Marti Co-Founder and President Cankut Durgun is back with Dr. Christianson - MARTI TECHNOLOGIES INC

Hey everybody, it's Dr. Paul Christensen here with Disruptor Investing, and today I'm joined by John Coote Durgan, who's the co-founder and president of Marty Technologies, ticker symbol MRT. John Coot, how are you doing today? I'm doing very well, Paul. Great to be back. Good, yeah. It's afternoon over there for you, right, in Turkey, yeah? That's right. It is 3.30 in the afternoon. Yeah, it is morning over here. We are just getting started here on the east coast of the U.S. Great. It was great catching up with you again. I have been tracking your progress. It seems like things have been going well since we last spoke. Let's cover a little bit of it, right? I see you have beat your September rider and driver targets. They came about a month early, is that correct? That's right. Yes. We have targets that we set for both riders and drivers on a quarterly basis. And we've beat all the quarterly targets that We've set in the past, but this time we were fortunate enough that we beat them about a month early. Yeah. And those rider and driver numbers are big. So 5.65 million riders and the 630,000 drivers are the numbers that I'm pulling. And that driver number to me is just a huge number. I think of 630,000 drivers, which is just huge in my mind whenever I see it. But today, I kind of want to go into a deeper level with you since this is our second interview. But before we do that, maybe we could take a step back for a second. And maybe can you just cover, tell us a little bit more about Marty and what it is for viewers who might be just, you know, introduced to the company for the first time or hearing about it? Of course. Yeah, we're the leading urban mobility app in Türkiye. We offer multiple services. We have a ride-hailing marketplace that matches riders with car, motorcycle, and taxi drivers. We also have two-wheeled electric vehicles on our platform, so e-bikes, e-scooters, and e-mopeds for rental. and then we also have a recently launched parcel delivery service and we are you know the number one mobility app across both ios and android stores in turkey we have over 8.3 million consumers to date and we're approaching 200 million trips completed wow we're operating in 30 cities across the country. Just for point of comparison, like Turkey is a country of about 80 plus cities. We're operating in the 30 largest ones, which collectively represent about 85% of GDP. About 90% of our trips right now are ride-hailing trips, but we actually got our start in the micro-mobility sector. So we launched the business in 2019. We built the largest micro mobility fleet in the country which gave us the brand the app on millions of phones as well as the operational on the field know-how and leveraging that in 2022 is when we launched the ride-hailing service but right now we are like most ride-hailing firms and urban mobility firms globally we are primarily a ride-healing first company complemented by two-wheeled electric vehicles and deliveries yeah so for if you're a u.s consumer listening to this it's kind of like the uber of turkey right um as you're looking at a little bit different start and how they got going and if you go back to our initial interview we talked about that start and and how differentiated it was starting out in micro mobility and then going into the full ride hailing um so let's kind of look at the the ride-hailing marketplace and uh turkey to today you know what does that look like in terms of riders drivers and cities so you talked about 30 cities correct that's right so we're in 30 cities which represent 85 of the country's gdp we have on the ride hailing marketplace side we have served 4.9 million riders so far and we've served that with a driver fleet of 584 000 registered drivers and what's important to note is that you know we are fortunate to operate in a country where there's a very very large city istanbul which is over 20 million people unofficially and it sort of serves as the beachhead for uh all the substance growth that we've achieved it's also a city with big uh traffic issues uh it's depending on the index that you look at right it's sometimes it's number one it's usually in the top five most congested cities globally and therefore the need for tech-enabled urban mobility solutions is pretty intense i for example live when there's no traffic i live five minutes away from uh from the office but when there is traffic that can turn into like a 30-minute trip just by way of comparison but this is not just a story about istanbul we got our start in istanbul but if you look at the turkish market so ankara the capital has about 5 million people. Antalya on the Mediterranean coast has about 3 million people, Izmir on the Aegean coast has About 4 million people and these are all sort of massive cities in and of their own right and even in the 30 cities that we expanded to right so beyond the four that I mentioned so far there's also cities which you probably most of our viewers probably haven't heard of right so there's Bursa for example there's Koje there's Konya there's Kayseri, this is Eskişehir. These are all cities with a population of sort of one to three million people. And there's a long tail of such large cities, which is the reason why we're actually seeing most of our growth outside of Istanbul right now. And just to put some numbers on that. So the share of our riders that are outside of İstanbul has increased from 35% last