Participants
Helin Celikbilek; IR Director; D Market Elektronik Hizmetler ve Ticaret AS
Nilhan Onal Gokcetekin; CEO; D Market Elektronik Hizmetler ve Ticaret AS
Seckin Koseoglu; CFO; D Market Elektronik Hizmetler ve Ticaret AS
Muharrem Gulsever; Analyst; Kona Capital
Presentation
Operator
Ladies and gentlemen, thank you for standing by. I'm Constantinos, your Chorus Call operator. Welcome, and thank you for joining the Hepsiburada conference call and live webcast to present and discuss the first quarter of 2024 financial results.
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.
Helin Celikbilek
Thanks, operators. Thank you for joining us today for Hepsiburada first quarter 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 the relevant IFRS non-IFRS reconciliation. As a reminder, a replay of this call will be available on our Investor Relations website.
And with that, I will hand it over to our CEO, Nilhan.
Nilhan Onal Gokcetekin
Thank you, Helin, and welcome, everyone, and thank you for joining us. I'm delighted to be with you today to present our first quarter results. It has been a strong start to the year as reflected on all of our results. Notably, we beat our G&A and EBITDA guidance for the quarter.
Good execution accelerated by the favorable base effect of last year due to the tragic earthquake drove 138% year-on-year GMV growth adjusted for inflation, our GMV growth was a solid 43%. Our gross contribution margin improved by 150 basis points to 12%, marking the highest since our IPO. Our EBITDA continued its uptrend, rising 170 basis points year-on-year to 2.4% of GMV on an unadjusted basis adjustment for inflation.
Our EBITDA as a percentage of GMV improved by 70 basis points year-on-year to 0.8%. These results are a clear sign of our winning strategy now let's take a look at a few of our operational metrics. Being 30th, most recommended e-commerce brand, once again with an NPS of 73 is a great source of pride we are committed to advancing this performance to the next level.
Our active customer base was 12.1 million on an additional 171,000 customers. We are delighted to see growing interest in our appealing loyalty program, which has scaled to 2.6 million members by the end of May, we recorded, TRY29.3 million order with 22% growth during the quarter. Our order frequency over the last 12 months reached 9.8. This is up 30% year over year with an active merchant base of almost 102,000, we expanded our selection by 38% to nearly 248 million SKUs.
Now let me provide a snapshot of our quarterly progress on top four strategic priorities. First is our loyalty program, Hepsiburada Premium. The program's growing customer base signals customer satisfaction with our proposition. This is also evident by program's strong NPS.
Also, premium members' higher frequency significantly contributes to our overall growth. Moving on to second priority, which is differentiation with superior delivery services. Our superior delivery services is realized with our in-house company HepsiJet. Merchant preference for HepsiJet services has risen significantly this quarter.
Jet delivered 68% of total parcels on our platform. This is up by 5.1%-point year-on-year. It's 82% next day delivery ratio among retail orders also confirms its integral role in our ecosystem. HepsiJet brings wider satisfaction to the Hepsiburada customer. Its fast, reliable, and high quality service reflects in our strong customer satisfaction score of 87.
Our third differentiator is Hepsipay. It's scaling its offerings with additions to its already comprehensive suite of payments and landing services. Fourth is our strongest muscles offering our strongest muscles to off-platform customers. Let me start with HepsiJet, which has more than doubled its volume year-on-year in Q1. Accordingly, with 3.2 million parcels delivered, its off-platform volume corresponded to nearly 33% of its total Q1. On the next slide, I'll elaborate on Hepsipay, including its off-platform performance.
Let me dive into how we are providing these cutting edge solutions with Hepsipay. In the current economic climate of high interest rates, being able to offer a suite of alternatives is a huge advantage.
In January, we took the further step of including our consumer finance loans to this step. Meanwhile, our BNPL solution is the largest non-bank BNPL solution in the market. Overall, our BNPL and shopping loan were utilized in over 1.1 million orders over the last 12 months.
On a broader scale, over the last 12 months, total landing volume through our platform tripled compared to the same period of last year and it reached TRY8.1 billion. That's roughly equivalent to $290 million. Hepsipay aims to grow this business line in a profitable manner and take a sizable share in Turkey's $34 billion consumer loan market. In this capacity, we will continue to leverage Hepsipay solutions, as well as those of our partner banks to grow our e-commerce business.
