Hepsiburada Reports Strong Q2 2024 Results Despite Economic Challenges

Earnings call: Hepsiburada reports strong Q2 2024 results amid economic headwinds By Investing.com

Turkish e-commerce giant Hepsiburada (HEPS) showcased a robust financial performance in its second-quarter earnings call for 2024, reporting significant growth in order volume, Gross Merchandise Volume (GMV), and customer metrics. Despite facing macroeconomic challenges, the company's GMV doubled compared to the first half of 2023, with a notable increase in active customers and the success of its loyalty program, Hepsiburada Premium. Operational efficiency was evident as HepsiJet delivered a majority of parcels and SKU offerings expanded. Looking ahead, Hepsiburada provided positive guidance for the third quarter, anticipating continued GMV growth and a stable EBITDA margin. Hepsiburada's leadership expressed confidence in their strategic priorities, which focus on enhancing customer loyalty, delivery services, and expanding affordability solutions. The recent earnings call underscored the company's resilience and adaptability in a challenging economic landscape, with management optimistic about sustaining profitable growth in the latter half of 2024. Operator: 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. Helin Celikbilek: 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. Nilhan Gokcetekin: 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. These are offered by an active merchant base of around 101,000. Now let me provide a snapshot of the quarterly progress on our four strategic priorities. First, let's look into our loyalty program, which is our key to win with loyalty strategy. The programs rise to 3 million numbers is a testament to the attractiveness of the program's value proposition. Program has an NPS of 84, which is the highest among loyalty program in Turkish e-commerce, reflects the trust in appreciation of its members. Premium members tend to prefer Hepsiburada as their go-to shopping platform. We observed that they generate 36% higher frequency after joining the program. This strongly contributes to overall order growth. Our local streaming partner, BluTV was acquired by Warner Bros Discovery (NASDAQ:WBD) in December '23. Accordingly, a broad range of best international service and shows from Warner Bros will soon be available as part of the premium program benefits, enriching the exclusive experience enjoyed by these members. We remain dedicated to retaining satisfied customers while welcoming new ones into the fall. Next slide, please. Moving on to other strategic priority, which is differentiation with our superior delivery services. Central to achieving this is our HepsiJet continued penetration on our platform. HepsiJet, which is our last mile services company delivered 73% of total parcels dispatched during the quarter. This is up by 6.8 percentage points year-on-year. Its volume expansion in oversized parcel delivery is also very impressive. In Q2, 68% of all oversized parcels on Hepsiburada were delivered by HepsiJet XLarge. This marked an 8.9 percentage point year-on-year increase. HepsiJet high NPS confirms its commitment to differentiation with service excellence, a commitment fueled by flexible and convenient delivery options. Being a new generation logistics company committed to sustainable practices in a pilot project, HepsiJet added seven to one electric vans to its fleet in the quarter. With the target to increase this number to 50 by year-end, this initiative marks as more steps towards addressing the bigger environmental issue. In this context, as the first e-commerce player to publish a sustainability report in Turkiye, I'm delighted to announce that we recently published our report for 2023. Our third priority is capitalizing on our clear differentiation with affordability and lending solutions. Hepsipay's comprehensive suite of payments and lending services gained further significance in a continued environment of tight liquidity debt. Our affordability solutions, which include our in-house Buy Now Pay Later solutions, consumer finance loans and shopping loans from partner banks have gained more traction. The quarterly share of these affordability solutions in GMV rose to 6.1% from 4.9% a quarter ago, which is around 20% increase. The consumer tendency to use general purpose loans for shopping on our platform has also increased. As such, including the