year to 46% currently. And the share of our drivers outside of Istanbul has increased from 26% a year ago to 36% currently. At SteadyState, we anticipate about a third of the business coming from Istanbul and over two-thirds coming from other cities across the country. Okay, so let's touch on that a little bit. Istanbul is obviously a huge city, right? It's one of the largest cities in the world if you're looking at 20 million people. uh congestion is a big thing right we talked about that previously and it's just a big it's big city and if you look at i had to go and look at some of the videos on youtube just how congested it is it's very i can see it's difficult to get around um so let's talk about the growth phases right because your your riders outside of istanbul are increasing right 35 46 of the base um is the next phase about adding more cities or going deeper into the ones you have? Or what are you kind of thinking now that you've hit about what, 85% of the GDP of Turkey? That's right. Because we've reached 85%, we serve 85% of the country. Each additional city from here on out, it adds a smaller slice of the economy. So the greater opportunity for us, while we will be expanding into more cities, the greater opportunities just increasing our penetration amongst our existing cities. And that increased penetration is going to take a few forms. So first of all, there is even in Istanbul, which is our most, you know, our earliest city where we launched and the most deeply penetrated city, we still have significant upside remaining. So I would guess that if you look at our share of total ride hailing trips in the city, which includes not just private car and motorcycle trips, but also taxi trips, I would estimate that we're probably only like 20% penetrated. So there's significant upside in our most advanced city, let's say. We also have the ability to help get our remaining cities to a level of maturity and a level of engagement similar to Istanbul, right? Given that Istanbul was the first city that we launched, we have even greater upside in growing and ramping up our operations in the other remaining cities some of which we launched just as recently as three four months ago the other element is monetization so right now we monetize in just seven of the 30 cities where we operate and as a baseline right so we launched our operations and Istanbul in late 2022 we We started monetizing Istanbul in late 2024, about two years after we launched. So most of the monetization opportunity, if we assume a similar timeline from launch to monetization in our other cities, where we're currently still very growth focused, most of the modernization is still ahead of us. And then finally, we also have the ability to expand our delivery service penetration. Our delivery services are currently just Istanbul alone, but the growth that we're seeing in istanbul is promising so we're actively considering expanding the delivery services in other cities as well so your story is fascinating right the way that you were able to go from your start which we talked about last time to where you are now and how have you been able to be just take that number one share and like keep old like the ubers and the bolts out like what stops them from walking in now that you've basically proven the market in istanbul because this is a new thing in in you know turkey right you're basically taking the concept that was here in the united states and bringing it there in your opinion what's the how did that happen like how did you do that there's nothing keeping them out in the market right for example uber does operate in the country in turkey but they operate with taxi hailing and delivery services they don't offer private car and motorcycle hailing uh marketplaces but we do know that globally right you'RE familiar for example with uber right because that's the the winner in the u.s market but what many people do not know is that the winner is other large geographies that are sufficient in size to build like a domestic champion is actually a different company pretty much in every country so it's a company called dd in china it's company called yandex and their transportation arm in russia it's grab in southeast Asia, and the list goes on, right? In every sufficiently large domestic market, sufficiently large to create a very large outcome, there is a domestic winner. And the question, therefore, is why do these local companies win? And why, if you look at Türkiye, for example, why are four of the five leading mobility apps operated by local companies, right. And The Reason, we believe is a few fold right first you know this is an operational business we are offering an online customer interface but we're offering it to what is essentially an offline solution and the operational performance you know whether it's driver onboarding whether it is keeping your drivers engaged and behaving properly whether it is the same sort of promoting the same behavior on the rider side there is a deep operational component here which local teams are more successful in performing there's also a regulatory engagement component right this is a transportation business it's the lives of riders and drivers and therefore offering a safe experience and working with regulators in order to build the marketplace we believe is important in our specific case you know our brand even before we entered ride hailing in 2022 we had a brand that was synonymous with mobility so people you know they wouldn't say i'm going to this