Q3 2019 Earnings Call
Good morning, ladies and gentlemen, thank you for standing by welcome could you May ask results conference call for the third quarter of 2019.
This time, all participants are in listen only mode.
After managements prepared remarks, there will be a question and answer session.
I would now like turn the call over such a mere head of Investor Relations for Julia. Please go ahead.
Thank you I need good morning, everyone. Thank you for joining us today for our first quarter 2019 earnings calls Weve everyday Archbishop when your neck co founder and CEO of visual.
And also when they get needs today, yes.
This call is also being webcast our yard section of our corporate website.
We've started by covering the safe Harbor.
We'd like to remind you that our discussions today will include forward looking statements.
Actual results may differ materially from those indicated into forward looking statements.
Over these forward looking statements may speak only to our expectation as of today, we undertake no obligation to publicly update or revise your state.
What a discussion of some of the risk factors.
Cause actual results could differ from the forward looking statements express to date PC to risk factor section of our finest perspective, south in connection with our initial public offering on April 15, 29 Kids. In addition on these calls we refer to certain financial measures not reported either.
<unk> I guess, where it you can find reconciliations of these ones I encouraged but actually measures to the corresponding our yet for its financial measures you know <unk> earnings press release, which is available on our Investor Relations website with that I tend to want to Sasha.
Thank you.
And welcome everyone. Thanks for joining the call.
I'd like to kick off by stating our confidence and the meat in the powerful secular shifts we're seeing I forgot today.
They are more consumers online and everyday there more businesses looking for ways to leverage technology to improve their operations and cool.
And then eating ecommerce platform in Africa, we are part of the transformation.
We have sufficient platform and talent to benefit from this tremendous <unk>.
Our strategy remain centered around the frame for key pillars try things abroad.
Yeah use age.
Even looking our strategic plan cheap and take space with Japan dragging money taxation.
And continuously improving cost efficiencies.
Oh, Vince is geared towards taking the company forward on our vote not too costly beach.
Let's take a look I'm peach tree.
Where we stand on each other.
Those dealers at the end of the fourth quarter 2019.
On growth.
We're making great progress on the U.S age and relevant relevance of our platform.
Jeremy condition in June .
Digital destination of choice for everyday needs in Africa.
GNP increased by 49% year over year and number of holders increased more than twice that size by 95%.
He reached 5.5 million, new electric consumers, almost 2 million more than a year ago on payments, we're making great strides with Japan, which is showing very strong growth momentum in both volume and transaction terms the junior paying on platform total payment volume.
Increased by 95% year over year, while the number.
Oh.
And while the number of Truing up they transactions actually Richard by 262% over the same period.
These are excellent results were very pleased with the development contraction of drumming up.
In parallel with best Gulf momentum loves the marketplace and to me if they were able to my second new dry monetization of that use age and transactions.
Gross profit increased by 45%.
And our market creeks revenue grew by 52% year over year.
And finally, we want to go and get it wasn't until you get paid to happen in a cost effective manner.
Adjusted EBITDA loss as a percent feature chembio decreased this quarter by 150 points.
On a yearly basis.
And our operating loss as a percentage of GMP decreased by 62 basis points.
Let's now review quarterly performance in further detail.
And then starting with girls on page five.
[noise] marketplace goal.
Thanks for us increasing adoption and usage of our platform, which you can be reflected in the evolution of our topline growth drivers this quarter.
We aspire to be the most rather than she commerce, that's wonderful African consumers and sellers to connect and transact. So we like to measures that you see chart showing up in terms of.
How many users are building searching can products inflammation.
Many of these users are dying, how many items they buy how often how many transactions they do and of course, how much they spent.
[noise] GMP increased by 39% during Q3 2019.
And here.
I'd like to point out that the comparison between Q3 19 in Q3 18 and between Q2 in Q3 19.
In the secured by a change in the commercial calendar dates and don't think reserve the junior anniversary campaign, which for US is what we call it tier one event.
Thanks entirely over the so-called through 2018, well about half of which took place. This year during the second culture and without this change in calendar the growth rate that then around 50%.
And you will actually consumers grew by 56%, which is the strongest growth level of the past five filters.
Our next quarterly consumer.
Reached 636000 consumers this quarter, which is more than doubled the amount of net coltrane consumer items over the same period last year.
And our orders grew even faster the number of older space on Julianna this quarter increased by 95% versus the year, we'll treat we're very pleased with its momentum because it demonstrates the continuous enhancements, we are making to the marketplace or working.
And here I would like to give you a few illustrations of what you're doing two drives this consumer adoption. The news age and the first one if you go to page six is the launch of Junior mall.
Which took place mid September .
Within certain brands for many years of course, and they've been using June yet to engage with users across Africa for some time.
Now we'd union mall, we have really enhance the value proposition.
Our market paints for both the brand and the consumers.
We created a dedicated space within the junior platform for the brands to better engage and reach online users.
The blends can now created Taylor.
Online store with customized content visual identity to tell the story of the brand with relevant content words images and videos.
