Q4 2020 Jumia Technologies AG Earnings Call

[music].

Good morning, ladies and gentlemen, thank you for standing by welcome to Gemayel's.

The conference call for the fourth quarter of 'twenty 'twenty at this time all participants are in listen only mode. After management's prepared remarks, there will be a question and answer session.

I would now like to turn the call the effort to soften the Damir head of Investor Relations for Jimmy. Please go ahead.

Thank you good morning, everyone and thank you for joining us today for our fourth quarter and toward the year 'twenty 'twenty earnings call with extra day fresh that's when your neck and jetted, Rebecca co founders and co Ceos of Shin Young I granted I'm 20 units a day, yeah cool it for Eagle for being webcast.

The IR section of our scoop rates of attack it.

I'll start by covering the fees hybrid where we'd like to remind you and I were.

Our discussions today will include forward looking statements actual results may differ materially from those indicated in the forward looking statements. Moreover, the forward looking statements may speak only to our expectations and that's the day, we undertake no obligation to publicly update or revise these statements for.

The discussion of some of the risk factors that could cause actual results to differ from the forward looking statements expressed today. Please see the REIT.

Expected section of our annual report on form 20-F.

Ended on July 8th.

In addition on the school, where you referred to so we can finance the measures not reported in accordance with paying for it you can find reconciliations of these non I have great financial measures for the core funding I ask for a financial measures. The now we're earning for two reasons.

Which is available on our Investor relations website, the bats, and handle part of Sunshine.

Thank you thank you for.

Welcome everyone and thanks for joining the call I hope that you're all staying safe and well.

The focus of our strategy has been very clear and remains unchanged.

The sustainable platform.

Capture of this great opportunity of E Commerce in Africa.

What we mean by sustainable ways to bring indisputable facts and evidence that our business model positions us well to become profitable.

And as you can see in our results.

Here are the facts for the culture.

Number one we have reduced our adjusted EBITDA loss by 47%.

We are now for five quarters in the row profitable after fulfillment at group level.

The majority of our country is now breakeven before Jimmy.

We are growing the usage of junior in the categories, which we have chosen to focus on.

And we do all of the of ball with lower G&A expenses, and lower sales and advertising expenses. So overall, we feel very strong about those results, which in the plane more evidence of the strength of our business model.

If we're looking to share more details on page four of the usage of junior.

Of course of 'twenty 'twenty was marked by the business mix rebalancing towards the higher share of everyday product categories and the strong focus on efficiency, ensuring that the usage would drive has attractive unit economics.

We drove down the share of phones in the electronics from 56 243 per cent of Jim.

We achieved despite improvement in cancellation for all of the New reason returns, which went from 30% to 25.

You mean debt the usage, we drive is more efficient and can be better monetized.

G M D and older is post ph D. R has been growing by 16% and 19% on all of the business outside of phones in the electronics, which is the business we have deliberately chosen to reduce.

On use age for us it was the year of choice of growing selectively and efficiently.

And the IP.

<unk> increased by 58 per cent and the penetration that has now reached the 35 per cent of boulders at group level.

We added more than hundreds of digital services on the gym, okay up in order to bring more one of them and convenience for consumers.

On the revenues.

Marketplace revenue and gross profit increased by 20% and 22%, respectively, and our gross profit margin as the percentage of G&A increased by almost four points now reaching 12%.

And last but not the east to be generated significant savings equal across all cost lines.

And we now have the leaner more efficient cost structure of fulfillment expense went down by 10% sales.

Advertising went down by 42% and G&A outside share base compensation went down by 12%. So if you look at our P&L, we're growing the possible use age we're increasing the gross profit theft of fulfillment, while the trees in G&A and sales and advertising. So mathematically we will reach break.

Even if we continue to do that.

On page five.

In 2019, we set for yourselves for clear objectives.

Reduce our loss in absolute terms and I think it's clear very clear of the Weird Guinea brain strongly against that objective, we've reduced the adjusted EBITDA loss by 10% in Q1.

26 per cent in Q2.

15% in Q3 and 47% in Q4.

And this progress importantly was achieved as the result of driving both more profitable usage and lower cost on.

On the page six you can see.

How we have transformed our P&L over the last two years.

In 2019, we were still not making money after the logistics.

And overall for every older which was placed on the tough one we were still making the leaks.

And you can see also of our crossword moving.