place they would be saying i'm martin to this right uh and that brand advantage we feel is very important and then finally i think that there's also a cost structure which local companies uh have that gives them an advantage over international companies that have their home base in higher cost structure regions right in turkey for example if you compare the cost of operating in turkey at i would argue similar if not better levels of talent than what's available internationally relative to the cost of operating other markets there is also a cost structure advantage so you're able to operate with higher margins as a local company as well we respect competition right we respect not only uber but all other international firms but we also are confident in our position okay so you're talking about margins here so i kind of want to get into some of the financials now if that's all right with you um so your effective take rate right now is in about the mid-teens versus 30 30 plus for your international peers and most cities including all the new ones aren't monetized yet can you just basically walk us through a roadmap you know when did those levers get pulled? And is there a risk if you start pulling them too fast now? Or how are you thinking about that? Yeah, so if you look at the baseline for when we have monetized is, as I shared in the case of Istanbul, it's two years after our city launch. And what that means is that, you know, because we launched all but the first four cities I mentioned, so Istanbul, Ankara, Antalya and Izmir were launched about three to four years ago, but the remaining 26 cities where we operate were all launched pretty much over the last year. And therefore, we do foresee that we will be monetizing them probably at a similar date post-launch as what we achieved in Istanbul, would be my operating assumption. The way we monetize is a bit different, right? So while international operators they apply a commission model so they take a cut out of every rider fare that is paid to a driver we monetize actually via platform access subscriptions so what we do is we have our riders and our drivers pay a subscription fee in order to access our services and therefore when we say that we have an effective tape great approaching the mid-teens what we mean by that is that is the total value of our platform subscription revenue divided by the total value of the fares exchanging hands on our service we believe that this is an advantageous model because it incentivizes high utilization on both the driver as well as the rider side once you have the subscription package in place you're incentivized to use it more and especially at a growth stage company like ourselves we believe that it's the right model of monetization uh there's of course you know you asked if there's risk to monetizing too fast of course there is uh and that is the reason why we you know do focus on growth for the first two years let's say of launching a city and only once we have the rider experience the driver experience ironed out including sufficient liquidity on either side in order to have post monetization ensure that the rider economics remains attractive so that you know you don't have demand growth slowing and therefore drivers sitting idle and also ensure that driver economics also remains attractive post monetisation because we don't want drivers because of the monetization's impact launching getting off the platform and then harms the rider experience so there would be a risk if we were to monetize too fast but our experience and the focus on growth that we have over the first two years of launching the city i think allows us to phase in monetization when the time is right and that risk is minimized yeah and you've got that playbook from other cities right so you can just kind of replicate that okay um so you've hit a 15 adjusted ebitda margin in less than four years after launching your ride hailing service um some of the peers you know that have been around for 15 years scale around 20 where do you think marty's ceiling realistically sits yep so we announced a 15 adjusted ebitda margin in the second quarter we're going to be announcing our third quarter results in november so be on the lookout for those as well where we'll be able to see the continued evolution of our adjusted EBITDA margin as well as the main driver of the adjusted EBITDOM margin is the gross margin so our gross margin was 77 percent in the second quarter that number is it's actually close to double what it is for international operators operating at steady state which operate with like 40 45 gross margins and the reason for that is twofold you know our gross margin is structurally higher because of two reasons one is we're operating in turkey where we have a lower uh cost structure if you compare minimum wages in turkey to those in other international geographies we do have a low cost operating structure and therefore in functions like driver onboarding our call center our customer service teams which go into the cost of revenues and therefore the gross margin figure we have a big advantage there the second reason is that insurance premiums in turkey are significantly lower than for international locations so many ride hailing firms globally they pay up to double digit percentage points if their revenue goes towards insurance and those premiums because the sector is more nascent because the liability system is different uh we have lower insurance premiums uh yeah and that gives us that gross margin