Hepsiburada Announces Fourth Quarter and Full Year 2023 Financial Results

ISTANBUL, Türkiye, March 25, 2024 (GLOBE NEWSWIRE) D-MARKET Electronic Services & Trading (d/b/a “Hepsiburada”) (NASDAQ: HEPS), a leading Turkish e-commerce platform (referred to herein as “Hepsiburada” or the “Company”), today announces its unaudited financial results for the fourth quarter and full year ended December 31, 2023.

Restatement of financial information: Pursuant to the International Accounting Standard 29, Financial Reporting in Hyperinflationary Economies (“IAS 29”), the financial statements of entities whose functional currency is that of a hyperinflationary economy must be adjusted for the effects of changes in a general price index. Turkish companies reporting under International Financial Reporting Standards (“IFRS”), including the Company, have been required to apply IAS 29 to their financial statements for periods ended on and after June 30, 2022.

The Company’s consolidated financial statements as of and for the year ended December 31, 2023, including figures corresponding to the same period of the prior year, reflect a restatement pursuant to IAS 29. Under IAS 29, the Company’s financial statements are presented in terms of the measuring unit current as of December 31, 2023. All the amounts included in the financial statements which are not stated in terms of the measuring unit current as of the date of the reporting period, are restated applying the general price index. Adjustment for inflation has been calculated considering the price indices published by the Turkish Statistical Institute (TurkStat). Such indices used to restate the financial statements as at December 31, 2023 are as follows:

Figures unadjusted for inflation in accordance with IAS 29, denoted as “IAS 29-unadjusted”, “unadjusted for IAS 29”, “unadjusted”, “unadjusted for inflation”, or “without adjusting for inflation”, are also included in the summary tables of the consolidated financial statements and under the “Highlights” section and explanatory notes as relevant. The press release also includes tables that show the IAS 29 adjustment impact on the consolidated financial statements for the periods under discussion. Figures unadjusted for IAS 29 constitute non-IFRS financial measures. We believe that their inclusion facilitates the understanding of the restated financial statements in accordance with IAS 29 and our year on year growth and profitability guidance. Please see the “Presentation of Financial and Other Information” section of this press release for a definition of such non-IFRS measures, a discussion of the limitations on their use, and reconciliations of the non-IFRS measures to the most directly comparable IFRS measures.

Fourth Quarter 2023 Financial and Operational Highlights

(All financial figures are restated pursuant to IAS 29 unless otherwise indicated)

• Gross merchandise value (GMV) increased by 25.4% to TRY 40.1 billion compared to TRY 32.0 billion in Q4 2022.
  • IAS 29-Unadjusted GMV increased by 103.9% to TRY 39.0 billion compared to Q4 2022.
• Revenue increased by 29.5% to TRY 11,811.9 million compared to TRY 9,120.5 million in Q4 2022.
• Number of orders increased by 1.7% to 34.4 million compared to 33.9 million orders in Q4 2022.
• Active Customers was at 11.9 million compared to 12.2 million as of December 31, 2022.
• (Order) Frequency increased by 43.7% to 9.5 compared to 6.6 as of December 31, 2022.
• Active Merchant base increased by 1.8% to 101.5 thousand compared to 99.7 thousand as of December 31, 2022.
• Number of SKUs increased by 40.8% to 230.4 million compared to 163.6 million as of December 31, 2022.
• Share of Marketplace GMV was 66.8% compared to 68.1% in Q4 2022.
• EBITDA improved to positive TRY 129.1 million compared to negative TRY 415.1 million in Q4 2022. Accordingly, EBITDA as a percentage of GMV was at 0.3%, a 1.6 percentage points improvement compared to negative 1.3% in Q4 2022.
  • IAS 29-Unadjusted EBITDA improved to positive TRY 555.7 million compared to negative TRY 15.0 million in Q4 2022. IAS 29-Unadjusted EBITDA as a percentage of GMV in Q4 2023 improved 1.5 percentage points to 1.4% compared to negative 0.04% in Q4 2022.
• Net loss for the period was TRY 644.1 million compared to a net loss of TRY 912.4 million for Q4 2022.
• Free cash flow was positive TRY 2,849.7 million compared to positive TRY 1,745.9 million in Q4 2022.
   