Aside from affordability aspect, our financial services also encompasses the payments business. In offline retail, Hepsipay leads the market with its 15.7 million wallet base covering 18 million store cards. Our one-click checkout solution, Pay with Hepsipay, is also live at 28 key retailers just within less than a year of its launch. Hepsipay aims to capture a substantial share both in key accounts as well as in Turkey's sizable online SME market.
And now, I'll add my part with our guidance. As we lead through the second quarter, we observe the continuation of challenging macroeconomic conjecture, cooling of consumer demand to a certain extent. And yet, our platform preserves our relevance for consumer purchases as their trusted household brand. Accordingly, we expect to deliver growth around 75% year-on-year in Q2 2024.
With that, GMV growth in the first half is expected to double year-on-year. With continued prudent cost management in place, we foresee an EBITDA within the range of 1.8% to 2% of GMV. As a reminder, our GMV in Q2 last year was 1.5%. So we expect to deliver a year-on-year improvement in our profitability in Q2. In these figures, I refer to are unadjusted for inflation.
With this, I thank you very much for listening and leave the floor to Seckin, our dear CFO, to provide further insights to our financial performance.
Seckin Koseoglu
Thank you, Nihan, and welcome, everyone. I'm glad to share that we had a robust start to the year with solid performance across all metrics. Adjusted for inflation, GMV grew by 43% in Q1. Strong GMV growth was through 17% average order value growth and a 22% increase in total orders. Given the tragic earthquake in February last year and its inevitable impact on our business last year.
Mall-based also has a positive impact on this growth performance. Gross contribution margin continued its improvement trend and reached 10.5%. Higher margin, coupled with disciplined OpEx management resulted in TRY289 million EBITDA at 0.8% of GMV. For more color on each of these.
Let's move on to the next slight first, our GME perform 43% of GMV growth came through 29.3 million orders in Q1 last 12 months order frequency also increased by 30% to 9.8. Our marketplace operations corresponded to 68% of our business in quarter one 24 at around the same level of Q1 last year. That was nearly 1.4 percentage-point shift toward non-electronic within GM this quarter, in line with our strategy, let's have a look at our revenue growth guidance.
45% revenue growth in the first quarter was achieved mainly through 38% retail and 32% marketplace operations revenue growth, delivery service revenues, which correspond to 14% of total revenues nearly doubled year on year. This was mainly due to the solid momentum in our off-platform business, coupled with annual raises in unit delivery service charges above inflation our advertising services revenues doubled during this period as well. Meanwhile, other revenue lines grew by 148%. Such performance was mainly through fourfold growth in loyalty subscription revenues and higher fulfillment service revenues compared to Q1 2023.
On the margin side, adjusted for inflation, we recorded 1.2 percentage-points rise in the gross contribution margin reaching 10.5%. Margin improvement was mainly attributable to a higher contribution of delivery service revenues from off-platform as well as advertising revenues.
Let's move on to our EBITDA performance. On the next slide, we recorded 0.8% EBITDA as a percentage of GMV in Q1 '24 with 75 basis points improvement on a yearly basis. This was mainly through 1.2 percentage-point rise in gross contribution margin, partially offset by 0.5% rise in shipping and packaging expenses.
And now let's look at our cash flow dynamic in the why the cash generated from operations was TRY1.5 billion in Q1 '24, up from TRY102 million a year ago TRY778 million as improvements in the change in net working capital year on year accounts for more than half of the increase. Others include TRY277 million increase in EBITDA, TRY137 million increase in the change in operating monetary gain, TRY126 million increase in other noncash items and TRY26 million increase in realized gains with TRY426 million in CapEx. Our free cash flow was around TRY1 billion in Q1 2024.
Let's move on to the next slide, and let's take a look at our key takeaways. We would like to leave you with the following from today's presentation, our robust top line growth in the first quarter exceeded our guidance. Adjusted for inflation. We recorded 42.5% GMV growth on a year-on-year basis. Our gross contribution margin continued to improve by 1.2 percentage-points and reached 10.5%.
We recorded TRY289 million EBITDA, corresponding to a 0.75% rise in EBITDA as a percentage of GMV. With this performance, we generated a strong free cash flow of TRY1 billion. Our solid overall performance confirms our sharp focus on building this loyalty, cultivating our sustainable, differentiated and expanding our B2B services as a turnkey e-com solution partner for merchants.
As I reflect on the good start to 2024, we are committed to growing on a sustainable and profitable manner going forward.
