speaker
Geli
Chorus Call Operator

Ladies and gentlemen, thank you for standing by. I am Geli, your chorus call operator. Welcome and thank you for joining the HepsiBorada conference call and live webcast to present and discuss the third quarter 2024 financial results. At this time, I would like to turn the conference over to Ms. Nilhan Onal-Goktetekin, CEO, Mr. Sechkin Koseoglu CFO, and Ms. Helene Zelik-Pelek, Investor Relations Director. Ms. Zelik-Pelek, you may now proceed.

speaker
Helene Zelik-Pelek
Investor Relations Director

Thanks, Geli. Thank you for joining us today for HepsiBrodas' third quarter 2024 earnings call. I am 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 20F 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 the relevant IFRS to non-IFRS reconciliations. As a reminder, a replay of this call will be available on our Investor Relations website. With that, I'd like to hand the call over to our CEO, Niha.

speaker
Nilhan Onal-Gökçetekin
CEO

Thank you, Helen. Welcome, everyone, and thank you for joining us. I'm delighted to be with you today to present our first quarter results. First, we are very proud to share a significant milestone in our journey. This quarter marks the first time we achieved quarterly positive operating income since our IPO in our IFRS financials. This accomplishment reflects the strength of our strategy, disciplined execution, and the dedication of our team. Now, let's dive into the details behind this transformative moment. We have successfully concluded another challenging quarter facing the continued macroeconomic pressures and curbed purchasing power. Notably, we delivered our GMV growth and EBITDA as percentage of GMV guidance in the third quarter. Diligent execution during the back-to-school shopping period and the celebratory campaign for the second anniversary of our loyalty program contributed to overall year-on-year GMV growth during Q3. On a 10.3% in the third quarter, we delivered 17.4% GMV growth in the first nine months compared to the same period last year, adjusted for inflation. On the profitability side, our gross contribution margin rose to 11.3% in the first nine months with a 1.9 percentage point improvement compared to the same period last year. Our EBITDA as percentage of GMV continued its rise, reaching 1% in the first 9 months of the year adjusted for inflation. Overall, we are very pleased to have demonstrated continued sustainable growth and improved profitability in the third quarter. Let me now go into our performance during the quarter as well. Let's look at a few of our operational metrics. Our active customers grew by 233,000 customers to 12.3 million. Meanwhile, we are glad to see growing interest in our phenomenal loyalty program, which has scaled to nearly 3.7 million members by November. As Turkey's most recommended e-commerce brand, we once again scored an MPS of 75. Customers identified our speed of delivery, range of affordability and landing solutions, and their trust in Hepsiburada brand as key factors in their preference for the platform. Continuing our appeal, in July 24, we launched our Renew Your Mobile at Your Doorstep product in 81 cities across Turkey. This marked Turkey's first-ever nationwide device renewal program at your home door. Its convenience was reflected in a vibrant customer satisfaction score. I am happy to note that this initiative is perfectly in step with our sustainability commitments. Returning to the third quarter KPIs, we recorded 32 million orders on a 19% year-on-year growth. Our order frequency over the past 12 months reached 10.8% up by 16%. With an active merchant base of Almost 100,000, we continue to expand our selection by 33% to 280 million SKUs through the onboarding of additional brands, particularly in passion and lifestyle categories. As I do every quarter, I would like to give a status update on our four strategic priorities to highlight our key achievements. First of all, let's consider our loyalty driver, Hepstiburada Premium Programme. Building on its momentum, we have reached nearly 3.7 million members by November end. Driving higher engagement, premium members' monthly order frequency rose by 31% after joining the program. Premium members' higher frequency significantly contributes to our overall order growth. To mark the second anniversary of the program, we held Hepsiburada Premium Days in mid-July. offering exclusive campaigns to our premium members. The 10-day event attracted 130 million visits to the platform and 4 million products were ordered through us. Our customer satisfaction is clear from the program's robust quarterly net promoter score of 84 points, which is 9 points above our overall MPS. We value this program for being a strong driver of frequency and catalyst for customer loyalty. Next slide, please. Let's consider another strategic priority, namely our differentiating logistic capabilities achieved through HepsiJet, both on-platform and