Full Year 2023 Financial and Operational Highlights
(All financial figures are restated pursuant to IAS 29 unless otherwise indicated)

• Gross merchandise value (GMV) increased by 31.1% to TRY 116.5 billion compared to TRY 88.9 billion in 2022.
  • IAS 29-Unadjusted GMV increased by 103.8% to TRY 96.5 billion compared to 2022.
• Revenue increased by 34.3% to TRY 35,558.5 million compared to TRY 26,478.0 million in 2022.
• Number of orders increased by 40.6% to 113.0 million compared to 80.4 million orders in 2022.
• Active Customers was at 11.9 million compared to 12.2 million as of December 31, 2022.
• (Order) Frequency increased by 43.7% to 9.5 compared to 6.6 as of December 31, 2022.
• Active Merchant base increased by 1.8% to 101.5 thousand compared to 99.7 thousand as of December 31, 2022.
• Number of SKUs increased by 40.8% to 230.4 million compared to 163.6 million as of December 31, 2022.
• Share of Marketplace GMV was 66.9% compared to 66.7% in 2022.
• EBITDA improved to positive TRY 449.2 million compared to negative TRY 4,267.9 million in 2022. Accordingly, EBITDA as a percentage of GMV was at 0.4% on a 5.2 percentage points improvement compared to negative 4.8% in 2022.
  • IAS 29-Unadjusted EBITDA improved to positive TRY 1,749.5 million compared to negative TRY 1,014.6 million in 2022. IAS 29-Unadjusted EBITDA as a percentage of GMV in 2023 improved 4.0 percentage points to 1.8% compared to negative 2.1% in 2022.
• Net income for the period increased to TRY 75.5 million compared to a net loss of TRY 4,790.7 million for 2022.
• Free cash flow was positive TRY 3,873.0 million compared to negative TRY 685.5 million in 2022.
   

Commenting on the results, Nilhan Onal Gökçetekin, CEO of Hepsiburada said:

“I am extremely proud of our team’s execution on our strategic priorities throughout 2023. The tangible results of our hard work amidst a high-inflationary environment is clearly reflected in our financial results. Our robust year-on-year GMV growth of 103.8% in the fourth quarter, typically a high shopping season, significantly contributed to our full-year results on an unadjusted basis. In 2023, we recorded 1.8% EBITDA as a percentage of GMV, reflecting a notable c.400 basis point year-on-year improvement in 2023, on an unadjusted basis. This turnaround in profitability resulted from our focus on monetizing our core operations, leveraging our key strengths for both on-platform and off platform operations, and our prudent cost management. With strong cash generation from our operations and optimized investments, we generated around TRY 3.9 billion free cash flow in 2023.

Our loyalty program, Hepsiburada Premium, more than tripled in size to 2.2 million members in 2023, reaffirming its value and appeal. Our relentless focus on operational excellence and customer satisfaction propelled us forward to confirm our NPS leadership in the Turkish e-commerce market for the second consecutive year.

We have expanded our product selection by onboarding various global brands onto our platform, while also strengthening our partnerships with our suppliers. Our merchants benefit from intuitive self-service tools and access to our fulfillment, logistics and fintech services with welcomed flexibility. Our advertising offering, HepsiAd, has undergone a successful relaunch, empowering merchants with tailored advertising solutions. These valuable solutions are proven to drive mutual growth.

In 2023, our fintech asset Hepsipay recorded 14.3 million wallet users with over 1.2 million Hepsipay prepaid cards issued. Our customers have enjoyed the convenience and optionality of our affordability solutions which include our “Buy Now Pay Later” (“BNPL”) solutions, as well as shopping or general purpose loans from intermediary banks. In 2023, the total financed transaction volume on our platform reached TRY 6.1 billion. Going forward, we will solidify our position as an e-commerce player providing the widest affordability solutions.

A key strategic pillar for us has been to offer our B2B clients a comprehensive suite of e-commerce solutions, leveraging our key strengths. In 2023, our last-mile delivery services provider HepsiJet, nearly doubled its external client base with a consequent c.60% rise in external delivery volume year-on-year. We believe HepsiJet’s robust NPS confirms its superlative service quality. On the fintech front, we continued the expansion of Hepsipay’s one-click check-out solution, an integral component of our strategy, which is now used by ten retailers. This take-up aligns with our vision of becoming one of the leading fintech companies in Türkiye.