And also have multiple services available to them to build awareness and drive some nice online sales performance, such as marketing and visibility packages access to business intelligence and data analytics and lastly, we provided seamless effortless fulfillment experience for junior.
All brands to genetics press.
We co locate the relevant and battery of brands in our fulfillment centers offering them.
And to enforce human solution.
The junior mall bounced how does not have traction with friends and destruction has been brought base with momentum across major product categories, we have and your NIM, all beauty and personal care brands like Little high Alan Johnson and Johnson email, we also have fashion brands electronic brands like.
So some so Microsoft HP in the fast moving consumer goods, we have very strong household brand names like you lever that's been put kind Gamble Coca Cola and we even have a dedicated you show for calcitriol, we undertake a core part of their commercial operation Jeep in Kenya.
And less than two weeks after its launch as of September Thirtyth.
Yeah Mall was home to 500, he shops, representing about 50% of Forbes took 100 consumer brands.
And approximately 35000 life products these things.
So first this is a great success and we really look forward to work coming to welcome to even more brands in the future.
And Jim always also great for the consumer isn't you recalled from our past earnings calls, we mentioned that since some of it to their careers for E Commerce adoption you.
You know markets, our mental barriers as opposed to infrastructure barriers rights and talk to you because we have already be able to platform and processing to overcome the unique challenges physical infrastructure in our markets.
And one of his name mental barriers that we repeating here from our African consumer is the inability to check the probably quite cheating when making an online purchase and Jimmy I'm. All these very much about addressing this mental barrier.
As we give consumers direct access to the Brian .
And we provide more comfort around product quality.
We also offer our consumers because he said 15, they returns versus seven day on the rest of the platform for most product categories.
And they can also benefit from Glenn warranty on selected products.
And of course, and Jimmy I expressed a lot faster the returns, which consumers love as well.
So Jim always really one of the illustration of our continuous efforts to drive consumer adoption and Nick junior debt and even more attractive destination for both the sellers and the consumers.
Now it's you asked me to page seven I wouldn't like to give you some color on how we drive usage, which is a core part of our marketplace.
With indicated in the past that just less than 1% of retail sales and I forgot or happening online.
This compares to 10% in the U.S. and more than 20% in China.
So growing the marketplace. The junior marketplace means capturing increased share of the consumer wallet and shifting and larger proportion of their spend online.
That's exactly what we are aiming for through the drive everyday taught a table reads on Julie.
We want to put junior at the heart of the consumption in Africa.
Capturing to the everyday.
Our consumers on this page seven you can we see what consumers are buying them and how it's evolving.
The size of the circle, we present the number of items sold.
The person page on the right.
The growth year to date, and I 10, so and the line be no, but some of the page isn't indicative range of the average I tend to <unk>.
So you can see the following its yourself from the talked rights the fastest growing category by far is what we called digital services.
These are essentially every day service it and we make available to consumers via our junior debt pay application Dean Foods for example, airtime top that data plan b charge and utility Bill payments.
Second fastest category fastest growing category, which is almost doubling the number of I can sold is FMCG fast moving consumer goods, which include groceries and stopped wells, which are typical high frequency purchases, but it's getting haven't I've rich I tend bar you below 10 year old.
Which make then.
Portable entry points into the junior anchor system as well as strong drivers of one of us and purchasing frequency.
She most of the left we're also very between the momentum were seeing an hour who didn't really business junior food.
It's going back 83% in terms of items sold on the year to date basis, and we love to delivery because it's also a high repeat purchase category.
And here we yes.
And that reach value, which is between 10 and 20 euros. If you go down you can see that's fashion, which is our largest product category in terms of ice and so and it accounts for almost a culture of items sold on our platform.
More than it can be nation of mobile phones, and consumer electronics, and it's a very strong category for us growing 58% in volumes year to date and the average I can value for fashion is around also between 10 20 years and then on the last time, we have categories, which have a higher I can buy you like consumer electronics phones.
On the new thing and they're also going very well between 54 63 and 71%.
So we're very pleased with its trends because we believe they are a validation by consumers of the rather than sort of junior across a broad spectrum of their needs and talking to them everyday products and services.
And this relevance if you now moved to page eight.
On slide into an acceleration in our annual actually consumers, who place more frequent smaller sized orders I know that keeps consumers that accelerated its a trend.
This culture to 56% years ago, which is the strongest growth level that the best buy cultures.
Our next quarterly consumer ads.
We just 636000 consumers this quarter, which has more than double the amount of.
The same period last year. The average order value has decreased from 65 Euro in Q3 of 2018 to 39 year old this quarter and at the same time <unk> average number of annual older <unk> for consumer has increased by 27% from 3.4 older Institute for.
0.3 orders and this means that we have more use age and we also have more data through leverage.
Overall.
To wrap up on the growth, we're very happy with the growth of the junior use H and the trends, which I have described.
Gives us a little confidence, but to me I said the heart of the secular shift in consumption habits in Africa.
Yeah, there's and high profile international brands are embracing the transformation.
As evidenced by the successful launch a junior loan.
