. The following discussion including responses to your questions reflects management 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 6K, our Form 20F filed with the SEC on May 1st, 2023, and other SEC filings for information on factors that could cause our actual results to differ materially from these forward-looking statements. Also, we will reference certain non-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 the relevant IFRS to non-IFRS reconciliations. 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, Niha.

Thank you, Helen. Welcome, everyone, and thank you for joining us. I'm delighted to be with you today to present our fourth quarter and full year 2023 results. It has been over a year since I first addressed you as the CEO of HepsiBurada. At that time, I made it clear that my mandate was building Hepsiburada's profitability turnaround. Last year, we have weathered a period of election-related uncertainty as well as the fallout of a tragic earthquake in February. Simultaneously, we remain in an inflationary environment, pressuring consumer purchasing power. Regardless, I am very proud to note our excellent teamwork Our focus to strategy and meticulous execution have resulted in strong financials. Our GMV more than doubled year-on-year in 2023, well above the average inflation rate. We delivered a substantial EVTA turnaround with an highest full-year gross contribution margin of 10.6% and diligent OPEX management. Our EBITDA as percentage of GMV rose by 400 basis points yearly to 1.8%. With robust cash generation from operations and optimized investment, we recorded a free cash flow of around 3.9 billion lira on an adjusted for inflation basis. These results confirm the validity of our strategic plan and encourage us to aim higher going forward. Now, let me compare our performance in Q4 and full year against our guidance. We broke our all-time high sales record during legendary November and high shopping trend also continued in December. This resulted in exceeding our quarterly guidance for both GMV growth and EVTA. Consequently, our full year results also exceeded our forecast. Our GMV growth was around 104%, exceeding our guidance by 380 bits. Our EBITDA's percentage of GMV turned to positive 1.8%, exceeding our guidance by 30 bits, thus highlighting our robust growth and disciplined approach to spending. This performance marked the beginning of our profitability turnaround objective. Here are some eye-catching numbers to put consumer preference for our platform into perspective. Our platform attracted 3.9 billion visits in 2023. Consumers continue to trust PepsiBrother while setting up their new home, in particular, buying their home appliances. To highlight a few related numbers, one out of every two dishwashers, one out of every two washing machines sold online were purchased on PepsiBrother last year. Meanwhile, HepsiBrada is also a go-to platform for consumer electronics, which was our strength from inception. In 2023, two out of every five laptops and one out of every three iPhones sold online were also sold on HepsiBrada. A majority of these purchases reached their destination via our own logistics company, HepsiJet. Let me now elaborate on our achievements in 2023. Early 2023, we have set very clear targets for our four strategic priorities, which I'll explain throughout this presentation. Solid progress across all these KPIs reflect the dedicated performance of and strong execution by our entire team. Before we move on, I should mention the extension of our share-based incentive plan in the second half of the year. Current plan is triggered upon meeting certain vesting conditions and covers our key executives. Let's now consider some highlights of our achievements regarding our customers, merchants, business partners, and key components of our ecosystem. Let me begin with our customers whose satisfaction is ever in our minds and is reflected in our KPI. Total orders reached 113 million on a 41% year-on-year growth. On top, 44% growth in order frequency proved that our customer engagement and loyalty strategy are working. As the trusted e-commerce brand in Turkey, we are proud to announce our market leadership in Net Promoter Score for the second consecutive year. In line with our pledge to customer centricity, we work very hard to improve our value proposition in terms of reliability, speed, and convenience. We also raise the bar on our convenience levels across payment, delivery, and return. Our profitability solutions are appreciated by our customers, especially in this challenging macroeconomic climate. We work to create lasting relationships and our strong loyalty program is the best indicator of our success in this endeavor. Hepziburada premium program members have more than tripled within a year to exceed 2.2 million. Their monthly order frequency rose by around 40% after joining the program. We note a 270-billionth yearly improvement in the share of 10-plus frequency customers in overall customer base in 2023. This level confirms the program's potential to position HepsiBurada as Turkey's go-to e-commerce platform and underlines the strategy to grow with retention. We will continue leveraging our core strengths and prioritizing customer satisfaction going forward. Now let me elaborate on our commitment to a deeper merchant relationship. In 2023, We enhanced end-to-end solutions for our merchants, such as fulfillment, logistics, toolman handling, fintech, and advertising solutions. To facilitate higher conversion to sales for our merchants, new tools and features such as SaaS service, campaign management, coupon creation, and tailored advertising solutions now feature on our merchant app. Hestijet's fast and reliable flexible logistics service led to a greater merchant preference. With almost 102,000 active merchant base, our total SKU count climbed to nearly 230 million. This year, we onboarded 38,000 new brands on the platform. Almost half of them were in fashion and beauty categories. With new global brands, our growing brand portfolio confirms our ability to unlock selection holdouts. Meanwhile, we deepened our long-lasting relationships with also well-established suppliers. And thanks to these strong relations, our platform has come to respond even more comprehensively to customer needs with its wider selection and appealing campaigns. Let me now elaborate on our strategic priorities for 2024. Delivery of sustainable and profitable growth remains at the heart of our strategy. As confirmed by our results, pillars of our strategy are sound. With more to be unlocked on each pillar, we aim to raise the bar in each KPI. Accordingly, in 2024, we remain focused on loyalty, cultivating sustainable differentiators of HEP-CP and JET, and expanding our B2B services as a turnkey e-com solution partner for merchants in Turkey. In the