To ensure solid growth and a higher profitability margin in 2024, we seek to execute on our strategic priorities and build on our success with customer-centric focus. We believe we will achieve this by scaling our loyalty program, differentiating our offerings with our fintech and logistics operations and achieving further penetration of these services in their respective markets. Additionally, we will continue focusing on incremental revenue avenues including our advertising solutions.

I extend my heartfelt gratitude to our exceptional team for their dedication, our loyal customers for their continued support, our partners for their collaboration, and our shareholders for their trust in our vision. Together, we will continue to push boundaries, and shape the future of e-commerce in Türkiye and beyond.”

Summary: Key Operational and Financial Metrics

The following table sets forth a summary of the key unaudited operating and unaudited financial data as of and for the three months ended December 31, 2023 and December 31, 2022 and the twelve months ended December 31, 2023 and December 31, 2022 prepared in accordance with IFRS. Unless indicated otherwise, all financial figures in the tables provided are inflation-adjusted (in accordance with IAS 29).

Note: The abbreviation “n.m.” stands for not meaningful throughout the press release.

Note that Gross Contribution, EBITDA and Free Cash Flow are non-IFRS financial measures. See the “Presentation of Financial and Other Information” section of this press release for a definition of such non-IFRS measures, a discussion of the limitations on their use, and reconciliations of non-IFRS measures to the most directly comparable IFRS measures. See the definitions of metrics such as GMV, Marketplace GMV, share of Marketplace GMV, Gross Contribution margin, EBITDA as a percentage of GMV, number of orders and Active Customer in the “Certain Definitions” section of this press release.

Q1 2024 Outlook

The below forward-looking statements reflect Hepsiburada’s expectations as of March 25, 2024, considering year to date trends which could be subject to change, and involve inherent risks which we are unable to control or foresee. The financial outlook is based on management’s current views and estimates with respect to existing market conditions. However, there are several uncertainties including the inflationary environment both in Türkiye and globally, local currency volatility, further tightening in monetary policy, low consumer confidence, pressure on purchasing power, regional geopolitical headwinds, the new regulatory environment for our activities in Türkiye and the evolving competitive landscape. Management’s views and estimates are subject to change without notice. See also the “Forward Looking Statements” section at the end of this press release.

For the first quarter of 2024, we expect to deliver IAS 29-Unadjusted GMV growth of around 120% compared to the same period of 2023 and IAS 29-Unadjusted EBITDA as a percentage of GMV of around 2%.

In 2024, we intend to remain focused on sustainable and profitable growth with a prudent approach to capital allocation.

Business and Strategy Highlights

As of December 31, 2023, the annual inflation rate published by TurkStat remained largely flat at 64.8%, compared to 64.3% as of December 31, 2022. Yearly average inflation rate published by TurkStat in 2023 was 53.9%, compared to 72.3% in 2022.The monthly inflation rates during the fourth quarter of 2023 were 3.4%, 3.3% and 2.9% in October, November and December, respectively. The Consumer Confidence Index increased to 77.4 as of December 31, 2023 compared to 71.5 as of September 30, 2023.

In Q4 2023, IAS 29-Unadjusted GMV increased by 104% to TRY 39.0 billion compared to TRY 19.1 billion in Q4 2022, exceeding the high end of our guidance range of 93% to 95% by 9 percentage points. Adjusted for inflation, GMV increased by 25.4% to TRY 40.1 billion in Q4 2023 compared to TRY 32.0 billion in Q4 2022. The month of November is typically one of the peak months of the year during which we traditionally hold numerous campaigns with participating merchants. In November 2023, the number of orders (excluding digital products) was 2.0 times that of the monthly average of the prior months of 2023. Our platform attracted almost 500 million visits and sold over 30 million pieces in November.

In 2023, IAS 29-Unadjusted GMV increased by 103.8% to TRY 96.5 billion compared to TRY 47.3 billion in 2022, exceeding our guidance range of around 100% by 4 percentage points. Adjusted for inflation, GMV increased by 31.1% to TRY 116.5 billion in 2023 compared to TRY 88.9 billion in 2022.

