Q4 2019 Earnings Call

Since please press star then zero, please note this event is being recorded. I would now like to turn the conference over to set by the mirror head of investor relations for jumia, please go ahead. Thank you Andrew. Good morning everyone. Thank you for joining us today for our fourth-quarter and full-year 2019 learning school with us today are sung up when your next is there any Oda have to Saunders and videos of Junior as well as on trade. My name is Ray. This call is also being webcast on the IR section cooperate website. We will start by covering the Safe Harbor. We would like to remind you that our discussions today will include 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

What do you guys be statement for 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 facts about refunding perspective filed in connection with our initial public offering on April 15th, 2019. In addition on this call. We will refer to certain Financial measures 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 session.

Thank you and welcome everyone. Thanks for joining the call.

We're up 2019 with a very busy. Walter. We had our highest volume of folders ever surpassing eight million, and I also took important actions to support our path to profitability and long-term growth before we go into the results in details. I would like to Briefly summarize these actions. So we should all look at the results with this in mind first. We initiated a rebalancing of our business mix towards higher consumer lifetime value business office.

in practice

This means reducing promotional intensity on certain product categories and items while constructing driving faster growth of the more Affordable Tire purchase frequency. Once this led to a softer DMV drove that it's supported consumer acquisition and the usage growth as a result of our annual active consumers reached the records 6.1 million and older has increased by 49% on a year-over-year basis. We are confident about events of this business makes rebalancing because it supports not only use age on our platform. But also our path to profitability gross profit.

64% between 25 million and 2 $4 and gross profit after fulfillment expense was positive at 1 million into four compared to the loss of two million at the same period last year.

In series of actions we took relate to the portfolio optimization that we had flagged in our Q3 earnings really and here I am we existed free country Cameroon Wanda and Tanzania and while we believe that those countries have a lot of potential in the long-term. We decided to allocate our resources to the countries that best support our long-term growth and path to profitability our pan-african Footprints and geographical diversification Czar assets with us. And we continue to invest across our eleven countries of operations and two we entered into a distribution and Commercial agreement in relation to our travel total which is flight and hotel booking and as part of the agreement we continue to promote those services on jumia that we redirect Thursday.

I live in traffic to our calendar.

Who manages the operational aspects of the business we are very confident that this enhanced focus and those efforts to optimize our Capital allocation will help us build stronger foundations for the long-term success of June.

So again, we feel very strongly about those actions that we took into for both on the business makes and the portfolio optimization and we think they will meaningfully contribute to our success and I will now pass it on to Germany who is joining us today and we'll walk you through our queue for performance in more detail.

Thank you, Sasha. Hello everyone. If you'd like to join me on page five, please. Let's take a closer. Look at our top-line growth Dynamics as mentioned by Sasha wage based on driving usage consumer adoption and engagement on our platform these letters to rebalance our business mix in favor of the categories that best serve these objectives white supporting our path to profitability as part of this rebalancing and to address the profitability aspect. We reduced promotional intensity and consumer incentive on selected product categories and items notably within the phone and the Consumer Electronics categories the chart on the left of the slide shows that most products. Experience grows in the 20 to 50% range in Q4 2019 compared to Q4 2018 while phones and consumer electronics. So GM.

in terms of items sold

Most of our product categories so rapid growth above 40% and even the phone and electronic categories increased in terms of items sort. These are still very much relevant categories for us and drive usage and consumer engagement. We believe the build out of the everyday product categories is key to meaningfully penetrating our addressable markets and driving the e-commerce adoption.

Looking at our top-line growth drivers at group level on site 6.

We see a headline 3% contraction in DMV in Q4 2019 adjusting for perimeter changes as a result of the portfolio optimization undertaken in the quarter long as well as previously reported in proper State practice GMP of two for 2019 would have been 293 million euro that six percent from 275 million in Q4 2018.

And u l active consumers for the full year 2019 reached a record six point 1 million. It's up 54% compared to 2018 our net consumer in 2019 or two point 1 million compared to one point three million in 2018 71% increase. This is a result of our constant focus on consumer adoption the record traffic on all our platforms which surpassed 1 billion in 2019 and well as well as improved conversion rates.

orders increased by

what's the name per cent to 8.3 million in 2019 from 5.5 billion in Q4 2018 on the back of both new consumer acquisition repeat purchase

alcohol's on slide seven exhibit strong repeat purchase momentum

are we forced to drive more assortment Ravens and to diversify your product category mix or clearly paying off when we see the repeat purchase patterns of our returning customers across court on the chart on the left hand side repeat consumers from the given cohort are increasing their purchase frequency as the return form or everyday product categories month and you also see that the first year consumers are increasingly starting from the higher base of annual orders showing improving traction as we capture new consumers in parallel we see a reduction in average basket size as consumers Trend towards affordable everyday product categories

2019

Do year where we see the acceleration in both the purchase frequency and drop investigate size as a result of the diversification default on the marketplace.

