Ladies and gentlemen, thank you for standing by. I'm Mina, your chorus call operator. Welcome and thank you for joining the Hepsiburada Conference Call and Live Webcast to present and discuss the Second Quarter 2024 Financial Results. All participants will be in listen-only more and the conference is being recorded. The presentation will be followed by a question-and-answer session. [Operator Instructions] At this time, I would like to turn the conference over to Ms. Nilhan Onal Gokcetekin, CEO; Mr. Seckin Koseoglu, CFO; and Ms. Helin Celikbilek, Investor Relations Director. Ms. Celikbilek, you may now proceed.

Thanks, operators. Thank you for joining us today for Hepsiburada second quarter and first half 2024 earnings call. I'm pleased to be joined on the call today by our CEO, Nilhan Onal Gokcetekin; and our CFO, Seckin Koseoglu. 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 6-K, our Form 20-F 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 relevant IFRS to non-IFRS reconciliation. As a reminder, a replay of this call will be available on our Investor Relations website. With that, I will hand it over to our CEO, Nilhan.

Thank you, Helin. 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 ‘24 exceeding our guidance for both GMV growth and EBITDA as percent 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 are due to 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 NPS metrics yet again confirmed to be Turkiye's most recommended e-commerce brand. Our active customer continued to increase and reached 12.1 million. Customer loyalty and retention are central to our strategy and head to where the 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 the last 12 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.…

Thank you, Nilhan, and welcome, everyone. I am delighted to be with you today to present our second quarter and first half results. We delivered a solid performance across all metrics, both in quarter two and the first half in a still challenging macroeconomic environment. Here, it's worth taking a minute to recap what Nilhan said regarding consumer demand dynamics of the two quarters of the first half, which consequently impacted our quarterly growth performance. Overall, quarter one consumer demand was high due to widespread expectation of price increases post March 31 local elections, which pulled consumer demand forward from April to March. Therefore, we see the merit in considering our overall first half GMV growth performance, which came in at 21.6% adjusted for inflation. On the profitability side, we recorded an 11.2% gross contribution margin and 1.0% EBITDA as a percentage of GMV in the first six months of the year. Let me now go over the details of the second quarter performance. In the second quarter, around 4% real GMV growth came mainly through order growth. Higher VAT rates also contributed to this growth in this year. We achieved the highest gross contribution margin since our IPO at 12% with a solid 2.6 percentage point improvement on a yearly basis in quarter two '24. Our EBITDA as a percentage of GMV continues its up trend, reaching 1.1%, with a 0.9 percentage point rise year-on-year when the one-off provision reversal for the Competition Board investigation concluded in July 2023 is considered. Let's move on to the next slide to look at our GMV breakdown. In quarter two, with a 4 percentage point shift compared to quarter two last year, our marketplace operations corresponded to around 71% of our business. This shift came as a result of a 5.1 percentage…

Ladies and gentlemen, at this time, we will begin the question-and-answer session. [Operator Instructions] Ladies and gentlemen, there are no audio questions at this time. We will now proceed with the written questions from our webcast participants.

Thanks, operator. The first question is, your GMV guidance implies a bigger premium to inflation in Q3 than in Q2. What's driving that?

There are a few drivers that is going to deliver higher growth in Q3 versus inflation. Number one is the impact of our strategic initiatives, Premium, which is driving higher loyalty, our investments with HepsiJet, which already doubled volume in off-platform, our improvements in ad and premium revenues. On top of this, we are also going to get the seasonality -- positive seasonality impact of back-to-school period. And hence, we are expecting a solid growth in Q3 ahead of inflation.

The second question is, what was the impact of the second quarter holidays on GMV?

We would probably have roughly an additional 6% real growth on top of our existing growth, bringing our real growth to 10%.

Third question is on the seasonality of cash flow. For the second half of 2024, would you expect a return -- would you expect to return to positive free cash flow like in 2023?

Yes, definitely. And I'm confident that we will have a positive free cash flow on a full year basis. We will definitely continue to improve our EBITDA and manage the working capital diligently in the second half of the year. On the flip side, we had a sizable realized FX gain last year, which may not necessarily be the same this year depending on the Turkish lira devaluation.

Thank you. Fourth question is shifting GMV towards Marketplace, 3P. Is that a seasonal shift or is it a strategy?

We definitely have a strong strategy to improve our mix for higher non-electronics, thanks to our premium and loyalty programs. Hence, this shift to non-electronics is coming towards 3P because home, fashion, all this non-electronics categories has a much higher rate of marketplace in our platform. This is the strategic part. On the other side, the slowdown in electronics markets in Turkey is also bringing a higher mix shift to non-electronics almost beyond our control as well as its coming as a tailwind to our platform.

Thank you. Fifth and last question in this question set is, as inflation subside, how will IAS29 accounting impacts evolve as we go into 2025 on revenue, EBITDA and free cash flow specifically?

Sure. On revenue, on an unadjusted basis, the growth will be lower as price increases will be lower in the market with lower inflation. But on an adjusted basis, there will be no real change on real growth. On EBITDA, this is going to have a positive impact as inflation goes down, the impact on cost of inventory will decrease, so this is definitely positive. And on FCF, adjusted and unadjusted FCF will be almost the same. So it's going to have a limited impact on that. But as EBITDA improves, definitely this positive impact will impact FCF positively as well.

