D-Market Elektronik Hizmetler ve Ticaret A.S. (HEPS) Q1 2024 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call highlights strong financial performance with GMV and revenue growth, improved margins, and increased order frequency. Despite economic uncertainties and competitive pressures, Hepsiburada shows resilience with strategic partnerships and regulatory advantages. Positive sentiment is reinforced by optimistic guidance and future profitability trajectory. However, lack of specific market share data and unclear responses on US GAAP reporting are minor concerns. Overall, the positive aspects outweigh the negatives, suggesting a likely positive stock price reaction.
Key Financial Performance
GMV (Gross Merchandise Volume) TRY 1.5 billion, up 138% year-over-year; growth driven by a favorable base effect from last year's earthquake and a solid 43% adjusted for inflation.
Gross Contribution Margin 10.5%, improved by 1.2 percentage points year-over-year; improvement attributed to higher delivery service revenues and advertising revenues.
EBITDA TRY 289 million, corresponding to 0.8% of GMV, up 75 basis points year-over-year; increase due to higher gross contribution margin, partially offset by increased shipping and packaging expenses.
Cash Generated from Operations TRY 1.5 billion, up from TRY 102 million year-over-year; driven by a TRY 778 million improvement in change in working capital and increases in EBITDA and other non-cash items.
Free Cash Flow Approximately TRY 1 billion in Q1 2024; calculated after accounting for TRY 426 million in CapEx.
Revenue Growth 45% year-over-year; driven by 38% growth in retail and 32% growth in marketplace operations, with delivery service revenues nearly doubling.
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Operating Highlights
Hepsipay: Hepsipay is scaling its offerings with additions to its already comprehensive suite of payments and lending services. It aims to capture a substantial share in Turkey's $34 billion consumer loan market.
HepsiJet: HepsiJet has more than doubled its volume year-on-year in Q1, delivering 3.2 million parcels, with off-platform volume corresponding to nearly 33% of its total Q1.
Active Customer Base: The active customer base reached 12.1 million, with an additional 171,000 customers added.
Loyalty Program: The loyalty program, Hepsiburada Premium, scaled to 2.6 million members by the end of May.
Order Growth: Recorded 29.3 million orders with a 22% growth during the quarter.
Gross Contribution Margin: Improved by 150 basis points to 12%, marking the highest since the IPO.
EBITDA: EBITDA rose 120 basis points year-on-year to 2.4% of GMV on an unadjusted basis.
Market Positioning: Hepsipay aims to grow its business line profitably and take a sizable share in Turkey's consumer loan market.
Delivery Services: Merchant preference for HepsiJet services has risen significantly, with 68% of total parcels delivered by HepsiJet.
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Risk or Challenges
Macroeconomic Challenges: The company acknowledges the continuation of challenging macroeconomic conditions, which may lead to a cooling of consumer demand.
Competitive Pressures: The company faces competitive pressures in the e-commerce market, necessitating a focus on differentiation through superior delivery services and financial solutions.
Regulatory Issues: There are potential regulatory challenges that could impact the company's operations, particularly in the financial services sector.
Supply Chain Challenges: The company may encounter supply chain challenges that could affect delivery services and overall operational efficiency.
Economic Factors: High interest rates in the current economic climate pose risks to consumer spending and borrowing, impacting overall business performance.
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Guidance & Outlook
Loyalty Program: The Hepsiburada Premium loyalty program is growing, with a customer base of 2.6 million members, contributing to overall growth.
Delivery Services: HepsiJet delivered 68% of total parcels, with an 82% next day delivery ratio, enhancing customer satisfaction.
Hepsipay: Hepsipay is expanding its offerings, including consumer finance loans and BNPL solutions, aiming to capture a share of Turkey's $34 billion consumer loan market.
B2B Services: Hepsiburada is focusing on expanding its B2B services as a turnkey e-commerce solution for merchants.
Q2 2024 GMV Growth: Expected growth around 75% year-on-year, with first half GMV growth expected to double year-on-year.
EBITDA Guidance: Forecasted EBITDA within the range of 1.8% to 2% of GMV for Q2 2024.
CapEx: CapEx for Q1 2024 was TRY426 million, contributing to a free cash flow of around TRY1 billion.
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Shareholder Return Plan
Share Buyback Program: None
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Key Q&A
Q:What would be the impact on the GMV for the second quarter due to the eighth holiday moving from 3Q to 2Q?
A:The impact of the eighth holiday is incorporated in our quarter two guidance. During holidays, offline sales go up and online sales are impacted. If the holiday was in July, we would have at least a percentage or two upwards in the growth trajectory.
Q:What is our market share in online retailing in Turkey and how do we perform against Amazon?