advantage i believe that that structural gross margin advantage will eventually uh flow straight through to the bottom line right there's no reason why it shouldn't flow through to ebitda it is also the reason why i believe even though we are operating with four years of scale in contrast to 10 to 15 years of skill for other ride hailing operators it's the reason why we already have the attractive adjusted EBITDA margins that we have now. For this year, for 2026, as a reminder, our forecast is for $85 million of net revenue. And that number, net revenue has been doubling, more than doubling year over year for two, three years now. And therefore, if we assume that the same takes place in 2027, and we assume that you retain you know uh 77 roughly 77 gross margin yeah and you also look at the fixed cost side right on the fixed-cost side so our engineering teams our gna uh those are for over a year now we haven't actually been increasing headcount we've been leveraging ai in order to increase the output of those departments in the absence of headcount expansion so if headcount doesn't increase and the fixed cost structure therefore doesn't shift meaningfully in 2026 in 2027 sorry you can do the math for sort of where the the uh ebitda figures will be in 2027. yeah and that gross margin we talked about last time and being that high was pretty impressive and i'm glad you were able to elaborate just basically how you're able to achieve that um but net so net loss right now is still at 12.5 million in q2 which i looked at and that appeared to be mostly financing costs from what I saw. What are the terms of maturity on that debt? And now that you're basically adjusted even up positive, is there a path to basically refinancing that? Or is that something that you are looking at? That's right. So of the $12.5 million net loss in the second quarter, $8.3 million of that was a one-time non-cash. It was a loss on debt debt extinguishment from amending our convertible notes so excluding that one-time non-cash contribution the net loss was actually 4.2 million dollars and that same number was nine it was a 9.2 billion dollar net loss a year ago so the underlying net loss like is more than 50 percent lower now. The convertible notes, the majority are 15 percent cash plus pick convertible notes. So it's 10 percent cash and 5 percent pick due July 2028. The vast majority, so it's $80 million plus of the convertible nodes are with that structure. And they carry a $1.65 dollar exercise price so at the current share price those convertible notes are quasi equity is the way to think about it they're in the money there's a smaller share of convertible notes uh which is about 20 million dollars or so that are 12 and a half percent notes those are pick only no cash and those mature in april of 2029 uh and those carry an exercise price of 2.47 dollars so right now you know out of the money as of the current share price um but the maturity of the notes is effectively you know the earliest of them is sort of close to two years uh away from now and if you look at the financials of the company at the moment when we secured especially the july 2028 notes right those were a five-year maturity those were initiated in july 2023 together with the listing at the listing date we were a company with revenue was about a fourth of what we forecast for this year and we were uh heftily loss making right yeah so now that we have a business that has you know revenue growing with triple digits on an annual basis we've achieved positive adjusted EBITDA we continue to have you know close to 80% gross margins uh that is a different financial profile than a business that was you know the business we took public in july 2023 and reducing the cost of capital it's part of my uh my job and uh we will announce sort of financing actions uh when they materialize okay that's good to know yeah i mean just some of your numbers and you know i'm a person who watches for inflections and that's kind of how i invest so seeing those things is exciting to me. Okay, so if we can, let's talk about this autonomous aspect of the business for a second. So you kind of cited Uber and Waymo's playbook for the Tensor partnership. And for those of you who aren't aware, I'm already partnered with Tensor to deploy autonomous vehicles, which is, you know, becoming a big thing here in the United States as well. In that Marty and Tensor structure, can you tell me basically who owns the customer? And And can you share how the economics are going to split with that? The customer is our customer, right? What makes us attractive for autonomous vehicle technology providers is that we solve their cold start problem, right. They can immediately serve the over 8 million consumers that we have on our platform. so the riders they continue to hail you know rides through the mart app so we provide the demand we provide a brand the platform we also provide the operational layer right not all ride hailing firms have a micro mobility arm or experience in managing a large micro mobility fleet but we do and we solve charging and parking and maintenance for our fleet of two-wheeled electric vehicles doing the same for uh four-wheeled sort of autonomous vehicles it's slightly different but it's also largely the same right whether it's parking locations charging infrastructure repair and maintenance capabilities and the network to perform that repair and maintenance what we look for in our technology partners is just to provide the autonomy and tensor