off-platform customers. HepsiJet continued its penetration within our merchant base with a 6.8% annual rise HepCJET delivered 74% of total parcels dispatched during this quarter. It's confirming its integral role in our delivery ecosystem. Its volume expansion in oversized parcel delivery has also been super impressive. In Q3, HepCJET X-Large delivered 69% of our oversized parcels, up by 12.4% year-on-year. HepCJET's strong MPS underscores its value-added service excellence and confirms our commitment to flexible and convenient delivery options. As another key strategic pillar, HepCJET also continues its off-platform expansion and doubling its volume year-on-year. With 9.8 million parcels delivered, its off-platform volume corresponded to nearly 35% of total volume in Q3. Let's move on to our strategic priority, capitalizing on our clear differentiation through lending solutions. Our solutions include in-house buy-now-pay-later solution, in-house consumer finance loan, shopping loans from partner banks, and general purpose loans for shopping on our platforms. This proposition is unmatched in the Turkish e-commerce sector and has increased our relevance in this challenging economic climate. The quarterly share of these solutions in GMV rose to 8.8%, up from 8.1% a quarter ago. A superior user experience is enjoyed by our platform throughout the buy journey. HepsiBurada is Turkey's largest non-bank BNPL solution provider. Our BNPL volume more than tripled year on year during Q3. Moreover, in-house consumer finance loans have the highest conversion rates compared to all other partner banks providing shopping loans in our platform. Our BNPL cost of risk was around 2.6% in Q3 2024 in line with our projections and pricing assumptions. We aim to grow this business in line with profitability to claim a sizable share of Turkey's $40 billion consumer loan market. In this capacity, we will continue to leverage our solutions and those of our partner banks to grow our e-com business. On the payments front, HepsiPay continues to increase its penetration. HepsiPay stands out in the market with its 17.6 million vaulted customers storing around 21 million cards by the end of November. We are determined to scale our convenient one-click checkout solution, Pay with HepsiPay, among other retailers also beyond our platform. This solution is already live at 127 key retailers, doubling its total payment volume in Q3 compared to Q2. HepsiPay remains committed to becoming Turkey's go-to digital wallet in both physical and online retail. Let me take a moment to talk about our November campaign performance before I dive into our Q4 guidance. Our preliminary results indicate that this year we delivered yet another strong performance in November despite all the macroeconomic challenges. We recorded the highest daily traffic in our history on Singles Day, and our platform received 500 million visits during the month. We greatly welcome Turkish customer appreciation for our superior service and solutions and all our campaigns in the busy month of November. And now, our guidance for Q4 and its implications for the full year. As we executed on our strategic priorities throughout the year, we stayed very focused on achieving sustainable growth and enhancing our profitability. Accordingly, we expect to deliver around 75% GMV growth in the full year. This is roughly 13% growth as adjusted for inflation compared to 2023. Such growth will be the end result of our guidance of 50-55% GMV growth for the fourth quarter. On the margin side, our fourth quarter guidance for EBITDA as percent of GMV is 1.8-2%. Consequently, our full-year EBITDA as percentage of GMV is expected to be around 2.2-2.1%. Both Q4 and fiscal year signaled continued margin expansion. These figures are in adjusted for inflation. Before I hand over to Seçkin, let me say a few words on Hepstiburada's forthcoming ownership transition. As announced, Caspi has signed an SBA with our founder and the members of Doğan family to purchase a controlling 65.4% stake in Hepstiburada. Approval from the Turkish Competition Authority was granted on November 19th. The transaction awaits certain regulatory approvals and involved parties expected to be closed in early 2025. We are extremely excited about the synergies that will arise from this deal as Caspi is the preeminent in payments, marketplace and fintech ecosystem in Kazakhstan. Our shared customer centricity and service quality orientation confirm the strong cultural fix necessary for success. We believe Caspi's expertise in fintech, technological capabilities, and experience will be significant accelerators for us, and we are now in a stronger position to remain a preferred companion in the people's lives. With this, I thank you so much for listening us and leave the floor to Seçkin, our CFO, to provide further insights into our strong financial performance.

Disclaimer

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