For Hepsiburada, GMV growth is a function of the growth in number of orders and average order value. We experienced order growth of 1.7% in Q4 2023 compared to Q4 2022, whereas in 2023, order growth was 40.6% compared to 2022. Order growth resulted from the continued rise in order frequency. Order frequency grew by 43.7% to 9.5 as of December 31, 2023, up from 6.6 in 2022. Strong digital products orders continued to fuel the rise in order frequency. Order frequency (excluding digital products orders) was 6.3 in 2023 compared to 5.4 in 2022, corresponding to 16.1% growth. Meanwhile, order growth (excluding digital products) was 8.4% in Q4 2023 compared to Q4 2022 and 13.7% in 2023 compared to 2022. While digital products only generated around 0.6% of our GMV in 2023, we value the repeat interaction they enable with the participating customer segments.

Meanwhile, average order value grew by 100.5% in Q4 2023, and 45.0% in full year 2023 compared to the corresponding periods in 2022. The average order value (excluding digital products) grew by 79.2%, outpacing the average inflation of 53.9% in full year 2023. The faster average order value growth (excluding digital products) is attributable mainly to faster-than-inflation rise in average selling prices and higher share of large-ticket items in electronics, both in Q4 2023 and for the full year 2023.

Our Active Customer base was 11.9 million in 2023, a decrease of 2.1% compared to 2022.

Overall, our performance was also supported by the appeal of our Hepsiburada Premium loyalty program, attractive affordability solutions and data-driven marketing campaigns.

The discussion below elaborates on our progress in Q4 2023 and full year 2023, as relevant, within each of our strategic priorities:

a) Nurturing loyalty

• Central to our strategy is prioritizing customer loyalty and retention. Our loyalty program, Hepsiburada Premium, has played a key role in achieving this. Meanwhile, focusing on retention has helped us to reduce and optimize our marketing and advertising spend.
• Hepsiburada Premium members enjoy access to a wide range of benefits that include free delivery and 3% cashback subject to certain conditions, plus free access to an on-demand streaming service, and discounted services, among others, for a monthly subscription fee of TRY 29.9 as at the date of this press release. Members more than tripled in 2023 to 2.2 million compared to 615 thousand in 2022. By mid-March 2024, the number of members had reached 2.4 million.
• Hepsiburada Premium members continue to generate higher order frequency than non-members. In Q4 2023, the monthly order frequency for members was 40% higher than the order frequency generated before joining the program.
• Based on the results of market research conducted by FutureBright (a local research company), Hepsiburada Premium members’ Net Promoter Score (“NPS”) was 80 in Q4 2023. This score remains higher than the Company’s overall NPS, which we believe signifies a strong satisfaction level among members.
• In 2023, on our Marketplace, we enhanced end-to-end solutions offerings for our merchants such as our fulfillment, logistics, two-man handling, fintech and advertising solutions. To facilitate higher conversion to sales for our merchants, new tools and features such as self-service campaign management, coupon creation and tailored advertising solutions are now available on our merchant app. With our 101.5 thousand Active Merchant base, our total SKU count has increased to over 230 million in 2023. In 2023, we expanded our selection of non-electronic categories on our Marketplace, particularly within fashion and beauty. We on-boarded a total of 38 thousand new brands on the platform, including a number of key global brands, with around 50% of these was within the fashion and beauty categories. Meanwhile, we have deepened our long-lasting partnerships with Hepsiburada’s well-established suppliers in retail operations.
• Our advertising business, HepsiAd, offers variety of advertisement options which boost the visibility of participating merchants. Through these ads, merchants are better able to reach their target audience and increase their sales, while benefiting from actionable consumer analytics. In 2023, around 18 thousand merchants used our advertising solutions.
• In 2024, we remain dedicated to growing the Hepsiburada Premium member base. One key initiative that we believe will support the program was the launch of a co-branded credit card with Yapi Kredi Bank, which offers its users attractive benefits. Following the launch, our focus is on increasing the Hepsiburada Premium credit card user base which we believe will, in turn, contribute to our overall growth. On our Marketplace, we plan to focus on expanding our merchant base, while encouraging merchants to utilise of our set of solutions. Particularly in advertising services, we believe there is potential to scale our performance levels going forward. Key focus areas in 2024 include increasing the adoption of HepsiAd’s solutions by our merchants and increasing such revenues per merchant.
   

b) Capitalizing on our clear differentiation with affordability and lending solutions as well as high service levels on the platform and superior delivery services