Now you can see how gross profit that's the fulfillment of kantar.

<unk> is the increasing.

Having rebounding the category mix and leveraging the leaner cost base. Each older. We now generate takes us closer to Boston.

And at the same time of the cost structure is clearly becoming more efficient across the books. So once again the clear evidence about the past the profitability at the P&L level.

On page seven free zone on the unit economics for the culture.

Our average order value is now 29 years.

That's 19% smaller than last year.

And every single component of our economy.

The improved.

Gross profit for the older cars, 15% gross profit over Jim G plus almost four points growth.

Profit after fulfillment now one year ago, when it was 0.1 last year.

Sales and advertising minus <unk> 33 per cent of older Tech and G&A minus 28% of older.

Another progress made both of them.

Of the 11 using of the cost.

And the progress as we have been talking about has been achieved without the tailwind from COVID-19.

We discussed over the last time.

Dan.

We discussed the Covid did not lead to any drastic changes in consumer behavior.

On our platform and nor meaningful surge of volume of Pan African level.

Robert It had a net negative effect on the business due to localized supply and logistic disruption that we have been experiencing throughout the year.

Obviously the situation is.

Moving we continue to monitor and particular, the rising cases, the rollouts of the vaccine and the what speed that will happen and the overall negative impact on consumer sentiment and spending power.

What's important is debt.

All of the actions that we took last year and in 2019 and 20.

Whether it's the increased focus on everyday categories or the cost efficiencies the regenerated and also the proactive capital raise that we conducted in December.

All of those action day, and hence our resilience to the volatility macro volatility and the position us very well for the long term.

And I'll conclude by sharing with you on page nine of few of the net.

The initiatives, we undertook this year.

Our key priority has been helping our people consumer sellers and communities we serve.

Stay safe of course, and as much as possible functioning through the prices all of those initiatives. The illustrate how important it is for us to drive impact beyond our day to day operations.

Im obviously happy to give you more color you know of discussions on all of this our mission.

And all of the values drive our actions and we are immensely grateful to our teams our frontline theirs in particular, who have shown the embody these values and acted with an incredible sense of purpose resource will match them. The education. We thank you all very very much for that.

And with this I'll hand over to Jeremy.

Thank you for that Shaw Hello, everyone. Our focus in Q4, 'twenty 'twenty and in fact throughout the whole year, what should drive the usage with one of high level of marketing efficiency and to the disciplined instead of keeping money are they going to category. The sports at the consumer lifetime value and of course the beaches.

Thank you David on the first point you can see that in Q4, 'twenty 'twenty, we continue driving usage with the very strong marketing efficiency.

Having built over the past nine years, one of the strongest brand in Africa, where nobody better to be much more tactical and much more efficient in our sales and advertising expense.

We reduced our season advertising spend by searched for per cent yoga ye the GMT was down 21% of yoga year of reaching 200 in search of 1 million in Q4.

Phasing of advertising expense for older decreased by 33 per cent rightholders declined by three percentage.

On the other hand, why and you will see the advertising expense per annual active consumer of decreased by 14, 8% year over year.

The electric consumers were up 12% with growth, both new and returning of consumers.

It's worth nothing that the gyms the old.

Actually the Rekey, the by 23, and 21% respectively. In Q4, 'twenty 'twenty compared to Q3 'twenty 'twenty. She brought to the debate the Black Friday event that the we did in November of 'twenty Twentyish.

And despite the significant reduction in marketing spend in the 'twenty 'twenty you shouldn't of even we still reduced the record level of consumer engagement page views across our platforms reached one 5 billion drink, even that's sort of just 3% compared to last year and our black Friday of video content, but you're still the almost 100 million.

He was with the three times higher.

For the 2019 the event just speaks to the relevance of our platform and the content for consumers.

One of the thing that we monitor very closely when it comes to the use of growth ease of constellation free delivery and return ratio and the trends of our use of 18 to get the post shipyard. If you go on page 12, and you look at the full year 2020 trends, we see meaningful improvement in this ratio both as a percentage of the GMP and yogurt.

The GMP ratio improved from 30% in 2019 to 25 per cent in 2021 of your all the ratio improved from 22 per cent for 16 persons.

This improvement means that our usage is becoming more efficient.

It was a higher proportion of the groceries, each can do monetize and our marketing investment even more efficient on the nitpick.

