D-Market Electronic Services & Trading (Hepsiburada) — FY 2022 Form 20-F
Reporting period: Fiscal year ended December 31, 2022. This is an annual report, not a Q4-only filing. Unless stated otherwise, financial amounts below are in Turkish lira (TRY) and the comparative financial statements have been restated for inflation under IAS 29 to purchasing power at December 31, 2022. The financial statements are IFRS, not U.S. GAAP.
Business context and operating performance
Hepsiburada operates a Turkish e-commerce platform combining first-party direct sales and a third-party marketplace, alongside delivery, fulfillment and payment services. Almost all revenue was generated in Türkiye. Marketplace transactions represented 66.7% of GMV in 2022.
| Metric | FY 2022 | FY 2021 | Change |
|---|---|---|---|
| Revenue | TRY 16.07bn | TRY 15.05bn | +6.8% |
| GMV | TRY 53.9bn | TRY 52.0bn | +3.8% |
| Orders | 80.4m | 53.5m | +50.4% |
| Active customers | 12.2m | 11.3m | +8.0% |
| Order frequency | 6.6 | 4.7 | Increased |
| Gross contribution | TRY 3.49bn | TRY 3.25bn | +7.5% |
| Gross contribution margin as % of GMV | 6.5% | 6.3% | +0.2 percentage points |
| EBITDA | TRY (2.59)bn | TRY (3.73)bn | Loss narrowed |
| Net loss | TRY (2.91)bn | TRY (2.02)bn | Loss widened 43.9% |
| Operating cash flow | TRY 429m | TRY (28.8)m | Improved |
| Free cash flow | TRY (416)m | TRY (418)m | Still negative |
Revenue mix in 2022 was TRY 12.58bn from direct sales, TRY 1.70bn from marketplace revenues, TRY 1.49bn from delivery services and TRY 296m from other services. Values are inflation-restated; nominal market inflation was high, so reported growth should not be read as equivalent real growth.
Profitability, cash flow and liquidity
- Operating loss improved to TRY 3.10bn from TRY 4.11bn, helped by lower advertising and shipping costs. Net loss nevertheless increased, mainly because financial income fell by TRY 2.11bn, including a substantial reduction in foreign-exchange gains.
- Advertising expense declined 40.2% to TRY 1.77bn; shipping and packaging expense declined 16.0% to TRY 1.60bn. Payroll and outsourced staff expense rose 12.8% to TRY 1.79bn, while other operating expense rose 44.1% to TRY 826m.
- Capital expenditure was TRY 860m, up from TRY 414m. Operating cash flow less capital expenditure resulted in negative free cash flow of TRY 416m.
- Year-end cash and cash equivalents were TRY 5.27bn and financial investments TRY 17.6m, compared with TRY 6.26bn and TRY 1.90bn, respectively, in 2021. About 54% of cash and cash equivalents was held in U.S. dollars.
- Bank borrowings were TRY 24m, while lease liabilities were TRY 262m. The company reported net cash of TRY 4.98bn after deducting cash from bank borrowings and lease liabilities. Trade payables and merchant payables were TRY 5.89bn; these are significant operating liabilities, not bank debt.
- Net working capital was negative TRY 4.48bn, versus negative TRY 4.06bn in 2021, reflecting the operating model and the balance of payables, inventory and receivables. Uncommitted bank credit limits totaled TRY 2.64bn, but availability and terms may be affected by banking restrictions and loan covenants.
Material changes versus prior year
- Revenue and GMV rose modestly in restated TRY, while orders grew sharply and average order value fell 31%. Management attributed the lower average order value to customers trading down, delayed price pass-through, a shift toward lower-priced categories and growth in digital goods.
- Marketplace revenue rose 40.8%, reflecting fewer customer discounts, despite the lower average order value. Direct-sales revenue increased 3.2%; delivery revenue was essentially flat.
- EBITDA loss improved by TRY 1.14bn, and EBITDA as a percentage of GMV improved to negative 4.8% from negative 7.2%. Management cited lower advertising and shipping costs and a slight improvement in gross contribution margin.