A:We cannot provide a conclusive comment on Amazon's performance in Turkey as they do not publish results. However, we are seeing them as a small player. We have significant share growth in electronics, around 32%, and we are gaining share in key categories.
Q:In what categories do you see higher slowdowns starting quarter 2024?
A:The slowdown has started, particularly in computers and TVs. We expect some recovery with Euro Cup and Olympics demands in Q3. The trend is trading down and deferral of demand.
Q:When do you expect to start booking tax expenses?
A:We do not expect to pay corporate taxes in 2024 due to tax incentives, and we will likely start paying taxes in 2026.
Q:What is our EBITDA margin on US GAAP basis this quarter and forecasted for next quarter?
A:We do not report our financials in US GAAP basis.
Q:Any plans to grow services in developed markets including North America?
A:We do not have plans to expand Hepsiburada in North America but are testing integrations for micro exports from Turkey.
Q:What is the expected incremental GMV increase due to the Jumia partnership this year?
A:We are excited about the Jumia partnership, but we expect most of the impact to come next year as we complete our integration.
Q:Are you considering a local equity listing in Turkey?
A:We are exploring options for a dual listing and evaluating market conditions and regulatory requirements.
Q:What drives management's confidence in continuing to grow share against global cross-border e-commerce platforms?
A:Turkey has a competitive supplier base, affordability solutions, and we are building cross-border capabilities.
Q:Can you provide an update on regulatory initiatives that may constrain larger competitors?
A:In 2025, license fees will kick in, private label bans will continue, and advertising promotion reductions will impact larger competitors.
Q:What are your medium-term thoughts around free cash flow generation capacity for 2024?
A:We will continue to improve our free cash flow position in 2024, focusing on EBITDA growth and net working capital management.
Q:Review of Unclear Management Responses
A:Management did not provide a direct answer regarding the exact market share in online retailing in Turkey, stating they cannot share exact figures as it is not reported.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
Amazon
Asif Jumia
Asif Sattar
Kona Capital
Ms
Nilhan
North America
Sattar investor
Seckin
Turkey number
activity competitor
basis point
capacity
collection
competitor market
computer
confidence share
decision
effect
flow generation
holiday
home product
household
integration
label
license fee
listing
manner
payment license
pillar cash
quality
requirement
satisfaction
service revenue
source
start
tax incentive
test
HEPS Transcript
D-Market Elektronik Hizmetler ve Ticaret A.S. (HEPS) Q4 2024 Results Conference Call Transcript
Neutral4-30
D-Market Elektronik Hizmetler ve Ticaret A.S. (HEPS) Q3 2024 Earnings Call Transcript
Unknown12-10
The earnings call reveals mixed signals: strong GMV and EBITDA growth guidance, but weak Q3 financials and macroeconomic pressures. The ownership transition poses regulatory risks, and there's no announced shareholder return plan. The Q&A highlights concerns about demand and unclear responses on fintech plans. While the company shows resilience with loyalty programs and fintech growth, the lack of clear positive catalysts and ongoing economic challenges suggest a neutral stock price movement over the next two weeks.
D-Market Elektronik Hizmetler ve Ticaret A.S. (HEPS) Q2 2024 Earnings Call Transcript
Unknown9-11
The earnings call summary presents a mixed picture. Basic Financial Performance shows modest GMV growth, yet strong margins. Product Development and Business Update are positive due to strategic initiatives and loyalty programs. Market Strategy faces challenges from competitive pressures and economic factors. Expenses and Financial Health are concerning due to high costs and negative cash flow. Shareholder Return Plan is neutral with no buyback program. The Q&A reveals cautious optimism but highlights economic and competitive pressures. Overall, the sentiment is neutral, with no major catalysts for strong price movement.
D-Market Elektronik Hizmetler ve Ticaret A.S. (HEPS) Q1 2024 Earnings Call Transcript
Positive6-13
The earnings call highlights strong financial performance with GMV and revenue growth, improved margins, and increased order frequency. Despite economic uncertainties and competitive pressures, Hepsiburada shows resilience with strategic partnerships and regulatory advantages. Positive sentiment is reinforced by optimistic guidance and future profitability trajectory. However, lack of specific market share data and unclear responses on US GAAP reporting are minor concerns. Overall, the positive aspects outweigh the negatives, suggesting a likely positive stock price reaction.
HEPS Report
Frequently Asked Questions
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They are generated by a specialized financial-language model trained exclusively on 15+ years of earnings transcripts. The model extracts financial figures, guidance, and tone with 97%+ accuracy and is regularly validated against human analysts. The full raw transcript always remains available for verification.