is the first partnership that we announce we're also in very advanced discussions with two other autonomous vehicle providers the way we see the eventual marketplace is one where we work in a supplier agnostic fashion with the best suppliers right because we are the owner of the demand and what we're doing is we're building what we call the turkia autonomous vehicle alliance so an alliance of autonomous vehicle providers that are going to be partnering with us for the demand and the operational capabilities in order to scale autonomous vehicles in turkey the specific economics is a function of the deployments the deployment locations the specific commercial terms that we reach with uh with each partner okay but it's not exclusive right so you just said two additional autonomous vehicle companies that's right uh these are these are non-exclusive which is if you look globally right what you'll see is that uh there's a few companies for example tesla is looking to provide both the autonomous vehicle technology as well as the demand but if you looked at many such partnerships that ride hailing first players have built in different geographies uh it's on a non-inclusive basis where they work with multiple technology providers to deliver the best you know autonomous vehicle experience to their the rider base that they have okay so you're kind of okay good um so we talked about a symbol traffic right it's kind of legendary and if i looked at some of the youtube videos and it's very congested how did how are these autonomous vehicles going to handle like one of the densest and most chaotic driving environments on the planet have you guys started these already or are they are they going or have you have you been to have you been to china i've never i'm my father's been to china but i have not been to china but i've been in some pretty congested traffic and just looking at that traffic those drivers seem very aggressive they seem good drivers but they were it was a very like go search online to see what the traffic's like in istanbul yeah so china is pretty dense uh and uh chaotic uh from a perspective as well especially especially for somebody who's used to sort of driving in the u.s right so yeah and these vehicles they already operate autonomous vehicles already operate in china and i would argue that actually autonomous vehicles are best suited to dense urban environments which they happen to also be chaotic in general you're right but they're best suited for these dense urban cities and the reason is because autonomous vehicles they're uh relatively high right now you know declining but a relatively still high upfront fixed capital investment and you need to recoup that investment and the way you recoup that investment is with demand which comes from the density provided by a large urban city and therefore I think Turkey is actually in a Istanbul as well as also in a great position for for autonomous vehicles the other advantage that Turkey has is that we're a serious vehicle manufacturing hub so if you look at many of the vehicles that are sold in the European market, a lot of them are produced actually in Turkey and specifically in cities like Bursa, which is like two, three hours outside of Istanbul. It's like an automotive manufacturing hub. The third advantage we have, which has a recently developed advantage, is that our state is looking very favorably on applications of artificial intelligence, of which autonomous vehicles are probably the most readily commercializable application of physical AI in the short term. And in a draft sort of put together by our Ministry of Industry and Technology and signed into force by our President Erdogan, we do have a national AI action plan, which covers the pilot requirements the scaling requirements the sandbox zones for autonomous vehicles and we will be we have not started yet in response to your question but we are actively working on in line with that framework and in line for in line with the regulatory requirements that are necessary to ensure that the pilots are safe and successful uh we are working to deploy in that timeline the reason why we need to focus on safety and have this coordinated approach is because what matters is not you know being the first to deploy a few vehicles what matters as being the first to operate i believe there's going to be you know tens of thousands if not a hundred thousand plus autonomous vehicles across turkey in steady state and to get there you need to ensure that safety comes first and that you work with the regulator so that you get your first to tens of thousands of vehicles rather than first to a few but then you might not be able to scale as fast as you'd like if you go too fast early on right okay that's good to know i didn't know about the the car manufacturing and the advantage that you had there either that you always get some new insights whenever you do these interviews so that that's good okay so talking about you know the the government the court system so let's talk a little bit about the istanbul commercial court um in june they ruled that ride hailing is unfair competition right then they refused to shut down the app um what does that ruling actually change for driver pickup uh you know for a driver picking up a ride tomorrow and what is the realistic path for the appeal in that timeline yeah uh so for a driver picking up a ride tomorrow nothing has changed right the service continues to operate and as you sort of noted uh while the court of first instance