Let's now move to our second priority, which is a junior thing and the progress we've been making on this front and we're now on page 10.
Ecommerce market places are very powerful engine to drive payments.
And build great thing taken pen businesses, and we were in the well some of the leading payment companies were born out up.
And fueled by marketplaces tape out in the U.S. and he pain, China NUCYNTA Pago in Latin America, and we are following the same pot.
Leveraging our e-commerce platform to drive adoption of doing that they want it with a view to ultimately create the meeting payment system in Africa.
If you seem to page 11, we are currently focused on we probably are we teams with juniper.
Number one is to drive the adoption and penetration of GMP within our own ecosystem.
Good luck on platform payment processing.
June is to build our financial services marketplace. So back our users both consumers and others you used to me I pay to access financial services like loans insurance and many more and freedom is to start processing platform payments.
On behalf of felt policies.
Let me give you more detailed them.
And we stopped with on platform payment do me a pay is currently lighting six of our country's operations.
And junior pay designed very much like Paypal account that can be linked by the consumer too many different payment methods, the genetic wallet and be linked to a debit or credit card. It can be linked to a bank accounts through a mobile money wallets, we are agnostic to the underlying payment method that the consumer links.
The GMP wallet, we seek to integrate all the relevant local payment solution for the consumers.
GMP is really core to our market principal position, because we want to ensure friction that consumer experience at checkout.
And Jim yet they is key for us because it drives operationally efficient and remove some of the complexities associated with cash on didn't agree.
We constantly and hence the junior be positioned by you and relevant features but consumers wanting illustration. This quarter is the lounge in Kenya of our junior pay up which offer consumers a number of everyday services like air time reach out and utility bills payment.
This allows us to extend the range of services available to consumers leveraging the convenience of pain, reaching.
The second core component of junior pay is our financial services marketplace.
Here, we connect financial institutions with our sellers and consumers.
And this is a very natural extension of our marketplace, our existing bids distribution platform and the most people use case in our ecosystem. A. Good example, can you just straight and this is junior lending which of the lending service.
First the others, where we provide.
Third party financial institutions with data to improve their ability to score the feathers. This helps our senators to access.
Short term loans provided babies financial institutions, and we make the commission and the sale of the loans and today, we PPP here do not take any credit risk on the balance sheet, and we make credit scoring distribution and collection of loans more effective.
As of September Thirtyth senior lending is also available in six markets and since we launched it in 2017, we facilitated the origination of almost 5 million euros worth of loans.
More than 700 and sell lives in our type on the average loan amount is about a 3000 euros and the average duration site.
And of course. This is also very good for our sellers, who can access better financing options. Thanks to Juneau.
And finally, we are preparing the launch of dripping for of platform payment processing.
As we are driving the penetration of Jimmy I pay within our own platform. This paves the way for the future extension of platform. We're building a strong user base.
We are building the proof of concept the case study [laughter].
Success that will serve to expand doing yet they services of platform.
To date doing that they powers the generic market pay sequel system and tomorrow. It will render the same services to help boxing merchants and those merchant can be over online merchants or offline merchants and some of which are already selling online to junior if you're thinking about for example, all the restaurants who already.
Listed on the genius would platform.
The investment we receive a master Cavalier this year in green validation of the payment solution. We have built but also a tremendous catalyst for server product development and innovation. We are working on that product development roadmap, which includes initiatives such as the QR codes mobile point of sale.
<unk>, which will support our expansion of platform. The vision behind your net thing is powering commerce in Africa and building on payments to offer rather than suite, the financial services to both the merchant and to consumers.
Now to measure the progress we have introduced two new keep you guys on Jimmy I pay the total payment volume and the number of transactions and Pete you need engine nothing.
On page 12, you can see.
The junior <unk> increased by 95% some 60 million euros.
32 million euros into pre 2019.
And this led to a new treatment the penetration of junior debt pay.
Weve TPV as a percentage of GMB rising from 8%.
To almost 12% in Q3 2019 and here I.
I would like to point out that the penetration is calculated using the total junior GMB went unionpay is currently only available in six markets right and some of which were recently launched it you take the same penetration number in Nigeria, or Egypt, where junior because it was announced earlier in 2017 it.
Of course much higher.
And you turn to page 14, the junior they growth trend or even stronger on the transaction babies transactions were up three and a half times.
Jim about 600000 transactions last year to 2.1 million this year.
And this each student treating the penetration of junior thing.
Transaction over total orders from.
16, and how person to almost 31% in Q3 of 2019 and again same coming here. This penetration is even higher when looking at and Nigeria and Egypt.
The very strong book in June that they penetration is driven by a number of initiatives of course, the continuous education efforts of consumers on our platform.
They become more familiar and comfortable with the genetic solution. It's also supported by incentives such has kept gas backs that we offer to consumers for the use Egypt unit they.
And we'll lots of junior pay to more geographies and more junior portals.
And we also continued to I'd rather than digital services to consumers on our June that pay up.
Now in parallel with driving the growth of the U.S age of drop and the development of junior pay we seek to increase monetization and cost efficiency. That's part of our best would probably be <unk>.