Thank you for listening, and we can now open the line for questions.
Question and Answer Session
Operator
Muharrem Gulsever with Kona Capital.
Muharrem Gulsever
Thank you very much for the presentation. My question will be regarding the eighth holiday that's moving from three Q to second Q in this year. What would be the impact on the GMV for the second quarter in your view? Thank you.
Seckin Koseoglu
The impact of the eighth holiday is actually incorporated in our quarter two guidance. We -- as you know, we had two eight holidays in quarter two, both of which are already incorporated in our top line guidance.
Muharrem Gulsever
I understand that, but my question is, if the eighth holiday would stay in the third quarter, what would be the GMV growth for this quarter?
Seckin Koseoglu
It typically impacts our business during holidays offline as sales go up and it online sales are impacted. So probably if one was in July, we would have at least a percentage or two upwards in the growth trajectory.
Muharrem Gulsever
Okay. Thank you very much.
Operator
Ladies and gentlemen, there are no further audio questions at this time. We will now proceed with the written questions from our webcast participants.
The first webcast question comes from Mark from Asif Satar, who's a private investor and I quote and what is our market share in the online retailing in Turkey, we operate in that category in the market. How is our performance versus strong competition, Amazon Turkey?
Nilhan Onal Gokcetekin
Thank you. The asset. Thank you so much for your question. So, for Amazon, they are not publishing the results for Turkey. We will not be able to give a conclusive comment, but from the public data like any active customer usage, we are seeing that they are still paying as a very small player in Turkey. That's number one. Number two is how we are looking into different segments that we have rights to win, albeit the number one is electronics beget GfK data in Cuba, we had significant share growth.
We are already around 32% on top of this, we gained share in all of our key categories. The other data stores we look into is Nissan and for non-electronic categories, as you guys know, home and mom and baby are very critical segment for us. The needs of the female household, we have right to win that we are gaining share there as for home products for their home products.
We are also triangulating different data sources, and we are seeing that we are gaining significant share there as well. So overall, we had a strong quarter and we are not able to share exact online share in Turkey because it's not reported. And but we are clearly beating our competitors with the shares.
Operator
The next webcast question comes from Maxim cross of CT. and I quote in what categories do you see higher slowdown starting from second quarter 2024? Do you see consumers trading down or decreasing frequency?
Nilhan Onal Gokcetekin
Maxim, thank you so much. So generally the slowdown, we can say it started. The critical part is endurable. And endurable is when you dive deeper, number one category I would call out is computer. As you know, computer is more discretionary. And there is some deferral of the demand, delayed demand. The other one has been TV among our categories, which we are expecting some recovery with Euro Cup and Olympics demands in Q3 as well. The trend we are seeing is trading down and deferral of the demand rather than significantly decreasing frequency of online shopping. Thank you, Maxim.
Operator
The next webcast question is a follow up question from Maxim, the crossover and quote on when do you expect to start booking tax expense?
Seckin Koseoglu
Sure. I'll take this question. We do not expect to pay corporate taxes in 2024 as we have tax incentives. And these are typically our R&D center tax incentives without any time constraints. And most likely we will start paying taxes in 2026.
Operator
The next webcast question is again a follow up question from Satya, who's a private investor and I quote on what is our EBITDA margin on US GAAP basis in this quarter? And what is expected EBITDA on US GAAP basis forecasted for the next quarter?
Seckin Koseoglu
We do not report our financials in US GAAP basis.
Operator
And the next webcast question is from Badar shown in salmon with generation PMC, a corporation and I quote any plans to grow your services in developed markets, including North America.
Nilhan Onal Gokcetekin
We don't have plans at the moment product to expand perhaps the Grodan launch in North America. Having said that, Turkish collection is very, very popular in different parts of the world. And these started doing some tests with integrations to other marketplaces to facilitate micro exports from Turkey.
So, if you go to Walmart today, you can see our private-label June already being sold in those stores, and we will continue to expand our cross-border services with smart integrations versus large investments. So this new market.
Operator
And the next webcast question is a follow-up question from us is for Satya and I quote or what is the expected incremental GMV increased due to Joo Mi on partnership in this. year?” Thank you.
Nilhan Onal Gokcetekin
Look Asif, we are very, very excited about Jumia partnership. First, let me tell you that means the region for Turkish connections, we are winning in home category in Turkey. It's small domestic appliances that are exportable, and Julia has been a huge potential in building this partnership with us. We are still in the building phase I am expecting most of the impact to come starting to come next year assets because we are and two being fulfilled by Jumia.