next few slides, I'll talk more about each pillar by providing a snapshot of our achievements as well as our ambitions. With regards to our loyalty program, we remain dedicated to growing its member base and keeping satisfied customers on board with enhanced offering and partnerships. One key initiative that I'm super excited about is our co-branded credit card with Yapacredit. The card offers its users market-landing benefits. Hence, we will focus on increasing premium credit card user base, which will also contribute to our strong growth. Let's now look into one of our key strategic differentiators. As a forerunner in the Turkish logistics sector, HepsiJet delivered around 68% of total, 67% of total parcels on our platform. HepsiJet continued the volume expansion of its competitive oversized delivery service as well. In 2023, 59% of oversized packages on the platform were delivered by HepsiJet, up by 12 percentage points year-on-year. In today's world, fast and reliable delivery is a must for typical Turkish customers. HepsiJet's 82% next-day delivery ratio among retail orders confirms our commitment clearly. 23 was the year in which we expanded JET's flexible delivery and return capabilities further. We believe these additions boost our value proposition, and accordingly, JET maintained its strong MPS, underscoring its acknowledged service excellence. We will build further on HepsiJET's integral role in our logistics ecosystem and excel in the speed of delivery and customer experience. Let me now move on to our next differentiator, HepsiPay. And let's start with HepsiPay's strong contribution to HepsiVurada. Leveraging our e-money and payment service licenses, we offer a comprehensive suite of payment and affordability solutions. In today's economic landscape, and in the face of market expectations of potentially heightened credit availability in the second half, affordability gained purchase significance. Under these conditions, consumers welcome the optionality of our affordability solutions, which include our in-house buy-now-pay-later solution, as well as shopping loans from banks and general-purpose loans from partner banks. On this front, our platform provides an excellent user service. Within seconds, our customers can check their BMPL limits and alternative loan options from partner banks and complete their purchases instantly. BMPL, our unique solution in the Turkish e-commerce market, has been utilized by nearly 330,000 customers by end of Q4. On a broader scale, Total finance transaction volume, including general purpose loans, reached 6.1 billion lira in 2023. In 2024, we will further solidify our position as an e-commerce player, providing the widest affordability solutions. We also recently launched Hepse Finance, our own consumer financing company, which we expect to contribute to our success. On the payment front, HepsiPay continues to improve our customer experience at our checkout during 73 with multiple additional features. We extended this solution to enable our merchants on dot-com business also at their checkouts. HepsiPay is now available at the checkout of 10 major retailers. HepsiPay also aims to win additional key accounts while also launching its proposition targeted for SMEs. The launch of HepsiPay prepaid cards in collaboration with Visa was another highlight of the year. The additional cashback benefit available is a motivator to become a premium program member. The card has caught the eye of customers with 1.2 million cards issued so far. On the strength of the above, HepsiPay's wallet base rose to 15 million by mid-March. following a yearly net addition of 3.3 million users in 2023. In 2024, HepsiPay is working to become Turkey's most used digital wallet solution in physical and online retail. This would ultimately position HepsiPay as Turkey's leading fintech company. Now, let me give you an update on our strategic priority of offering our logistic services to third parties. Doing this has unlocked new revenue streams, contributed to our operational efficiency, and reinforced our position in respective sectors. JET nearly doubled its external customer base in 2023, while its third-party volume rose 1.6 times year-on-year. This confirms our ability to generate B2B revenues off-platform, showcasing Capstijet's strong momentum as an appealing logistics partner. Overall, 2023 was a year of initiatives that leveraged our strengths in fintech and logistics for creating a solid B2B business. Meanwhile, resulting numbers confirm that we are on the right path. In 2024, we will continue to accelerate our focus on this business line. Achieving profitability formed the basis of our strategy, and I'm glad to see this confirmed in our year-end results. A robust turnaround in EVTA was made possible through the key building blocks of optimized marketing and advertising expenses, higher gross contribution margin, process automation, and OPEX frugality. In 2024, our ambition is to sustain our profitability trajectory. We believe growing our advertising business Raising third-party revenues, a higher share of margin-accretive categories, and the continued frugality will be instrumental in achieving this year's higher profitability target. On the next slide, I would like to deep dive on where we stand in our advertising business and our ambitions. Our well-established advertising business, HepsiS, suggests a huge opportunity to increase our share of Turkey's rapidly growing digital media market. The current uptrend of global peer performance in the advertising business suggests the possibility of scaling our performance levels going forward. Pepsi is equipped with various ad formats that boost the visibility of participating merchants. Through these ads, merchants reach their target audience, increase their sales, while benefiting from actionable consumer analytics. Around 18,000 merchants used our advertising solutions last year. Increasing HAPS debt penetration and revenue for merchants will be among key focus areas this year. And now, I'll close my presentation with our guidance. I have meticulously outlined our strategic priorities and our focus areas for 2024. With dedicated execution on this, our objective is to continue our GMV growth, focus on incremental revenues and higher margin businesses, and achieve higher profitability margins in 2024. Accordingly, for the first quarter of 2024, we expect to deliver GMV growth around 120% compared to the same period of 2023. The low base of the first quarter 2023, was mainly due to earthquake, has a positive impact in this expected growth level. At a VTA level, we expect to deliver around 2% as percentage of GMB, and these guidance figures are adjusted for inflation. With this, I thank you for listening and leave the floor to Seçkin, our CFO, to provide further insights into our financial performance.