- Net loss widened despite improved operating loss: financial income fell to TRY 1.91bn from TRY 4.02bn, largely because foreign-exchange gains were lower. Operating cash flow turned positive, but higher capital expenditure kept free cash flow negative.
- Hepsiburada acquired consumer finance company Doruk Finansman in February 2022, subsequently renamed Hepsifinans. The company also launched Hepsiburada Premium in July 2022 and continued developing its BNPL and wallet services.
Outlook, commentary and principal risks
- Management’s 2023 priorities are customer loyalty, affordability and lending options, better service and delivery, profitability through focus on core operations and expense discipline, and offering payment, lending and delivery services to third parties. The filing does not provide a numeric revenue, EBITDA or profitability forecast.
- Management expects 2023 capital expenditure to rise in TRY terms, citing inflation, currency depreciation, technology investment and expansion of strategic assets. It anticipates Hepsipay will represent about 16% of capital expenditure and HepsiJet about 8%.
- The company expects near-term losses to continue. Management states that available cash and expected operating cash flow should cover obligations in the short term, while noting it cannot reasonably quantify long-term funding needs amid macroeconomic uncertainty.
- Türkiye’s 64.3% CPI inflation in 2022 drove IAS 29 reporting, which reduces comparability with unadjusted historical accounts. The company has no currency hedging and disclosed that a 10% stronger or weaker U.S. dollar would have changed 2022 loss before tax by approximately TRY 175m in the opposite direction.
- February 2023 earthquakes occurred after the reporting date. Eight of HepsiJet’s 192 cross-docks were affected; about 1,950 merchants in affected areas temporarily suspended stores. Demand and orders fell temporarily, then traffic and orders recovered to near pre-earthquake levels by mid-March, according to management.
- Material litigation and regulatory items include a proposed $13.9m settlement of U.S. IPO class actions, subject to final court approval; a TRY 95.6m provision for a Competition Authority investigation; and a TRY 23.7m provision for a Turkish Capital Markets Board fee that the company is appealing. The company also paid TRY 26.5m after an inspection-related competition fine.
- After year-end, the Turkish data-protection authority imposed a TRY 500,000 fine; five other data-protection investigations remained pending. The Central Bank also identified seven payment-services IT compliance instances and requested a remediation plan; possible fines were stated as TRY 129,000 to TRY 2.913m per breach, with no provision recorded.
- Management concluded internal control over financial reporting and disclosure controls were ineffective at December 31, 2022 due to a material weakness in IT general controls, including access rights, change management and segregation of duties. Management reported remediation efforts underway. The auditor issued an unqualified opinion on the financial statements but did not attest to internal-control effectiveness.
- Other risks include intense e-commerce and fintech competition, execution and credit risk in BNPL/lending, cybersecurity and privacy exposure, evolving Turkish e-commerce and financial-services regulation, and potential impacts from currency volatility, political and economic conditions, and earthquake risk. The company does not anticipate dividends.
Most important facts for investors to verify
- Confirm the IAS 29 inflation restatement basis and use like-for-like restated figures when assessing growth, margins and year-over-year trends.
- Track whether operating-cost reductions translate into sustained improvement in EBITDA and whether the company can reduce negative free cash flow while funding planned investment.
- Assess cash composition, usable bank credit lines, the seasonal working-capital cycle and the effect of supplier and merchant payment terms on liquidity.
- Monitor the final outcomes and cash costs of the class-action settlement, competition matters, capital-markets fee case, data-protection investigations and Central Bank findings.
- Verify progress on IT-control remediation and whether subsequent reporting demonstrates that the material weakness has been fully addressed.
- Evaluate whether Premium, Hepsipay, Hepsifinans and external delivery/payment services generate profitable growth, including credit losses and regulatory compliance costs.
- Consider the sensitivity of customer demand, costs and reported results to Turkish inflation, TRY/USD movements, and any continuing earthquake-related disruption.