And in fact, we have been growing the perfect type of usage GMT and older supposed shipyard.

Been growing by 15, and 19% on all of the business outside of Florida in electronics.

The business, we have the spirit each for them to reduce in the context of the business mix rebalancing that we undertook.

If we look at page searching the impact of the business mix rebalancing.

One we reduced our reliance on for the next one which went from contributing 56 per.

For some of our Jim's last year to 43 for some of these here.

The empowered in of our average order value decreased by 23 per cent from search of ninth of sorts of euro as the everyday.

Every day categories, such as Gucci of M. C. G fashion, which are gaining prominence on our platform and Jim Yeah, typically lower to get sites.

And three while it's smaller than the average.

The other are also more profit the multiple stabled at gross profit up there for a few months of expense for older went from the loss of 10 cents in Q4 2019 to a profit of eight to 10-Q for 'twenty 'twenty.

So when the completion on usage, we grew where we wanted to and very efficient we have a better mix of categories did in the year ago and much of it or you need to Colombia.

Let's now look at two metrics on.

On page 15.

The TPG increased by 30% from 46 million in Q4 last year to 59 million Euro in Q4. This year thinking on platform penetration of junior debt as a percentage of the GMP from 15.

The 25, 7% and two for this year.

On page 16 of junior.

Net debt transactions increased by 10% from two point for me last year two points of $7 million this year, which transactions of both 10, Europe, which include prepaid for changes on the junior physical good marketplace and threw me off of the platforms growing by 55 per cent over the same period.

Overall search of $3 one per cent of the oldest fleet in the junior platform in Q4, 'twenty 'twenty were paid for using <unk> compared to 29, 5% last year.

So junior debt.

We have beat the checkout solution that provides the consumer incentives with the fast payment experience.

Out of.

Consumers can create the junior account by linking it to another line of payments because of the charges.

And yet they still order to the relevant payment methods in Africa and income tax for more than 15 different underlying payment methods at.

It also underpins that you take stock of debt recorded 99, 9% of time in 2020, including during the major commercial events, such as Black Friday, where do you think about 100 per cent.

The other aspect of the junior debt that they'd like to spend a bit more time on the the junior the up which is the great way for us to provide consumers with more payments use case, that's the relevant to them and that drive the user engagement and stickiness for them.

Now on the page 17.

We're building the app with the view to making us the destination for broad range of lifestyle and financial services.

So first on the prepaid babies and Powerplay junior debt.

At the end of 2022 net the App.

Approximately 276 live in the App.

Well for like 33 partners across five countries in Africa.

Ship share in 2018, the App, we just start of over 4 million downloads and is highly rated by consumers. We're focused on building a diversified category of unique on the other.

With 43 per cent of 'twenty 'twenty, Jim he coming from airtime 40 per cent for me E G. The.

The net payments. We are also developing new work of degrees, where we see meaningful growth potential such as for intra services, which already accounts for 10 per cent of the dream of Jim G gaming, which accounted for 4% lifestyle services three per cent in transportation and travel get the glory, which are still nascent at this stage the development of junior debt the Wizards of the checkout solution.

And the broader business platform all of it.

The consumer facing to drop our key priorities for us and why do we have accomplished a lot since of the MTP ever dreamed up the four years ago, we have barely scratched the surface of the payments and Fintech opportunity in Africa.

And we believe that we're uniquely positioned skips the lights on these opportunities.

Moving now on monetization page 19.

In the context of the 21% of yogurt year, Jimmy contraction in Q4 marketplace revenue increased by 7% and gross profit by 12% over the same periods.

Taking a closer look at our youth marketplace revenue streams on flight Twitch the.

Commissions increased by 19% year over year due to an increasing the share of higher commission rate get degrees.

The fashion beauty always since the G as well as lower promotional intensity.

So the few months revenues increased by 14% at the <unk>.

Results of continue the shipping yeah, just men as well as the pricing changes well you know of cross border logistics.

We initiated these changes in Q3 2020 and continued roll them in Q4.

As part of these changes the portion of the international shipping fees that were previously charged to the centers of no passed onto the consumers. This change resulted in some of our international logistic revenue to be recorded as 14 months of the new instead of revenue from value added services.

The also what drove the 27 per cent decrease in value added services.

Marketing and advertising revenue increased by 30% as the result of the strength pick up by advertisers of gene.