impact of those spent in the platform, GMV penetration of our overall affordability solutions rose to 8.1% in Q2 from 5.8% a quarter ago. Hepsiburada is the largest non-bank BNPL solution provider in Turkish market. Our BNPL volume more than tripled year-on-year during Q2. Our overall BNPL and shopping loans were utilized nearly 1.3 million orders over the last 12 months. We diligently manage credit risk in our BNPL with a cost of risk around 2.6% in August. On a broader scale, over the last 12 months, total lending volume on our platform reached TRY11.2 billion with an incremental of around TRY3 billion over the last quarter. Nearly half of this volume was issued through our partner banks. Shopping related credit receivables create limited balance sheet loss with average durations of 3.7 and 4.2 months of BNPL and consumer finance loan solutions, respectively. We aim to grow this business line profitably by continuing to leverage Hepsipay solutions and those of our partner banks verified growing our e-commerce business nicely. Aside from affordability aspect, Hepsipay scaled upon the payment front. Its wallet pay gross to $16.7 million, covering 19.5 million store cards by end of August. Hepsipay further enhance customer experience with the recently launched auto top-up feature in the wallet. Hepsipay remains committed to becoming Turkiye's primary digital wallet in both physical and online retail. Our fourth key priority is offering our strongest muscles to off platform customers and let me start with HepsiJet. With over 9 million parcels delivered HepsiJet doubled its external customer volume year-on-year. Accordingly, in Q2 '24, its off-platform share rose by 11.1 percentage points year-on-year to nearly 36% of its total, thanks to doubling its volume with many trusting customers of platform. As an appealing logistics partner, HepsiJet continues to expand its customer portfolio through several key accounts. Next is Hepsipay's one click checkout solution, Pay with Hepsipay. We continue to expand this convenience solution to many other retailers. Hepsipay is now integrated with 50 leading retailers of Turkiye having almost tripled its total payment volume in Q2 compared to Q1. Hepsipay aims to continue winning key accounts by also launching its proposition in the SME market. And now, I will end my part with our guidance for Q3. For the second half of the year, we remain cautiously optimistic about market conditions and yet, we are truly confident in our ability to execute on our strategic initiatives for the period ahead. Accordingly, in the third quarter, we expect to deliver GMV growth within the range of 70% to 75% year-on-year. We continued our prudent cost management in place, and we foresee an EBITDA of around 2.2% of GMV. These figures I've referred to are in adjusted (ph) for inflation. With this, I thank you for listening, and I'll leave the floor to Seckin, our CFO to provide further insights into our strong financial performance. Seckin Koseoglu: 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 point shift towards non-electronics, which is in line with our broader strategy. Change in market dynamics with a slowdown in electronics market also had an impact in this shift. Let's have a look at our revenue and gross contribution dynamics in the next slide. While quarter two revenue growth was nearly flat, our revenues grew by 20.5% in the first half. Flat revenue performance in quarter two '24 was mainly due to a 13% decrease in our 1P revenue compared to quarter two '23 offset by the strong growth in our delivery service revenue and other revenue, including advertising services revenue and loyalty program revenue. The 13% decline in 1P revenue was mainly due to the 4 percentage point shift in GMV mix towards 3P. Our strategic priority to expand our services offered to third parties and scaling our advertising services, as well as our loyalty program were instrumental in this quarter's gross contribution margin expansion by 2.6 percentage points. Let's move on to our EBITDA performance on the next slide. We recorded 1.1% EBITDA as a percentage of GMV in quarter two '24 with a 0.9 percentage improvement on a yearly basis, excluding the one-off item last year. This improvement was driven by a 2.6% rise in gross contribution margin, partially offset by a 0.9 percentage rise in shipping and packaging expenses, a 0.5% rise in advertising expenses and a 0.4% rise