And I'll now hand over to lunch one to walk you through our dates this quarter on when utilization and cost efficiency.
Thank you for such a.
Hello, everyone.
In parallel with driving adoption and usage of all platform, we seek to monetize these usage and transactional activity in the gradual unsustainable Monday.
It's please go to page 15.
As we've discussed in the past we believe the most relevant monetization metrics for us all market based revenue and gross profits.
We don't see revenue as a meaningful metric to assist the monies dilation AFFO business.
As it is impacted by shifts in the revenue mix between first party and marketplace.
In the third quarter of 19, we continued to see a reduction in the proportion of responded business you know Jim on the young basis.
Our marketplace revenue increased by 52%.
Why all gross profit margin expanded by 28 Bips from 6.3.
To 6.6% of Jim.
Sure I would like to point out the reclassification of certain types of vouchers from sales and advertising expense towards depend of revenue in accordance with I Srs Justin.
This reclassification was recorded in Q3 19, and the prior periods showing in all financial statements of nuts been retrospectively adjusted.
You can see early stage, the Q3 19 numbers of marketplace revenue and gross profit margin.
Well to the reclassification.
And we applied the same accounting treatment as prior quarters marketplace revenue in Q3, 19 would've been 20 million euros corresponding towards 60% yield increase.
She need only gross profit margin in Q3, 19 would have been 7% corresponding to a 72 bips margin expansion.
The full reconciliation of these figures has been included in the appendix.
Moving onto page 16, we continue to drive miniaturization from diversified marketplace revenue streams coming.
Commissions, which all jobs to all centers grew by 27%.
Yeah. The reclassification mentioned earlier impacted this revenue line and growth on a comparable basis is 62% yogurt.
Concealment, which all believe refute jobs to consumers grew by 82%.
That you wouldn't sandwiches, which include services provided to all centers around logistics, but getting content creation grew by 33%.
And marketing and advertising, which corresponds to the revenue generated from the sale. It's a broad range of at solutions to setters and advertisers grew by 125%.
The sustained momentum in this revenue stream showed the appetite from both centers and advertisers.
For a company offer of digital advertising that can reach for broad base of users why driving measurable paraffin.
Well the first two years of Julia we were mostly a commission business from the money utilization standpoint.
This was the time all centers were new to a platform and e-commerce in general.
We then introduced value added services and started monetizing them.
And we are currently focused the marketing and advertising services.
For us.
He sees a highly attractive revenue stream as there are almost no viable cost associated with these services. So it's almost pure incremental margin.
The development of this revenue stream can only happen at the right John in the learning curve of centers.
Once they are sufficiently familiar with the platform and are used to its functionalities.
We know sealed this is the gates and are ready to put more attention beyond this initiative.
For a better understanding of this revenue stream, let's please go to page seven Jim.
Junior advertising is set up as an in house advertising agency, we did he gate in marketing and advertising professionals.
The target clients fall, Jimmy advertising, all brand advertisers and setters advertising adjacencies and other providers of relevant services and products <unk> ecosystem participant.
Leveraging our unique data and multiple touch points with consumers, we offer advertisers a comprehensive suite of AD solutions, including.
Sponsel add all Sponsel distributors.
We also offers funds all brands, we saw an insider format.
During the Brownlow go along side of customized headline and the selection of products.
Sharon tools also leveraged to the monetization of placement in the news later and modifications to App users.
And last but not least the stalls we didn't do a minimal I remind you of choice for marketing and advertising purposes as brands at the option to sell a different visibility and advertising, but cages.
These solutions offer compelling benefits to advertisers, including.
The ability to target the Oh agents in a very grand enrollment or leveraging the consumer and protecting data we have.
We are also able to engage consumers at different stages of their drilling.
Right, Okay. The visits of the junior platform gel CRM tools.
All when they are broadening the platform with the purchase intent and even though when did receive either package as we also at the ability to include samples into but can you just addressed consumer.
Let's say specific products.
Lastly, we offer advertisers measurable results they can track through specific dumping reporting tools.
Jim advertising he's a very good illustration of always think about men's dinesh and Oh, we can leverage all data and usage.
As a compensation for service that and then says the performance of all setters.
Helping them engage with your mind users in a more secure way to make it improve their business online and offline.
Let's now move on to cost efficiencies.
Page 19.
We have three types of cost you know BNL.
The first one is fulfillment expense.
<unk> largely viable and influenced by a number of factors such as the original specie age for example, the cost of shipping a product from the cross border said are they overseas is higher than she being from a local said.
The destination of the decade, as well as the type of goods and sized.
When we compare on mix effect gauges during Q3 19 versus Q3 18.
We saw in increasing the proportion of cross border packages shipped from overseas centers as well as a higher proportion of packages that either outside prior cities.
These contributed to an increase you know fulfillment expenses by 65% in the third quarter else 19.
Yeah, but do you still have the fulfillment expense as a percentage of Jimmy reflect the order and product mix trends, we're seeing well marketplace.
The increase proportional everyday product mix leads to lower average order values, which intern drives the fulfillment expense as a percentage of GMB.