• We are focused on using our sustainable differentiators to provide our customers with best value through our affordability solutions (through Hepsipay) and superior delivery services (through HepsiJet). We believe that our solutions set us apart from the competition through our commitment to customer satisfaction.
• In 2023, we had an overall NPS of 72 compared to 74 in 2022 (according to the results of market research conducted by FutureBright on behalf of Hepsiburada). This score positioned us as the leading platform in terms of NPS for the second consecutive year. We believe that our fast delivery services, wide range of affordability solutions and the depth and breadth of our selection were instrumental in earning customer appreciation and trust.
• In 2024, we aim to continue leveraging our core strengths and prioritizing customer satisfaction.

      i)      Hepsipay

• Leveraging our e-money and payment services licenses, we offer a comprehensive suite of payment and affordability solutions on the Hepsiburada platform as well as externally to other partner retailers.
• As of December 31, 2023, our wallet and payment gateway solution, Hepsipay, registered approximately 14.3 million Hepsipay wallet customers (representing users who have opened their wallet account by giving the required consent to Hepsipay), up from 11.0 million in 2022. As of mid-March 2024, the number of Hepsipay wallet customers reached 15 million.
• We remain the only e-retailer with licenses in payments and consumer finance, and were the first in the market to launch a BNPL solution. As of December 31, 2023, our BNPL solution had been used by over 328 thousand customers with approximately 978 thousand orders processed through our non-card affordability solutions (including BNPL and shopping loans). Meanwhile, our total financed transaction volume (including general purpose loans) reached TRY 6.1 billion, with 57% of this volume generated through our BNPL solution in 2023 compared to 26% in 2022. In Q4 2023, orders made through non-card affordability solutions corresponded to a 5.6% share of total GMV, compared to 3.9% in Q4 2022. We diligently manage credit risk in our BNPL solution, while maintaining our focus on growth optimization.
• As of December 2023, following the launch of the service in May 2023, around 1 million Hepsipay prepaid cards had been issued through the Hepsiburada mobile app. The Hepsipay prepaid card is linked to the QR payment feature allowing customers to use it at any off-line retailer that accepts QR payments. By mid-March 2024, Hepsipay cards issued exceeded 1.2 million. The option for Hepsipay prepaid card holders to top up their e-wallets by way of general purpose loans is now available from six leading banks in Türkiye.
• In 2024, Hepsipay is working to become Türkiye’s most used digital wallet solution in physical and online retail. Hepsipay also aims to win additional key accounts and launching a product solution targeted at SMEs. We believe this could ultimately position Hepsipay as Türkiye’s leading fintech company.

      ii)      HepsiJet

• In 2023, HepsiJet continued offering competitive services, including our oversized delivery services that differentiate us in the market. We believe swift delivery is a core customer expectation and, in 2023, HepsiJet delivered 82% of orders placed through our retail arm (1P) within the next day (compared to 83% in full year 2022).
• HepsiJet is also a key component of our value proposition for our merchants. In 2023, HepsiJet delivered around 67% of our total parcels (compared to 65% in 2022).
• In 2023, HepsiJet had an NPS of 87 according to our internal survey results, underscoring its service excellence. Through HepsiJet, our customers enjoy flexible delivery options and value added services which we expanded during the year. HepsiJet serves in all 81 cities in Türkiye with over 3 thousand carriers.
• Our oversized package delivery service (HepsiJet XL) delivered 59% of oversized parcels ordered through our platform in 2023, up from 47% in 2022.
• In 2024, we expect to build on HepsiJet‘s integral role in our logistics ecosystem and excel in speed of delivery and customer experience.
   

c) Pursuing profitability by focusing on core operations, growth in non-electronics and step change in opex

• Continuing the trend from previous quarters in 2023, we delivered a positive IAS 29-Unadjusted EBITDA of TRY 555.7 million in Q4 2023. This was achieved mainly through a stronger Gross Contribution, optimized marketing spending and a prudent approach to operational expenses. EBITDA was also positive at TRY 129.1 million in Q4 2023 compared to negative TRY 415.1 million in Q4 2022.
   