So, we are doing the first shipment. It will take some time for this product to be inbound. We are selecting very, very cost-efficient methods to be in Jumia and with relevant customers. So, nothing significant this year, but definitely watch this space for improvements next year as we complete our integration and leverage their existing traffic of different partners.
Operator
The next webcast question comes from Grant Thornton Howell, who's a private investor and I quote, are you considering a local equity listing in Turkey? Thank you.
Nilhan Onal Gokcetekin
So, we recognize the potential benefits that a dual listing could bring very well and we are actively exploring various options to determine the best course of action for our stakeholders. As part of this process, we are evaluating market conditions, as well as regulatory requirements involved in a dual listing. At this point, we haven't made a concrete decision regarding a potential listing in Borsa, Istanbul, but we will keep the market informed as we progress and make any definitive decision. In the meantime, we appreciate your continued support.
Operator
The next webcast question comes from Sinan Chin with Amber Road investors, and I quote, “What drives management's confidence that it will continue to grow share as global cross-border e-commerce platforms consider entering the Turkey's market?” Thank you.
Nilhan Onal Gokcetekin
Thank you, Sinan. I think there are couple of things that gives us confidence that we will sustain and continue to grow share despite global cross-border platforms.
Number one, Turkey has a very, very competitive supplier base. If you look into this global cross-border success story. Absolutely. They had strong playbooks, but they don't have competition like Turkey, especially at home, very, very economical.
Second, affordability is critical solution for Turkey. We are the only online company which has the payment license, which can do installment in categories like cosmetics, it's on the FMCG, mobile phone. Third, quality matters a lot. And in Turkey, this is still number one purchasing driver for Turkish online shopping. And as you know, we are winning with all of our quality metrics.
We are year-over-year MPA's champion in Turkey. So we are up for competition we appreciate the new entrants that will continue to raise the bar for Turkish customer as we had strong right COVID.
And finally, we are also building cross-border capability. This is has been done. So we just launched our first product in a test environment in non-chain lead time, some partnership with Jumia to build some business together. So we will also grow our cross-border business. It's the growth of our Turkish business as well.
Operator
The next webcast question is from James Hayes with Lucerna Global Capital, and it's a series of questions, and I quote, “Thank you all for doing the call. Can you please provide an update on the various regulatory initiatives which may constrain the activities of the larger competitor in the market? Second question is, which are the items which have only kicked in early 2025?
And are there any additional regulations to take effect later this year? Third and final question is, finally, the free cash flow in the quarter was quite impressive, can you provide any medium term thoughts around free cash flow generation capacity or for the full year of 2024?” Thank you.
Nilhan Onal Gokcetekin
Thank you, James. Very good question. So 2025, there will be various regulatory initiatives that will constrain the activities of the larger competitor in Turkey. Multiple things, number one is license fee is kicking in in Turkey. So for the large, larger online players, which has this proportion of shares, there will be significant amount of payment to make as license fee to the government. The second that is, as you know, private label, which was a stronghold of Alibaba in Turkey is banned.
We are expecting that there will be continued impact as of 2025. The continued impact of advertising promotion reduction will also have an impact. So these are the three I would say that with a much more democratic environment in Turkey that is supporting small, medium-sized enterprises could continue to make an impact on the large competitors in the market.
And for your cash related questions, I’m going to turn the floor to Seckin.
Seckin Koseoglu
Thank you so much for the question. As you know, there are two components for the free cash flow generation. One is EBITDA and the other one is a net working capital management. And we will continue to grow our EBITDA year-over-year on a full year basis as well. So definitely we will be improving on the key pillars of the cash flow for the full year.
On the networking, net working capital side, what I can say that as the higher interest rates and the government's actions to minimize the inflation has started to see a bigger impact in the market. As you know, all companies will be looking into their working capital requirements with increased focus, but we will always continue to be a negative net working capital business.
So as our business continues to grow in the top line, this will also be the second layer and the key pillars to increase our free cash flow. So that can be some seasonality impact from one quarter to another. But on a full year basis, we will continue to improve our free cash flow position in 2024.
Operator
Ladies and gentlemen, the conference is now concluded and you may disconnect your telephone. Thank you for calling, have a good afternoon.