so there's a multi-layered uh court process in turkey there's the court first instance there's an appeals court and then there's like the yadagatai which is effectively the supreme court of turkey this is still at a court first-instance decision and the court-first instance did rule that our ride-hailing service constitutes unfair competition to taxis while not blocking access to the app so from the perspective of riders and drivers we continue to operate nothing changes we have appealed the court of first instances decision and the appeals process is currently undergoing that said just taking a step back right like litigation from taxi service providers or the taxi lobby uh it's it's not a marta specific or even a turkey specific uh case it's a it's a global case right if you look at this industry 40 years in to operations which is where we are in our ride-hailing business so that would be pre-2015 in markets like the us this is just a very standard tech chapter right all of the operators face the ride hailing operators faced contested regulation sometimes city by city sometimes state by state sometimes at the national level uh many court cases sometimes unfortunately even more right sometimes there were like physical uh incidents uh taking place and what we know is this what we know is that in 151 countries across the world uh this sector ride hailing was formalized and And the reason is because it creates a better rider experience. It creates job opportunities, full-time and part-time for drivers. It creates tax revenue for the administration. It allows for tracking, digital tracking of rides. And that is paramount for rider and driver safety. Because of all these benefits, this sector was formalized in pretty much every large economy across the world. And a lot of our energy right now is going into constructive age engagement with policy policymakers in Turkey in order to achieve the same outcome. Yeah, well, that's good to have insight on that. And it looked like it was, from what I saw, potentially going to be favorable on your side, but we'll see how that plays out. Okay, so I know we're getting close to the end of our time here. Let's do this. let's say if we're doing this a few years from now you know what are some things or some numbers that you potentially look at or where where do you personally want marty to be in let's say 2030. i would continue to look at our you know our operating metrics so first from a kpi perspective where are our drivers and our rider numbers and the trips right so that's the physical sort of size of the marketplace we believe that there's going to be a million and a million and a half drivers and we believe there's no reason why everybody in the country should not use a ride hailing service transportation is a service that everybody uses perhaps you know if you're very old or perhaps if you're young maybe use the service together with somebody of a different age and you're in the same riding vehicle even though you don't appear as the source of demand but you do get in that vehicle and there's 80 80 million plus people in turkey therefore that will eventually use this service we also want to translate that increasingly into revenue growth right and that is a function of not just sort of increasing the volume of trips but it's also a function continuing to increase the pace of monetization from the current take rates that we have, which is approaching the mid-teens to closer to global averages, which is twice as high. And eventually that should also further reflect in the EBITDA and subsequently the free cash flow profitability of the company. We also have opportunities to apply, whether it's autonomous vehicles, whether its further expand our delivery service whether it's introduce other adjacent services once you have an app that is used by pretty much everybody in the population there's a lot of other services online to offline services even beyond deliveries for example like financial services wallets peer-to-peer transfer solutions there's lot of services that you can offer to the same cohort and we will be pursuing those one by one. I'm 40 years old right now, although I don't feel 40. And I have two co founders, they're in their 30s. So they're even younger than I am. And we're in this for the long haul. That's good and potential super app ambitions in there I'm potentially hearing. Yeah, so what we call ourselves right now is a mobility super app because we have different mobility transportation solutions we have you know car hailing and motorcycle hailing and taxi hailing in e-bikes and e-mopeds and e scooters but beyond uh mobility there is deliveries uh beyond deliveries there are financial services there's you know other super app services uh that offer a much wider range of daily use case products and services to uh to its users and we're a candidate i think probably be prime candidate into kia to offer all those services yeah definitely of hell those users okay well john coot thanks again it's always a pleasure speaking with you and i really looking forward to watching your progress as the the quarters move on um anything that you'd like to say to the the uh viewers before we depart here i think we've covered it uh thanks very much for for having me again all right thanks so much and everybody that was john kudurgan who's the co-founder and president of marty ticker symbol mrt hope you all have a great rest of your day and we'll be back again here tomorrow with another ceo interview take care everybody