These Trends give us confidence that we are building a unique digital destination for every day need in Africa. Our focus is on getting more users on the platform converting used to purchase and driving the consumer lifetime value.

I'd like to give you some insights into how we drive consumer engagement and use Black Friday 2019 activation as a case study on flight eight Junior Pioneers Friday event on the Pan African babies in 2014. And every year we strive to engage consumers with Innovative and exciting content in the 2019 Edition month. We launched the collections initiative where we showcase inaccuracies mayor the depths of Assortment on our Marketplace.

some of our

Performing collections were fishing friends that featured our fashion bestsellers working style for Footwear and home made food for cooking ingredients in addition to consult introduced gamification retrieve the games at the hour where we launched exclusive deals on the app and treasure hunts where consumers were invited to scout the app for proof phones at the same time on the marketing side. While most of our marketing is online focus and performance-driven are offline marketing is carefully crafted to maximizing back home in the Jeep for example, the soundtrack of the junior Black Friday commercial made it to the second position in the Arabic top chart with heavy rotation across major national radio channel. You see just traits or ability to create engaging content tailored look at preferences.

We're Relentless effort to drive usage and engagement are geared toward building or pipeline of future consumers and positioning.

Yeah as a digital platform of choice to reach African consumers.

And it's no move to our progress on to me a place like ten.

Thank you for 2019. We continued expanding the range of services for both consumers and sales are jr. Play app offer consumers and increasing rents increasing Thursday of every day Digital Services such as utility bill payment time recharge transport ticketing as well as Financial Services provided by third-party Partners down to four 2019. We introduced an international topic feature where jr. Play app users can send airtime recharges to prepaid phone number.

We also expanded the range of Consumer Financial Services into saving products with the lounge of the extra money market fund in Nigeria. We also rolled out MasterCard Tuesdays on our platform in Kenya Nigeria and Egypt during which Junior pay consumers who pay using MasterCard, enjoy an additional discount and long campaign allowing MasterCard users to win trips and tickets towards the Champions League match on the set of front we dilute it with a selected group of our sales manager or Junior pay business platform, which covers payment financial services and marketing tools.

while the payment in closed-loop wallet functionalities of jumia

So far being consumer-facing this initiative allows us to explore the merchants and SMS Market starting with the base of sellers active on our platform.

Moving on to the performance of June 2019 on flight eleven Junior TV increased by 57% year-over-year and is led to an increase in a situation of June to 15.2% of GM be in Q4 2019 versus 9.4% in Q4 2018 here. I'd like to point out that you spend nutrition you calculate it for the total drama GM's when Junior pay is currently only available in six markets some of which we recently launched if you take the same number in Nigeria or Egypt where it immediately was launched in 2017. It's of course much higher moving on to page twelve doing a pig roast friends are even stronger on the transaction page.

The number of juniper transactions jumped 110% year-over-year. We had more transaction the Q4 2019 then during the entire year of 2018 month lease led to an increase in the penetration 29.5% of orders in Q4 2019 up from 21% in Q4 2018. Our majah, please business is a powerful fly wheel drive, the penetration of the junior player is also a driver of consumer acquisition and usage in its own right with the grass range of everyday digital service is available on the Junior app.

I know.

Vertical remote one will walk you through our update on our financial performance.

Thank you Jeremy. Hello, everyone.

We all know on page fourteen.

In parallel with driving usage reduction of our platform.

We seek to monetizer agent transactional activity in a gradual manner.

Marketplace Revenue increase in Q4 2019 by 60% year-over-year. Oh primarily driven by increased usage of our platform and our efforts seem to be in charge is shoot of relevant services to our platform participants.

gross procedural Rose 64% year-over-year to 24.8 million

gross profit margin rising to 8.2% of g MD up 336 bits in twelve months

We are very pleased with the material Step Up in gross profit as this is Takia result or the enhanced promotion of discipline we enforced as well as the rebalancing of our business mixed or a small business.

Let's know take a closer. Look at all values Marketplace revenue streams on slide system.

