Jumia Technologies AG (NYSE:JMIA) Q3 2023 Earnings Call Transcript

Jumia Technologies AG (NYSE:JMIA) Q3 2023 Earnings Call Transcript November 15, 2023

Operator: Good morning, ladies and gentlemen, and thank you for standing by. Welcome to Jumia’s Results Conference Call for the Third Quarter of 2023. At this time, all participants are in a listen-only mode. After management’s prepared remarks, there will be a question-and-answer session. With us today are Francis Dufay, CEO of Jumia; and Antoine Maillet-Mezeray, Executive Vice President, Finance and Operations. We will start by covering the Safe Harbor. We would like to remind you that our discussions today will indicate forward-looking statements. Actual results may differ materially from those indicated in the forward-looking statements. Moreover, these forward-looking statements may speak only to our expectations as of today.

We undertake no obligation to publicly update or revise these statements. For a discussion of some of the risk factors that could cause actual results to differ from the forward-looking statements expressed today, please see the risk factors section of our annual report on Form 20-F as published on May 16, 2023, as well as our other submissions with the SEC. In addition, on this call, we will refer to certain financial measures not reported in accordance with IFRS. You can find reconciliations of these non-IFRS financial measures to the corresponding IFRS financial measures in our earnings press release, which is available on our Investor Relations website. With that, I’ll hand over to Francis.

Francis Dufay: Thank you. Welcome everyone, and thanks for joining us today. The third quarter was very important for Jumia, as we were able to achieve much of what we had planned when we changed both the strategy and the leadership of the company. We made clear then that the overriding objective was to reduce losses and move towards profitability. We are happy to report that this quarter has seen further significant progress in loss reductions, as well as cash management while we now see the impact of our growth strategy. Let’s now look at a few key indicators. The adjusted EBITDA loss of $15 million in Q3 ‘23 was the lowest since our IPO in 2019. This represents a decrease in adjusted EBITDA losses by $31 million versus Q3 ‘22, down by 67% year-over-year and by 70% on a constant currency basis.

For year-to-date, the adjusted EBITDA loss is $61 million, down by 61% compared to the $158 million in the first nine months of 2022. Our liquidity position amounted to $147 million at the end of Q3 ‘23, which reflects a decrease of $19 million in Q3 ‘23, compared to a decrease by $66 million in Q3 ‘22, down by 71% year over year. This is the result of our comprehensive plan to build a lean organization, stop certain unprofitable activities, and capture efficiencies in operations and marketing. We strive to run our business with a key focus on achieving profitability and positive cash flow, and Q3 ‘23 has shown great progress in that regard. There is, of course, still a lot of work, but we are excited by the next phase of the turnaround at Jumia.

As also explained previously, growth is crucial and we are not only focused on cost reduction. We believe in our growth plan as we’re already seeing positive signs while spending far less than in the past in all areas. We continue to execute our plan to build stronger fundamentals for growth in our core categories and we are starting to see the impact. Revenue reached $45 million down by 11% year-over-year and up by 19% on a constant currency basis. GMV reached $181 million declining by 25% year-over-year and by 3% on a constant currency basis. This compares to a decrease in adjusted EBITDA losses by 67% year-over-year and 70% on a constant currency basis, and a decrease in sales and advertising expenses by 74% year-over-year and 67% on a constant currency basis.

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Q&A Session

Five countries reported positive GMV growth year-over-year on physical goods, both as reported and on a constant currency basis. These five countries accounted for 49% of the GMV from physical goods in Q3 ‘23. The GMV of our physical goods platform in all countries was down by 17% year-over-year and increased by 10% on a constant currency basis. The countries with positive GMV growth were the first in which we implemented our new strategy and the results give us confidence for the other countries in the group. As you are aware, there are a number of activities in the Jumia Group and we have decided to focus in particular on physical goods. This came with clear decisions to de-prioritize other areas so that we could focus on our organization on the right battles.

For example, within physical goods, we chose to de-prioritize and streamline a number of categories such as FMCG. In food delivery services operated on our Jumia food platform, we chose to focus last year on our biggest markets and discontinued operations in three countries. Similarly, we decided to refocus our work on JumiaPay towards building a stronger enabler for our e-commerce business, thus increasing the penetration of JumiaPay on our platforms. All platform expansion of JumiaPay remains prioritized specifically in Egypt and Nigeria, where we have the relevant licenses. Let me now remind you of what we outlined when we took over leadership of the business. Strategies for cost control and profitable growth and our approach to making Jumia the preeminent e-commerce business in Africa.

One year ago, we made a conscious decision to reorganize the company and focus on a few key priorities in order to establish a stronger foundation for growth. Today, we are pleased to see clear progress, not only in terms of costs and cash management, but also in terms of what we consider to be growth fundamentals. Our plan does not end here, and we still have a lot of work to do to execute on those priorities. This is just the start. Looking at the long term, we believe that this strategy will give us a unique advantage in capturing the growth of consumption and e-commerce in Africa. With the African population expected to increase by the UN (ph) from 1.5 billion in 2023 to 2.5 billion in 2050. We are looking at an amazing opportunity. We need to build the right assets for the long term, and we believe that our strategy is doing just that.

We focus on creating a better value proposition for customers that we can sustain in the long run as well as create a barrier to entry. Let me outline some of the activities and initiatives that have produced a significant turnaround in the fortunes of Jumia. First, our supply side strategy and execution. As previously stated, we believe that demand in our African markets is large, but largely unfulfilled. And it is our goal to address this issue for our customers. We intend to do this by collaborating with vendors and brands to provide the greatest selection at competitive price points. Consumers in our markets are price sensitive and will seek the best deal, whether online or offline. Our efforts to create a stronger value proposition in core categories, which we define as phones, electronics, home and living, passion, and beauty, have resulted in better repurchase rates from new customers acquired in those categories, and increased average order value for physical goods.

We seek to continuously improve our assortment and price points, working with both international brands and local vendors. Second, achieving operational efficiencies. Operational efficiency continues to improve, with fulfillment expenses per order excluding JumiaPay reaching $2.1 down by 26% year-over-year and 8% on a constant currency basis. Efficiencies were achieved while expanding our footprint in secondary cities throughout 2023. This expansion is being driven by the growth of our branded pickup stations network, which now accounts for 44% of physical goods deliveries, increasing by 8 percentage points versus last year. Third, improving marketing efficiency. While focusing on stronger supply, better outreach to customers, and an overall improved customer value proposition, we continued shifting the focus away from costly marketing channels in Q3 ‘23.

This led to a decrease in sales and advertising expenses to $4.3 million, down by 74% year-over-year and 67% on a constant currency basis, as well as a reduction in consumer incentives such as vouchers and free shipping. Fourth, building a lean organization. We have built a lean organization with G&A expenditures, excluding stock-based compensation at $15.9 million, down by 43% year-over-year and 33% on a constant currency basis. This was primarily driven by savings on staff costs, after right-sizing our structure earlier this year. Year-to-date, the headcount in G&A functions was reduced by 317, which corresponds to a 19% headcount reduction. As part of the organizational changes, we have meaningfully reduced the size of our team in Dubai and relocated leadership positions to our African offices, closer to our consumers, our sellers, and our operations.