Lastly, another important driver if we see them an expense is volume.
Abrupt Cecil looking at all fulfillment expense on the volume basis is the ratio of food cinnamon expense per order, which decreased by 20% on the yearly basis.
The more orders we are the more packages, we ship the better the rates, we can negotiate from third party logistics partners on the big Vacates bases for giving them.
She made only the more Williams area.
Hi, your personal leverage on no physical infrastructure.
All sales and advertising expense is essentially discretionary.
And he's focused on performance marketing.
Wide range of channel.
You may recall from all prior earnings you lose durations, we get heat of the very strong level of jewelry I'd run the Walnut Hill country.
For us right now.
Not so much about driving more wanted.
It's about driving adoption in an effective money and building customer lifetime value.
Why all active customers increased by 56%.
And our older is accelerated by 95%.
All sales into <unk>, I think expense increased by 6% and decreased as a percentage of Jim but 143 bips on the yearly basis.
Sure.
I would like to point out that it'd be justification of vouchers up revenue deduction that a positive impact on all sides on advertising.
Welcome her ability proposal.
We have also shown on this page the QC 19 fuel cell and advertising expense right off the reclassification.
We apply the same accounting treatment as prior quarters'.
Hasn't advertising expense in Q3 would have been 14.1 million euros corresponding to a 16% yield increased.
Kevin advertising expense as a percentage of GMB, what have you, 5.1% corresponding to a 100 beach decreased on a yearly basis, which is still a very significant efficiency gain.
We're very pleased with this performance.
Reflect the strength of the Jimmy of rent or a diligent glad rich or unique data the relevance of <unk> offering for consumers as well as all discipline in terms of sales and advertising investment.
And finally, all certain major cost Maria is technology and generate.
These are mostly fixed and include for instance, because the Baltic platform.
Wages and benefit she's for accounting and go DNA and share based compensation.
All second Gen expense.
Excluding share based compensation increased by 38% than a young bases, mostly as a result of an increasing staff cost and professional fees.
Yeah, I would like to point out that 19. So a novel uplift you know base of DNA as we set up the necessary infrastructure.
Functions and processes short period of the listed company.
Comparing to Ginnie costs, excluding share based compensation from Walter Walter DCR shows modest increases in the range of 4% to 5% quarter on quarter.
We remain focused on driving further efficiencies in our Ginnie days and knock them stempki optimizing operating structure.
Let's move on page 20.
As a result of increased usage.
Increased monetization and cost efficiency.
We continue to make progress on all past the profitability.
Our adjusted da lost as a percentage of Jim <unk> decreased by 153, Bips from 18% in Q3, 18% to 16.5% in Q3 19.
Over the same period operating loss as a percentage of Dnbi decreased by 62 basis points from 20.5% in Q3, 18% to 19.8% interesting 19.
The key levers to take all business to profitability remained the same.
Focus on value a margin accretive growth, while continuously driving cost efficiencies.
And cost efficiencies mean, optimizing variable cost bell volume you need to scale and driving operating leverage on fixed costs as well as pure really gets rationalization measures.
Moving onto page 21.
That's the profitability is further supported by all I sit lied business model and favorable working capital dynamic.
Capex during the third quarter of 19 was one point.
Argument on the road, which is less than the 1% of Jim.
We operate junior logistics as a platform with very limited capex requirements.
Net changes in working capital resulted in then flow of 0.4 million euros. This quarter. Thanks to continuous improvements in inventory management, you know retail these net alongside a shoulder receivables cycle.
As a result of these features or adjusted to mediate he's a close proxy for cash utilization and the delta between operating cash flow and adjusted EBITDA is less than 6.5%.
Finally at September 32019, we at 291 million euros, what million euros of cash or the label, including 227 million euros of cash and cash equivalent and 64 million to rows of stem deposits, which all cash balances blessed and the nine month deficit basis.
With that I'll end the call back over its desha.
Thanks, that's one and let's wrap it than Q3 performance and then I'm now on page 22.
If I assess the delivery against our strategic objectives.
I'm very pleased with the growth of junior usage.
Actually I see as consumers an older years.
I'm also very pleased with the progress on Jimmy I pay.
And on the monetization prompts the take up of marketing and advertising is very encouraging.
When it comes to cost efficiency.
I think that fail and advertising performance is really good we are very efficient than they say 10, especially considering the growth in platform usage and do pay adoption.
What I am less piece with this quarter.
Is it round the fulfillment expense.
And here, it's not about the absolute amounts wherever we are actually making good progress on efficiency and the volume basis.
But it's rather about how much of this amount we are passing through to our sellers.
And especially our cross border sellers, who are seeing very strong growth momentum at the moment.
We are addressing this and fine tuning our shipping matrix and I would cross border business lunch or more effective classroom.
Overall, we are.
Absolutely convinced that we have the right strategy to build the winning e-commerce platform in Africa and to think junior to profitability.
The strong momentum were seeing on our platform is age and the traction we have with consumers and feathers give us a lot of confidence in degradable cheat sheet, we haven't ahead of us.
