20-F: Hepsiburada Navigates Inflation, Expands Financial Services in 2023

Hepsiburada reports a net income of TRY 75.5 million in 2023, driven by strategic growth and monetary gains, while expanding its financial services and navigating a hyperinflationary environment in Trkiye.

Summary

• Hepsiburada generated a net income of TRY 75.5 million in 2023, a significant turnaround from previous years' losses.
• The company's revenue increased by 34.3% to TRY 35.6 billion in 2023.
• Gross Merchandise Value (GMV) rose by 31.1% to TRY 116.5 billion.
• Active Customers numbered 11.9 million as of December 31, 2023.
• The share of Marketplace GMV accounted for approximately 67% of the total GMV.
• The company is actively expanding its financial services through Hepsipay and Hepsifinans, including Buy-Now-Pay-Later (BNPL) solutions and consumer finance loans.
• Hepsiburada operates in a hyperinflationary environment in Trkiye, requiring adjustments to financial reporting under IAS 29.
• The company is subject to ongoing investigations by the Turkish Competition Authority.
• A cybersecurity incident in February 2024 led to unauthorized access to some merchant and customer data.
• Hepsiburada is taking remedial actions to address identified material weaknesses in its internal control over financial reporting.

Sentiment

Score: 7

Explanation: The document presents a mixed picture. While Hepsiburada achieved profitability and revenue growth, it faces challenges such as a hyperinflationary environment, ongoing investigations, and a cybersecurity incident. The company is taking steps to address these challenges, but their impact remains uncertain.

Positives

• Hepsiburada achieved net income in 2023 after previous years' losses.
• Revenue and GMV showed significant growth.
• The company is expanding its financial services offerings.
• Hepsiburada is taking steps to remediate material weaknesses in internal controls.

Negatives

• Active Customers decreased slightly from 12.2 million in 2022 to 11.9 million in 2023.
• The company operates in a hyperinflationary environment, which can impact profitability.
• Hepsiburada is subject to ongoing investigations by the Turkish Competition Authority.
• A cybersecurity incident in February 2024 led to unauthorized access to some merchant and customer data.
• The company has identified material weaknesses in its internal control over financial reporting.

Risks

• The hyperinflationary environment in Trkiye could negatively affect the business.
• Ongoing investigations by the Turkish Competition Authority could result in fines and reputational damage.
• A cybersecurity incident could cause material delays or interruptions in information systems and damage the brand.
• Material weaknesses in internal control over financial reporting could lead to inaccurate reporting and a decline in investor confidence.
• Political and economic instability in Trkiye could adversely affect the business.

Future Outlook

Hepsiburada aims to build on its strategic priorities in 2024, focusing on nurturing loyalty, capitalizing on differentiation, promoting profitability, and offering payment, lending, and last-mile services to third parties.

Industry Context

The Turkish e-commerce market is growing rapidly, driven by increasing internet penetration and high credit card usage. Hepsiburada faces competition from other e-commerce companies, offline retailers, and new entrants in the financial services sector.

Comparison to Industry Standards

• Hepsiburada competes with Trendyol, Amazon, and N11 in the Turkish e-commerce market.
• The company's brand awareness is high, with a 100% aided brand awareness score.
• Hepsiburada's logistics network enables fast delivery, with an on-time delivery performance of 94.7% in 2023.
• The company is expanding its financial services to compete with established players in the fintech space.

Management Changes

Legal Proceedings

• The company is subject to ongoing investigations by the Turkish Competition Authority regarding anti-competitive agreements and automatic pricing mechanisms.
• The company was subject to six investigations conducted by the Personal Data Protection Authority (PDP Authority) in 2022 and 2023 and is likely to be subject to such investigations in the future.

Related Party Transactions

• The company engaged in sales to companies controlled by members of the Doan family of TRY 35.0 million for the year ended December 31, 2023, and purchases from companies controlled by members of the Doan family of TRY 266.0 million for the year ended December 31, 2023.
• The company purchased 4,615,384 Class B ordinary shares from TurkCommerce against payment of $ 5,732,306.93.

Stakeholder Impact

• Shareholders may experience fluctuations in the value of their ADSs due to market volatility and other factors.
• Employees may be affected by changes in personnel costs and organizational structure.
• Customers may benefit from the company's focus on improving the customer experience and expanding product offerings.
• Merchants may benefit from the company's efforts to provide end-to-end solutions and increase their access to customers.

Next Steps

• Continue to implement strategic priorities focused on loyalty, differentiation, profitability, and third-party services.
• Remediate identified material weaknesses in internal control over financial reporting.
• Monitor and respond to ongoing investigations by the Turkish Competition Authority.
• Strengthen cybersecurity measures to prevent future incidents.
• Monitor and adapt to the evolving regulatory environment in Trkiye.

Key Dates

Keywords

Hepsiburada, financial results, e-commerce, Turkey, GMV, revenue, profitability, hyperinflation, financial services, Hepsipay, Hepsifinans, cybersecurity, internal controls