Commissions which are filled chance to offset has increased by 62% year-over-year.

Let me see growth outpaced Jimmy growth as a result of an increase in the Shelf product categories with higher average commission rates.

Notably fashion and Beauty as well as enhance promotional discipline and reduced deployment of consumer in incentives some of which are accounted for as our options from commission Revenue.

Which element which comprises delivery fees charged to Consumers increase by 52% year-over-year in Pearland was ordered Rock.

Changes in the packages mix notably an increased proportion of packages shipped from overseas Sellers and increased delivery outside primary cities contributed to the increase in wage statement Revenue.

We sold double-digit gains in that you had to tell Avenue which includes Services provided to our salaries around Logistics occasion and content creation.

As we moved into 2019 we further expanded the false leg of our monetization strategy with marketing and advertising Services, which represented 9% off our Marketplace for the new. Thank you for 19.

Marketing and advertising Revenue more than doubled over your thank you for 19.

Let's no move on to the progress on cost efficiencies.

As a reminder, we have three main course in our p.m. Fulfillment costs, which is largely available sales and advertising expense which is discretionary to a certain extent and general and administrative expense.

Let's start with fulfillment expense flight 17.

We are pleased to report that our gross profit after fulfillment expense was positive in Q4 nineteen reaching 1 million euros compared to a loss of two point 1 million. Thank you for eighteen.

If you look at our fulfillment expense in absolute terms in 2019 compared to Q4 18. We see an increase of 38% off which is below or Auto volume growth.

He's worth noting that the full signal and expands is influenced by a number of factors such as the original package its destination as well as the type of good work shipping and its size.

when

We did drive at the level of a given Logistics Roots. I am now on slide eighteen. We see that volume increases Drive fulfillment cost efficiency.

On this page, we're taking the example of the logistics route serving name of the addresses for small and medium-sized packages.

Our freight and shipping cost per package decreased by 24% in the course of nineteen.

This was largely a result of a trident digit increase in packages volume, which allowed us to increase the number of third-party Logistics Partners on the route and drive more competition among them.

This of course apps negotiate better rates on the cost per package.

So the Fulfillment cost is very much a scale game and effort to drive usage and hire purchase frequency of 3 to extracting volume driven saving money on the valuable cost and operating leverage on the cost of the physical infrastructure.

For several main cost component is sales and advertising. I am now on slide 19.

Sales and advertising expense increased by 14% into 419 why we grew orders active consumers and GM vehicles most categories much faster.

Oh sales and advertising expense for annual Active consumer in nineteen decreased by 21% from 11.618 to 9.2 in nineteen month. We've been very disciplined with our marketing budget and South to increase Returns on or marketing Investments by increasing the share of traffic on the app which helps reduce re-engagement off.

Finally offered major Costa Rica is technology engineer. I am not fly twenties.

Our technology and content expense increased by 18% on a yearly basis as we continue to investing in our Tech infrastructure.

Jimmy's on the rear we've seen enough, please in our cost base in the cost of nineteen compared to eighteen as we set up the infrastructure to operate as a listed company.

YG NX SBC increased by 45% in the first nine months of nineteen compared to st. In eighteen the rate of increase significant decrease in the fourth quarter of nineteen. Eighty 80%

We eat or 2.2 million of restructuring expenses as part of both fully optimization.

And it can transfer station initiatives and we expect to see the benefits of this initiative over the coming quarters.

I'd like to give you more color on what is included in this one point seven million of GNA excluding SBC and restructuring expenses.

The largest components staff cost which is 31% of the total of 10 million euros in the fourth quarter of nineteen.

The main area where we expect the savings from the actions. We took in Q4 nineteen to materialize.

Then approximately 25% coming from the appreciation and amortization provision and other non-cash expenses followed by 23% coming from professional wage and subcontracts, which include expenses related to legal and services.

And another 21% of older GNA which includes office and infrastructure costs.

As a result of increased usage increased monetization and cost efficiencies. Our unit economics are improving.

I am not on slide twenty-one.

Our adjusted. Yeah, excluding restructuring expenses increased slightly in absolute terms from 48.6 million to 418 to 51.2 million to 4:19.

The business mix rebalancing window to the clear impact on our unit economics in to 4:19.

We have smaller size but more profitable orders.

On the table on the right hand side. You can see that white or average already decreased by 35% from 56.2 to 36.4 the author's contribution or gross profit minus fulfillment expense on order basis from positive to $0.12 per order.

Our cost efficiencies drove a 24% decrease in of extra order.