Let's now look ahead and talk about initiatives on trends for the coming two quarters.
First growth.
Here.
Our long term objective is to drive adoption engagement in the U.S AJ.
This use age is ultimately what drives sustainable revenue and options as well as the engine for the adoption of GMP. It's very simple the more people used to me out the more data we have the more we can monetize and the more we are able to drive the adoption of genetic.
In the next few quarters.
Turning to focus the Lux on consumer adoption.
Leveraging our high frequency product category and services.
This will continue to reduce the average order value and continue to make junior relevant and accessible to consumers.
We're also going to put more emphasis on profitable growth.
Even more focus on you need to clinics and long term consumer lifetime value.
Overall, we expect this would translate into GMB growth around 20% to 30% for the next five quarters.
As far outpaced by our older is books, which we expect to be above 50%.
This is a choice and here, we are deliberately choosing to drive volumes rather than value in the next few quarters and of course. We also expect this focus alongside a cost rationalization initiatives to support higher margin in 2020 and by higher margins I know.
Hi, good gross profit margin and an overall reduction in our cash utilization and I just wanted to get lost in 2020 .
Secondly on Jeanette pay.
Here, we are reallocating some of our existing resources.
Oh, seven advertising budgets and taking GMI resources towards the development of junior pay.
It's a key priority for us both payment processing and financial services marketplace, and we really see campaign, having huge value creation potential in the long term.
In parallel with girlfriend, Jimmy I pay we continue to monetize the June to use age of junior Weve two priorities in mind.
One is to drive it gradually because as a marketplace. It's very important to keep it good balance between the growth you gifts to the fathers and how much revenue you extract.
And to to focus on services that enhance the performance of our ecosystem, but these events like marketing and advertising, which is a key priority for us at the moment or logistics. Our mission is about serving consumers, but also said there was nothing and powering their businesses through rather than two.
The answer is it.
And finally in terms of costs.
We want to see fulfillment deficiency, as we gain scale and operational excellence.
We also want to continue to see increased marketing efficiency as we drive adoption.
And we wanted to keep our GMI and they're very tight control.
Here, we regularly review our resources on capital allocation, and we make adjustments to our portfolio to maximize return on investment and to enhance our focus.
A number of initiatives are currently underway.
We don't expect initiatives to a material impact on our financial profile.
For Us this is all about being more efficient in terms of our resource allocation and business focus.
And the you should join me now on page 24, I'll conclude with our long term vision.
We believe we are building the winning platform in a hugely under penetrated markets.
Today, we are barely scratched the surface of this huge opportunity. We have decade. So go ahead of us to drive the penetration of ecommerce and digital services in Africa.
We were operating a proven business model, which has done and it's still hugely successful in other regions.
We've been able to de risk allows part of the tuition being sued diversified in terms of regions in terms of category being a marketplace with almost no inventory and an asset like logistics platform.
We're very focused on our past imposter, EG and we are taking very concrete steps.
To that effect.
[noise] other business models across the world a proven ecommerce marketplace are very powerful to extend into adjacent categories annual changes for US right now, it's really all about discipline Gulf focusing on our core priorities.
Good I must free attention and a we're now ready to take your question.
We will now begin the question answer session to ask the question you May Press Star then one on your Touchtone phone.
Using speakerphone, please pick up your handset before pressing the keys.
Is that any time. Your question has been interesting you would like to withdraw your question. Please press Star then too.
Our first question comes from Aaron Kessler with Raymond James.
Yes, hi, guys. Thanks for the question, maybe just first on the GMB growth can you discuss that a lot more in detail. It was right seasonality in the quarter any specific categories or region that were softer as well known if we look at page seven a presentation, let's say some of the categories actually had pretty.
Strong growth well either orders, maybe just reconciling the strong growth obviously on page seven with the reported GMB growth. Thank you.
Of course on and thanks for the question regarding the calendar ethic and to be very precise. So so you have to exact dates last year, we reorganized the junior anniversary campaign.
Excuse me in July this was between July 16 of 2018 in July 29.
And there this year it was organized between June 24 and July seven.
Right. So here again, you know, we sometimes moved the dates based on or did they took Ramadan for example, or you know sometimes there's a very tight Jerry also here, there's there's back and the if you adjust for that you have about 60% dropping through pre 19, which is a which is which would have been to grow.
Right. If you if you apply this this impact and then yes on page seven you can see the growth is really a and the growth that you see in the square next to the circles is in items sold and this growth is the girl.
The year to date number right. So here, we wanting to show what type of categories that consumers are buying.
And the how is that changing over time. So here you had really a year to date basis, the volume growth and I tend sold and then the GMB growth year to date. They don't have been number to both of my top of my head, but it's only about 39% right. So those numbers are in I pencil and your today.
So that's that's maybe your your explanation here.
Got it okay.
On the Jimmy <unk>, maybe give us I know just launch but any.
Updates on adoption there maybe awareness among the Jim your customers that far for Jimmy mall, as well maybe to monetization structures that can be fairly similar to your current platform.
