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9/11/2024
Ladies and gentlemen, thank you for standing by. I am Mina, your Chorus Call Operator. Welcome and thank you for joining the Hepsi Broda Conference Call and Live Webcast to present and discuss the second quarter 2024 financial results. At this time, I would like to turn the conference over to Mr. Shigan Onal-Jotetekin, CEO, Mr. Shetkin Kiosheoglu, CFO, Mrs. Helene Celik-Bilek, Investor Relations Director. Mrs. Celik-Bilek, you may now proceed.
Thanks, Operators. Thank you for joining us today for Hepzibur Oda's second quarter and first half 2024 earnings call. I'm pleased to be joined on the call today by our CEO Nilhan Onal Gökçetekin and our CFO Seçkin Köseoğlu. 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 6K, our Form 20, filed with the SEC on April 30, 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 the relevant IFRS to non-IFRS reconciliations. As a reminder, a replay of this call will be available on our MSC Relations website. With that, I will hand it over to our CEO, Nilhan.
Thank you, Helen. 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. We delivered another solid set of results in Q2 2024, exceeding our guidance for both GMV growth and EVTA as persons of GMV. We got these results despite the prevailing macroeconomic headwinds. In the first half of the year, our GMV doubled compared to the first half of previous year, and our EBITDA reached 2.4% of GMV, unadjusted for inflation. Adjusted for inflation, we recorded nearly 22% real GMV growth and 1% EBITDA as percent of GMV. Due to consumer demand coming forward to Q1, we argue the prudence of considering our overall first half performance. Moreover, in the first six months, we delivered the highest first-half free cash flow ever since our IPO. These results confirm that, strategically speaking, we remain on the right path. Now, let's look at a few of our operational metrics. With our exceptional customer experience, top-notch logistics services, and diverse affordability solutions, our MPS metrics yet again confirm to be Turkey's most recommended e-commerce brand. Our active customers continue to increase and reach 12.1 million. Customer loyalty and retention are central to our strategy, and Hepsiburada Premium has played a key role in strengthening these relationships. Just two years after its launch, it's hugely encouraging to see that Hepsiburada Premium has scaled to 3 million subscriber mark. Returning to the second quarter, we recorded 36.7 million orders on 33% year-on-year growth. Our order frequency over last 11 months reached to 10.6, up by 23%. With the onboarding of additional brands, particularly in the fashion and lifestyle categories, by end of the quarter, our selection on platform reached 264 million SKUs. These are offered by an active merchant base of around 101,000. Now, let me provide a snapshot of the quarterly progress on our four strategic priorities. First, let's look into our loyalty program, which is our key to win with loyalty strategy. The program's rise to 3 million members is a testament to the attractiveness of the program's value proposition. Program has an NPS of 84, which is the highest among loyalty programs in Turkish e-commerce, reflects the trust and appreciation of its members. Premium members tend to prefer HepsiBurada as their go-to shopping platform. We observed that they generate 36% higher frequency after joining the program. This strongly contributes to overall order growth. Our local streaming partner, Bulu TV, was acquired by Warner Bros. Discovery in December 2023. Accordingly, a broad range of best international series and shows from Warner Bros. will soon be available as part of the premium program benefits, enriching the exclusive experience enjoyed by its members. We remain dedicated to retaining satisfied customers while welcoming new ones into the falls. Next slide, please. Moving on to other strategic priority, which is differentiation with our superior delivery services. Central to achieving this is our HepCJET continued penetration on our platform. HepCJET, which is our last mile services company, delivered 73% of total parcels dispatched during the quarter. This is up by 6.8 percentage points year on year. Its volume expansion in oversized parcel delivery is also very impressive. In Q2, 68% of all oversized parcels on HepsiBurada were delivered by HepsiJet X-Large. This marks an 8.9% year-on-year increase. HepsiJet's high MPS confirms its commitment to differentiation with service excellence, a commitment fueled by flexible and convenient delivery options. Being a new generation logistics company committed to sustainable practices in a pilot project, Hepstijet added 21 electric vans to its fleet in the quarter. With the target to increase this number to 50 by year-end, this initiative marks a small step towards addressing the bigger environmental issues. In this context, as the first e-commerce player to publish a sustainability report in Turkey, I am delighted to announce that we recently published our report for 2023. Our third priority is capitalizing on our clear differentiation with affordability and lending solutions. HepsiPay's comprehensive suite of payment and lending services gained further significance in a continued environment of tight liquidity. Our affordability solutions, which include our in-house buy-now-pay-later solutions, consumer finance loans, and shopping loans from partner banks have gained more traction. The quarterly share of these affordability solutions in GMV rose to 6.1% from 4.9% a quarter ago, which is around 20% increase. The consumer tendency to use general-purpose loans for shopping on our platform has also increased. As such, including the impact of those spent in the platform, GMV penetration of our overall affordability solutions rose to 8.1% in Q2, from 5.8% a quarter ago. Hexaburada is the largest non-bank BNPL solution provider in the Turkish market. Our BNPL volume more than tripled year-on-year during Q2. Our overall BNPL and shopping loans were utilized nearly 1.3 million orders over the last 12 months. We diligently manage credit risk in our BNPL, with a cost of risk around 2.6% in August. On a broader scale, over the last 12 months, total lending volume on our platform reached 11.2 billion lira, with an incremental of around 3 billion lira over the last quarter. Nearly half of this volume was issued through our partner banks. Shopping-related credit receivables create limited balance sheet loads with average durations of 3.7 and 4.2 months of BNPL. and consumer finance loan solutions, respectively. We aim to grow this business line profitably by continuing to leverage HepsiPay's solutions and those of our partner banks, thereby growing our e-commerce business nicely. Aside from the affordability aspect, HepsiPay scaled upon the payment fraud. Its wallet base rose to 16.7 million, covering 19.5 million store cards by end of August. HepsiPay further enhanced customer experience with the recently launched Otetopa feature in the wallet. HepsiPay remains committed to becoming Turkey's primary digital wallet in both physical and online retail. Our fourth key priority is offering our strongest muscles to off-platform customers. And let me start with HepsiJet. With over 9 million parcels delivered, HepsiJet doubled its external customer volume year-on-year. Accordingly, in Q2 2024, its off-platform share rose by 11.1% year-on-year to nearly 36% of its total, thanks to doubling its volume with many trusting customers off-platform. As an appealing logistics partner, HepsiJet continues to expand its customer portfolio through several key accounts. Next is HepsiPay's one-click checkout solution, Pay with HepsiPay. We continue to expand this convenient solution to many other retailers. HepsiPay is now integrated with 50 leading retailers of Turkey and having almost tripled its total payment volume in Q2 compared to Q1. HSTP aims to continue winning key accounts by also launching its proposition in the SME market. 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 period ahead. Accordingly, in the third quarter, we expect to deliver a GMV growth within the range of 70% to 75% year-on-year. We continued our prudent cost management in place and we foresee an EBITDA of around 2.2% of GMV. These figures I refer to are an adjustment for inflation. With this, I thank you for listening and leave the floor to Seçkin, our CFO, to provide further insights into our strong financial performance.
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