in payroll and outsourced staff expenses. The increase in shipping and packaging expenses as a percentage of GMV was mainly driven by higher order volume on our platform and rising volume of HepsiJet's third-party business. Rise in delivery fees per unit outpacing the average inflation in quarter two '24 compared to quarter two '23 also had an impact. Next, let's have a look at our cash flow dynamics. In quarter two '24, cash used in operations improved by TRY503 million compared to a year ago. This improvement resulted from TRY121 million increase in EBITDA, TRY448 million decrease in realized FX losses, TRY73 million increase in the change in operating monetary gain against TRY107 million decrease in the change in net working capital and the TRY32 million decrease in other non-cash items. With TRY407 million in CapEx, our free cash flow was around negative TRY645 million in quarter two 2024. Considering the first six months, we delivered the highest first half free cash flow since our IPO. We can move on to the next slide. And I would like to leave you with the following takeaways from today's presentation. Despite quarter two's continued macroeconomic headwind, we achieved real GMV growth on a year-on-year basis, contributing to 21.6% growth in the first half. Building on our strategic priorities, we recorded the highest gross contribution margins since our IPO at 12% in quarter two '24. The uptrend in EBITDA continued in step with our sustained cost optimization efforts reaching 1.1% of GMV in quarter two '24. Our controlled cash management enabled us to record TRY472 million free cash flow in the first half of 2024, which marks the highest first half since IPO. As we reflect good results in the first half of the year, we are committed to growing sustainably and profitably going forward. Thank you for listening. We can now open the line for questions. Operator: 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. Helin Celikbilek: Thanks, operator. The first question is, your GMV guidance implies a bigger premium to inflation in Q3 than in Q2. What's driving that? Nilhan Gokcetekin: 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. Helin Celikbilek: The second question is, what was the impact of the second quarter holidays on GMV? Seckin Koseoglu: We would probably have roughly an additional 6% real growth on top of our existing growth, bringing our real growth to 10%. Helin Celikbilek: 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? Seckin Koseoglu: 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. Helin Celikbilek: Thank you. Fourth question is shifting GMV towards Marketplace, 3P. Is that a seasonal shift or is it a strategy? Nilhan Gokcetekin: 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. Helin Celikbilek: 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? Seckin Koseoglu: 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. Operator: 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. Seckin Koseoglu: 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. Operator: Our next webcast question is from Maksim Nekrasov with Citi. Thank you for the presentation. Can you comment on the consumer environment in Turkey? Nilhan Gokcetekin: 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 (NASDAQ:AAPL). 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. Operator: Our next webcast question comes from Hanzade Kilickiran with JPMorgan (NYSE:JPM). 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). Seckin Koseoglu: 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. Operator: 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? Nilhan Gokcetekin: 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. Operator: 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? Nilhan Gokcetekin: 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. Operator: 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? Seckin Koseoglu: 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. Operator: 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. Seckin Koseoglu: 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. Operator: 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. Nilhan Gokcetekin: Thank you so much for listening to us. We appreciate your time and questions. Thank you. Operator: Ladies and gentlemen, the conference is now concluded, and you may disconnect your telephone. Thank you for calling, and have a good afternoon.