Yes. Good question, it's a it's a bit early Oh, we launched in them all and really on September 15, right. So this was part of the about where you know that were kind of back to school lounge and we.
So they too early to tell it's certainly you can see the success from a brand perspective.
On the this is the you know another said brands, we have been working with over the years as well as a few of them, which are new and so here, it's a little bit too early to tell someone in the on the money position pump rights and really we have.
The structure of money position, which includes the usual, which is the commission and some of the value added services.
Of course, the intention with junior I'm always to provide also and quite a lot of advertising and visibility and data services and we know that those sellers and typically those brands are very eager to get more data on their consumer than under on that business well. So you go to really build their brand and to build their awareness.
We have some consumers, which don't necessarily know the brand and of course. They are you can do nexpress, which is part of our money positioned chicken. So definitely a here. This is and how we see them and position and feel pretty confident that the body condition is extremely relevant to that effect.
Great. Thank you.
Our next question comes from Ralph Schackart with William Blair.
Good morning, especially on the call you talked about a few strategic initiatives for 2020.
I do see losses, increasing marketing services, expanding Jimmy APAC et cetera, maybe just take a step back and summarize your top strategic priorities for 2020, and then after you sort of execute against some of these initiatives how should we think about GMB growth sort of coming out of about thinking in the near term you talked about 20, 30%, but obviously the platform is ground you know more than.
Double that historically, just sort of if you could summarize those thoughts and help us think about long term Jim the opportunity would be helpful. Thanks a lot.
Of course, and then thanks for the question.
Thank you.
We are very much focused on that same key for pay that strikes and the those are going to use age.
Do you pay.
Monetization and cost efficiency.
Right then we might as this equation, if you will because each of those objectives. It somehow conflicting with each other on a dynamic basis. When we look at so 2020 , we definitely want to.
Push on those four.
We want to put special emphasis on cash that's a trend.
Cost efficiency.
And this is why we are taking some of those measures I mentioned.
We want to very much continue on money position engine you pay.
And in terms of go.
We want to be.
But more selective with our girls, we want to be focus on profitable growth.
And we want to.
Pursue faster growth of buttons and users rather than.
Then the Jimmy right. So I think thats, how we really see the 2020 again, it's the same priorities with different warranted.
And Oh, we can make the rest again the theme focusing on the usage of generics I can't even longer term than 2020 .
You know ecommerce today less than 1% and I think we all hear realized that the options is huge and we have hundreds of millions of consumers to go after in the long term and we have Oh, you know a billion that you can be to go after right. So for US. It's all about solving for the writes a equation that the right time.
And making sure that we build a very strong platform for the long term and right now we feel that this for the next five quarters as other real and the good priorities for us to continue to drive the usage and make good steps toward supposed to be together with juniper.
That's helpful such I think it.
Our next question comes from Mark Mahaney with RBC capital markets.
[laughter] could I throw a three questions out first could you provide little color on which countries are seem to be performing better than others. Secondly, could you lay out some expectations for Jimmy a pay adoption or at what point do you think that Jim you pay could be a reach 50% of Ah G. M. B and then third maybe most importantly.
You're talking about the path to profitability.
Hey, this on your thoughts as to when and how your reach EBITDA breakeven. Thank you.
Thanks, Mark I'm the countries and we cannot disclose this isn't formation. So I'll have to Oh have to keep this one and at some point. We yeah. We may end up for like some geographical breakdown what I can tell is as we see a lot of momentum pretty much across the board but.
And we don't disclose that in terms of junior apparel.
You know something with it we want to to drive in a very effective and a gradual manner. If you look at Nigeria, and it's where we have launched from your opinion or 2017, you know actually that the penetration is already above 50%. Because this is what we had published last during Q4 right. So we have already it.
She is that milestone as you know into markets and I can tell you that the penetration right now even higher right its kintex increasing in those markets.
So here, we want to continue to drive this country, it's hard to tell when it will take place at the group level, because we have announced recently as you all markets and a we try to balance of course, the penetration of doing that pay with the with the efficiency of ourselves in advertising and investments as well as the growth of the.
The marketplace. So it's really a combination.
And I think you know that will happen sooner or later and then given that it's already happened Egypt, Nigeria. We think we can confidently say a that he will happen in the future also at the good level.
Then when it comes to pass two bucks to be fun.
No. This is something that we have really been focusing in between feel the explaining that our strategy is not just about growth, but about reaching profitability and this remains completely valid and we're very focused on that and then what matters for US right now is really.
And to continue to execute on those four pillars, because we really believe those are the key to to life possibility right. So driving the usage extracting more revenues and gross profit from that use age with our money taxation stream on working on our cost efficiency in older to make steps toward possibly.
The T. and here right now, we're really focused or for the next five quarters to starts reducing our.
Adjusted EBITDA loss, right and our cash utilization, so we want to stops and seeing a clear trend and there would have been resulting in measuring the progress rubber as a percentage of Dnbi and now we want to stop seeing over the next five quarters the trend in absolute right and we want to see the cash burn going down and we want to see the adjusted to be made going down.