So back to you, Mina.

Thank you. We will now move on to further written questions. The first one is from [indiscernible] from Frontera Capital. Hi, could you please talk about measures being taken to address the rise in finance costs due to higher rates? Thanks.

As interest rates have gone up and stayed the same for quite some time. We have adjusted our credit card policy adjusting the thresholds that we give interest-free installments to our consumers as one mitigating impact. We continue to increase our affordability solutions, which is helping us manage the overall cost of financing and we are on a very positive plan as Nilhan explained. So we will continue to focus on these measures and make sure that the credit card costs and the overall financing costs are manageable going forward.

Our next webcast question is from Maksim Nekrasov with Citi. Thank you for the presentation. Can you comment on the consumer environment in Turkey?

Absolutely. So thanks for the question. I think there are two parts to this question. One part is the macro environment where government has been taking actions been very decisive to fight inflation, which has accelerated in early Q2. High interest rate environment at 50% versus last year this time was around 8.5%, created a tandem, safe to say, credit environment has been tougher, so some of the discretion in the category, we are seeing that the demand is contracting. On the flip side, there is a definitely strong interest of our solutions, which I explained in our results affordability. Our very competitive prices, and also, there is going to be seasonality impact coming with back-to-school in Q4, Black Friday, that is going to flourish the demand. We are also expecting innovation for our recent NPI from Apple. AI innovation is also going to bring some tailwind to our electronics market, and we expect to build still consumer demand with our strategic differentiators.

Our next webcast question comes from Hanzade Kilickiran with JPMorgan. Thank you very much for the presentation and congratulations on strong results. My question is on your guidance, which seems a bit optimistic versus the inflation and expected slowdown in the consumption. Can you please explain the main revenue drivers for the growth? And why do you think Hepsi may stay resilient against lower consumption across all factors in the remainder of the year? Thank you, presenter (ph).

As Nilhan mentioned in the previous question, our guidance is based on the back-to-school period where we are going to have a higher GMV and in line with that higher revenue. We expect that quarter three electronics markets will be in a much better position versus quarter two in terms of growth. And this is going to impact our 1P business. And as 1P part of the business goes back, it's going to have a positive impact on the revenue. And definitely, our ads business will continue to flourish together with increased trade with back-to-school. And on top, our premium revenues will continue to deliver as we increase our premium user base.

Our next webcast question is from Sinan Xin with Amber Road Investors. Have you detected any shift in behavior from consumers as the cross-border taxes have changed as of August 2024?

Sinan, I will say this is slightly early to speak because the change has been effective end of August. So we only had few trading days, but I promise to comment on this in the next quarter's call. Obviously, I also want to underline -- if anything, this would have a tailwind impact to Hepsiburada demand because we have extremely minimal global inbound share. It's around 1% of our business. So we would expect such a change to impact global competitors, which has heavily relying on imports. So this could bring a tailwind to our business, but I would like to wait and see the real impact before we give an estimation here.

The next question is a follow-up question from Maksim Nekrasov with Citi. To follow up, do you see a material pressure on consumer or trading down, would you expect competition to be tougher in the second half of 2024 and '25 as a result of higher promotional activity?

So the pressure -- there is definitely a pressure on the consumer because credit environment is more tough. Interest rate is still high and number of installments available for consumers are getting more limited. So this is the headwind part of it. And in half two, we generally expect higher competition because of the seasonality impact as that. But yet, as you can see in our forecast, our expectation in terms of our own performance, thanks to all the affordability and landing metals we built, thanks to a growing share in our external platforms with our logistics business. And with the other strategic measures we have taken, we think we are going to deliver a strong performance in the coming months and also into next year.

Next question is a follow-up question from [indiscernible] from Frontera Capital. As a follow-up, do you expect to get to bottom line profitability in the second half?

As I mentioned before, we will definitely continue to improve our EBITDA profitability. But I think it would be a little bit premature to comment on the bottom line profitability because our FX gain was the main tailwind last year. And it’s very hard to predict the dollar rate that will materialize in the market in the coming months until the end of the year. So it would be very hard to comment on the bottom line at this point. But EBITDA will continue to improve for sure.

Our next question is a follow-up question also from Sinan Xin with Amber Road Investors. Are there any limits to funding capacity from your funding partners or balancing capacity for your affordability solutions and Hepsi funds? Do you plan on doing further asset-backed insurances? Thank you.

We do not have any issues on funding our BNPL plans, definitely both from our own balance sheet and also using different instruments like asset-backed securities, and bond issues. We will shortly initiate the second tranche of our asset-backed security program, and it will continue. So as the business grows in affordability solutions, we have the right tools for funding it healthily.

Ladies and gentlemen, there are no further questions at this time. I will now turn the conference over to management for any closing comments. Thank you.

Thank you so much for listening to us. We appreciate your time and questions. Thank you.

Ladies and gentlemen, the conference is now concluded, and you may disconnect your telephone. Thank you for calling, and have a good afternoon.