D-Market Elektronik Hizmetler ve Ticaret A.S. (HEPS) Q2 2024 Earnings Call Transcript

Helin Celikbilek - IR, Director Nilhan Gokcetekin - CEO Seckin Koseoglu - CFO 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. Helin Celikbilek 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. 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. These are offered by an active merchant base of around 101,000. Now let me provide a snapshot of the quarterly progress on our four strategic priorities. First, let's look into our loyalty program, which is our key to win with loyalty strategy. The programs rise to 3 million numbers is a testament to the attractiveness of the program's value proposition. Program has an NPS of 84, which is the highest among loyalty program in Turkish e-commerce, reflects the trust in appreciation of its members. Premium members tend to prefer Hepsiburada as their go-to shopping platform. We observed that they generate 36% higher frequency after joining the program. This strongly contributes to overall order growth. Our local streaming partner, BluTV was acquired by Warner Bros Discovery in December '23. Accordingly, a broad range of best international service and shows from Warner Bros will soon be available as part of the premium program benefits, enriching the exclusive experience enjoyed by these members. We remain dedicated to retaining satisfied customers while welcoming new ones into the fall. Next slide, please. Moving on to other strategic priority, which is differentiation with our superior delivery services. Central to achieving this is our HepsiJet continued penetration on our platform. HepsiJet, which is our last mile services company delivered 73% of total parcels dispatched during the quarter. This is up by 6.8 percentage points year-on-year. Its volume expansion in oversized parcel delivery is also very impressive. In Q2, 68% of all oversized parcels on Hepsiburada were delivered by HepsiJet XLarge. This marked an 8.9 percentage point year-on-year increase. HepsiJet high NPS confirms its commitment to differentiation with service excellence, a commitment fueled by flexible and convenient delivery options. Being a new generation logistics company committed to sustainable practices in a pilot project, HepsiJet added seven to one electric vans to its fleet in the quarter. With the target to increase this number to 50 by year-end, this initiative marks as more steps towards addressing the bigger environmental issue. In this context, as the first e-commerce player to publish a sustainability report in Turkiye, I'm delighted to announce that we recently published our report for 2023. Our third priority is capitalizing on our clear differentiation with affordability and lending solutions. Hepsipay's comprehensive suite of payments and lending services gained further significance in a continued environment of tight liquidity debt. Our affordability solutions, which include our in-house Buy Now Pay Later solutions, consumer finance loans and shopping loans from partner banks have gained more traction. The quarterly share of these affordability solutions in GMV rose to 6.1% from 4.9% a quarter ago, which is around 20% increase. The consumer tendency to use general purpose loans for shopping on our platform has also increased. As such, including the impact of those spent in the platform, GMV penetration of our overall affordability solutions rose to 8.1% in Q2 from 5.8% a quarter ago. Hepsiburada is the largest non-bank BNPL solution provider in Turkish market. Our BNPL volume more than tripled year-on-year during Q2. Our overall BNPL and shopping loans were utilized nearly 1.3 million orders over the last 12 months. We diligently manage credit risk in our BNPL with a cost of risk around 2.6% in August. On a broader scale, over the last 12 months, total lending volume on our platform reached TRY11.2 billion with an incremental of around TRY3 billion over the last quarter. Nearly half of this volume was issued through our partner banks. Shopping related credit receivables create limited balance sheet loss with average durations of 3.7 and 4.2 months of BNPL and consumer finance loan solutions, respectively. We aim to grow this business line profitably by continuing to leverage Hepsipay solutions and those of our partner banks verified growing our e-commerce business nicely. Aside from affordability aspect, Hepsipay scaled upon the payment front. Its wallet pay gross to $16.7 million, covering 19.5 million store cards by end of August. Hepsipay further enhance customer experience with the recently launched auto top-up feature in the wallet. Hepsipay remains committed to becoming Turkiye's primary digital wallet in both physical and online retail. Our fourth key priority is offering our strongest muscles to off platform customers and let me start with HepsiJet. With over 9 million parcels delivered HepsiJet doubled its external customer volume year-on-year. Accordingly, in Q2 '24, its off-platform share rose by 11.1 percentage points year-on-year to nearly 36% of its total, thanks to doubling its volume with many trusting customers of platform. As an appealing logistics partner, HepsiJet continues to expand its customer portfolio through several key accounts. Next is Hepsipay's one click checkout solution, Pay with Hepsipay. We continue to expand this convenience solution to many other retailers. Hepsipay is now integrated with 50 leading retailers of Turkiye having almost tripled its total payment volume in Q2 compared to Q1. Hepsipay aims to continue winning key accounts by also launching its proposition in the SME market. And