Again over the next five quarters. This is video a priority and two to two to Denver, and we're going to do that by just doing and what I had been thing, which is two to grow the usage efficiency focus on profitable growth focus on a very attractive category than CLP drive money positioning.
If the and cost efficiency and you've heard some of the measures were taking on cost efficiency.
Thank you Sasha.
Our next question comes from Brian Nowak with Morgan Stanley .
Thanks for taking my question I've had to just sosh over the first one is that sort of the comments around more profitable and disciplined growth. Just so we could sort of understand from an extra perspective can you sort of give us a couple of tangible examples of areas in which you see yourself changing a strategy where you were previously acquiring.
Unprofitable gross now you kind of wanted to focus more profitable growth, what's what's changing sort of mechanically a couple examples there and then the second one just gotta go back to the last question. So it sounds like the next five quarters are a focus on profitability. So the way to think about it you you see a past or breakeven five quarters from now or is it still further out.
From a from a break even perspective thanks.
Thanks, Brian and they'll stop with the second question noise feel for valves rights and the and then you know we have really building for the long term and I think what we wanted to is that we are clear on what we are as you know steering the business for in the next few quarters right. So we want to really go after the same four priorities.
We want to PMC a reduction in cash burn right, it's not going to take us some profitability within those five quarters, but we want to start seeing some stats I think a lot of great steps over the last filters that we now one to one which is to reduce our adjusted to be in absolute number and the cash utilization in.
So that we would need more time than those headquarters to to get there on the first one it's a very good question and it's very much you know.
Around.
A very granular decisions that we make sure and in terms of ER and marketing efficiency in terms of the category mix in terms of how we drive this year the of consumers, but so again to ticket that was very simple example rights when you do a promotion and when you do boucher or a coupon for.
So from consumer as you can decide to gives a 2% reduction where you can decide to be 3% reduction if you've used 3% reduction you'll get more people coming but you will spend more money and a inevitably you know there's a certain and is there something level, which is the right level and you can I just this level with time.
And the overall that you put a little bit more stringent criteria with your investments in terms of all of marketing intensity in terms of the discounts in terms of.
The missions or reduction that you get to the sellers do you have some of that and this is something that we feel very comfortable doing now because you can see the dynamics that you see in the marketplace. I mean, if you look at Q3.
And you look that increase in sales in advertising year over year, we are at a 6% reported than 12%. If you adjust for the reclassification to increase a film and advertising by about 12% and we doubled the number of holders we had the fastest growth over the last five cultures of.
Consumers.
49% DMD, we doubled the penetration of doing that pay and we drove almost a point of entry. There. So we know a gross profit. So no. It's really about prepaying the tension in the equation in the commercial equation to make sure that you see a lot of grow well.
Very tight discipline on several of the tightening among taxation.
Great. Thanks.
Again, if he would like to ask a question. Please press Star then one.
Our next question comes from Sarah Simon with bearing Burke.
Is high I've called two questions for me first well Ah first one is around cash flow breakeven, except for you felt you had enough resources to get to breakeven do you still think that's the case and then the second one she said.
If you adjusted for the phasing of Jimmy anniversary degrade kind of 50% in terms of GMB and the new guidance.
Let's say limited range about half that.
Is it reasonable to assume that the categories, you're gonna be less focused on all those 20 already ones that you were showing on page seven or are we talking because obviously, it's quite a big step down.
Or is it something else. Thanks.
Yeah, Thanks, Sara and and the cash we currently have.
Roughly 300 million of cash and.
Cash and bank and shorten that because it's.
And then our Q free cash utilization was around 44 million.
Now have you see a.
As part of our Boston coffee and tea, we are working on reducing the cash utilization in the next few quarters as I was saying and then of the past to profitability is going to be gradual and.
And a key milestone of Houston to to reduce the cash utilization and then just seem to be 80 in absolute value right. So here. This is long focus and this is really what we want to do over the next five quarters and as we do that no. We can we can talk again about this question then in terms of so you know.
The the growth of Vigilantly again for us it's really about.
Where do we see the most attractive it traction in terms of use age and.
You're right that since something of those big and when we look at the she'll be in particular right and those are sometimes categories, where you have less frequent purchase and the which require more investment either in marketing or discount. So it's it's really in the commercial equation that we're going to play and.
Now we have those amazing food delivery digital services, FMCG, and you'd see which are going so well. So we're going to ride. This ways right. So I think you can see the mobile phones are still going very well, but the other ones are going even better right. So I think it's really.
Going with with this if there's some opportunity that we have a great and powerful engine paired with those categories and we want to really leverage that's it's not that we want to go away necessarily from the other one than that and you see that ER.
They're still going very very well and consumer electronics is going 71% in that in volume this year.
We want to be selective and commercial equation that commercial intensity and it's that the other ones are going so fast right. So.
They do that to the knick systems are they going to evolve, but not because the other ones are going so slow because they are going very fast.
Okay. Thanks.
As we have no further questions. This will conclude our question answer session and also our conference call for today.
Thank you for attending today's presentation you may now disconnect.