d) Offering payment, lending and last-mile delivery services to third parties

• Our strategy to extend our services and solutions beyond our platform by offering them to other retailers benefits both retail partners and customers. We see great potential for Hepsipay and HepsiJet to use their assets and increase their revenue contribution to our Company.
• HepsiJet today serves over two thousand external customers including household-name retailers, nearly doubling last year’s figure. We believe HepsiJet is best positioned to build on this momentum and grow its share in the logistics market.
• The share of external customer volume in HepsiJet’s operations increased to 24.9% in 2023, up from 19.6% in 2022. Total parcel volume of third parties delivered in 2023 increased by 59% compared to 2022.
• As of December 31, 2023, following the product launch in July 2023, Hepsipay’s one-click check-out (Pay with Hepsipay) offering was successfully integrated into the online check out of ten retailers. Through this offering, Hepsipay has gained a share of these retailers’ online sales by enabling payment with cards stored on the Hepsipay wallet. We believe that the envisaged growth in one-click check-out integrations will become instrumental in Hepsipay’s off-platform expansion.
• Hepsipay's solid wallet base, diverse affordability solutions, own loyalty program (Hepsipara Program) and fast and reliable check-out attest to its competitive advantage.
   

In 2024, we aim to continue executing on four strategic priorities including nurturing loyalty, capitalizing on our differentiation in last-mile delivery, capitalizing on our differentiation in affordability & lending solutions and offering payment, lending as well as last-mile delivery services to third parties.

ESG Actions

• As part of our efforts to integrate sustainability goals into our business processes, Hepsiburada was the first e-commerce company worldwide to commit to the United Nations Global Compact's "Moving Forward Faster" initiative. The initiative aims to accelerate the achievement of the UN Sustainable Development Goals by 2030.
• In 2023, Hepsiburada launched the Promise for Tomorrow program to provide new opportunities for young people, support their personal and social development, and help them realize their potential. The program offers young people with e-commerce, entrepreneurship, and marketing training.
• As part of our social responsibility projects, Hepsiburada has continued to provide food, medical supplies, and logistics support to animal associations.
• Hepsiburada's ongoing "A Smile is Enough" project has reached 36 thousand children since its inception.
• In Q4 2023, the "Technology Empowerment for Women Entrepreneurs" ("TEWE") program, launched in 2017 to develop women's role in the Turkish digital economy, reached an additional 2,904 women. To date, the TEWE program has supported around 50 thousand women entrepreneurs. Furthermore, as of December 31, 2023, the number of women's cooperatives on our platform reached 250.
• Following the earthquakes that struck the southeastern region of Türkiye in February 2023, in March 2023, the Company launched the "Trade and Technology Empowerment for the Earthquake Region" program. Since the program's launch, the total number of active merchants operating in the earthquake region has reached approximately 16,400, with over 2,800 new businesses selling their products online through Hepsiburada. Active sellers in the earthquake region have sold a total of 6.9 million products through 4.4 million orders, generating a trade volume exceeding TRY 3.5 billion. In addition to its E-Commerce Specialization Centers in Adana and Hatay, Hepsiburada plans to open its third center in the first half of 2024. Through the E-Commerce Specialization Centers, Hepsiburada supports existing merchants and organizes training courses and programs for those new to the e-commerce market. Over a thousand merchants from the region have benefitted from such training courses.
• As a part of the TEWE program, various NGO collaborations have been established to provide sustainable support to the impacted region. As of December 31, 2023, the number of women entrepreneurs and women's cooperatives in the earthquake zone had reached 3,207 and 38, respectively.
   

Subsequent Events

Update on Hepsiburada Seyahat operations

With effect from the close of business on March 31, 2024, Hepsiburada has made the commercial decision to discontinue its complementary business Hepsiburada Seyahat, which conducts airline and bus ticketing operations under a travel agency license granted in February 2021. The contribution of the Hepsiburada Seyahat business to the Company’s GMV was not material for the year ended December 31, 2023.  Any tickets sold prior to the discontinuance will remain valid and Hepsiburada will remain at the service of such ticketholders.

Capital Markets Board approval to participate in an asset-backed security issuance

On March 21, 2024, the Capital Markets Board of Türkiye granted approval to Pasha Yatirim Bank Hepsiburada Varlik Finansmani Fonu for the issuance of asset-backed securities in a structure where Hepsiburada participates as the originating entity with respect to its BNPL receivables. The approval is granted f