now, I will end my part with our guidance for Q3. For the second half of the year, we remain cautiously optimistic about market conditions and yet, we are truly confident in our ability to execute on our strategic initiatives for the period ahead. Accordingly, in the third quarter, we expect to deliver GMV growth within the range of 70% to 75% year-on-year. We continued our prudent cost management in place, and we foresee an EBITDA of around 2.2% of GMV. These figures I've referred to are in adjusted (ph) for inflation. With this, I thank you for listening, and I'll leave the floor to Seckin, our CFO to provide further insights into our strong financial performance. Seckin Koseoglu 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 point shift towards non-electronics, which is in line with our broader strategy. Change in market dynamics with a slowdown in electronics market also had an impact in this shift. Let's have a look at our revenue and gross contribution dynamics in the next slide. While quarter two revenue growth was nearly flat, our revenues grew by 20.5% in the first half. Flat revenue performance in quarter two '24 was mainly due to a 13% decrease in our 1P revenue compared to quarter two '23 offset by the strong growth in our delivery service revenue and other revenue, including advertising services revenue and loyalty program revenue. The 13% decline in 1P revenue was mainly due to the 4 percentage point shift in GMV mix towards 3P. Our strategic priority to expand our services offered to third parties and scaling our advertising services, as well as our loyalty program were instrumental in this quarter's gross contribution margin expansion by 2.6 percentage points. Let's move on to our EBITDA performance on the next slide. We recorded 1.1% EBITDA as a percentage of GMV in quarter two '24 with a 0.9 percentage improvement on a yearly basis, excluding the one-off item last year. This improvement was driven by a 2.6% rise in gross contribution margin, partially offset by a 0.9 percentage rise in shipping and packaging expenses, a 0.5% rise in advertising expenses and a 0.4% rise in payroll and outsourced staff expenses. The increase in shipping and packaging expenses as a percentage of GMV was mainly driven by higher order volume on our platform and rising volume of HepsiJet's third-party business. Rise in delivery fees per unit outpacing the average inflation in quarter two '24 compared to quarter two '23 also had an impact. Next, let's have a look at our cash flow dynamics. In quarter two '24, cash used in operations improved by TRY503 million compared to a year ago. This improvement resulted from TRY121 million increase in EBITDA, TRY448 million decrease in realized FX losses, TRY73 million increase in the change in operating monetary gain against TRY107 million decrease in the change in net working capital and the TRY32 million decrease in other non-cash items. With TRY407 million in CapEx, our free cash flow was around negative TRY645 million in quarter two 2024. Considering the first six months, we delivered the highest first half free cash flow since our IPO. We can move on to the next slide. And I would like to leave you with the following takeaways from today's presentation. Despite quarter two's continued macroeconomic headwind, we achieved real GMV growth on a year-on-year basis, contributing to 21.6% growth in the first half. Building on our strategic priorities, we recorded the highest gross contribution margins since our IPO at 12% in quarter two '24. The uptrend in EBITDA continued in step with our sustained cost optimization efforts reaching 1.1% of GMV in quarter two '24. Our controlled cash management enabled us to record TRY472 million free cash flow in the first half of 2024, which marks the highest first half since IPO. As we reflect good results in the first half of the year, we are committed to growing sustainably and profitably going forward. Thank you for listening. We can now open the line for questions. 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. Helin Celikbilek Thanks, operator. The first question is, your GMV guidance implies a bigger premium to inflation in Q3 than in Q2. What's driving that? Nilhan Gokcetekin 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. Helin Celikbilek The second question is, what was the impact of the second quarter holidays on GMV? Seckin Koseoglu We would probably have roughly an additional 6% real growth on top of our existing growth, bringing our real growth to 10%. Helin Celikbilek 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? Seckin Koseoglu 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. Helin Celikbilek Thank you. Fourth question is shifting GMV towards Marketplace, 3P. Is that a seasonal shift or is it a strategy? Nilhan Gokcetekin 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. Helin Celikbilek 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? Seckin Koseoglu 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. 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. Seckin Koseoglu 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? Nilhan Gokcetekin 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). Seckin Koseoglu 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? Nilhan Gokcetekin 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? Nilhan Gokcetekin 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? Seckin Koseoglu 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. Seckin Koseoglu 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. Nilhan Gokcetekin 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.