The tagging solutions bunch of pillar.

Already during the Black Friday, where we run campaigns on behalf of over 150 different advertisers, including high profile partners, such as Richard thinking the L'oreal, Hawaii, PNG Intel and many more.

We intend to further diversify our revenue mix by monetizing nothing of the transaction and to use it for marketplace. The total the broader assets of our platform and we're starting to drive revenue from largest junior logistics, Let me tell you what.

A bit more about it on page 29.

Logistics in Africa are notoriously challenging with multiple <unk> such as the lack of thought dress. The lack of again, the organized and we like the blue capacity storage fee and shoes and some of them. So the pinpoint junior logistic you said wishing you the very beginning and one that you'd see the many of you since he's in the industry in Africa.

Was that the mine we conducted a pilot in 2022 opened up the logistics to third parties, whereas the centers on the junior market based on the beach.

Net clients can now leverage the junior logistics platform for their fulfillment.

As part of the pilots we shipped the almost half of minions package on behalf of more than 270 clients across five countries. We have outlined some examples for you on the Beach for example, the nature job we work with the bank major Yes first of all day on the bank as one of their preferred logistics Park North of did your prepayment costs for consumers.

In medical we work them using the detailed look at NTT of Orange or did you go about the cool operator did you ever seen called an activation kits the consumers.

Kenya, we work with Premier Foods, the global food and packaged good producers to have for logistics solution from their main warehouse narrowed to all of their distribution centers of course, Kenya the.

Sales of the pilots are very promising the traction we have me the first clients reinforced our confidence in the long term growth potential of this revenue stream and now its kind of virtual Antoine.

Thank you Jeremy Hello, everyone.

Moving on to cost and non page 23.

We have been driving strong efficiencies across the food cost structure.

Well, the Finland expense decreased by 18% in Q4 2020 compared to Q4 2019 as a result of operational enhancement growth of the logistics operations. These include the optimization of for cross border shipping metrics.

Of course savings in all fulfillment centers and the change you know then the repricing model from cost Brubeck H two cost per stop.

In addition, we were able to pass on an increasing proportion of fulfillment expense does the combination of consumers and sellers, the oh fulfillment and value added services revenue streams of the respectively.

The best true of all fulfillment expense measure at the ratio of fulfillment plus the value added services.

Revenue older fulfillment expense increase for from 64% in Q4 19, 276% in Q4 'twenty.

As a result, we are pleased to report the fifth consecutive quarter of positive growth profit after fulfillment expense, which reached a record of 8.4 million euros in Q4 2020.

I'm now on page 24 sales and advertising expense decreased by 34% from $15 5 million euros in Q4 19 to 10.2 in Q4 'twenty.

All marketing efficiency metrics are showing strong improvement.

Sales and advertising expense per order decreased by 73 per cent from 1.9 Euro in Q4 19 down to 1.3 growth order in Q4 'twenty.

Annual sales and advertising expense through annual active consumer decreased by 48% from nine to granular like the consumer to for H.

And sales in advertising as a percentage of the <unk> decreased by 88 basis points from five 3% to $4 four per cent.

These efficiencies are made possible by the strength of our brand.

The Oh, such repeatable to continue and then cement in 2022 of performance marketing strategy of growth search and social media channels, including through more granular segmentation of the target market with differentiated campaigns and content for each segment.

Finally, all food major cost of the reality technology in Ginnie.

And we are now seeing meaningful improvement here and the rationalization efforts undertaken 19 in 'twenty stopping us.

G&A expense, excluding the heat reached 21.8 million euros downturn.

Per cent year over year.

This was partly a result of stuff goes for addiction, and professional fees savings largely attributable to both for the optimization and cost rationalization initiatives.

Moving onto the balance sheet and cash flow I guess all back the profitability is further supported by our asset light business for that.

Back in queue for 2020 was 0.7 million as we operate Gmail logistics of the platform with very limited Capex requirements net Tianjin of working capital resulted in an outflow of $1.2 million in the fourth quarter of 2020.

And in fact for the full year of 2020 working capital at an inflow of ethic of 9 million of rose, thanks to improved receivables and payable cycles as well as lower inventory needs.

Cash utilization for the quarter defined as cash used in operating and investing activities was 27 point of 1 million erosion in Q4. This.

This compares to a cash utilization of $52 9 million euros in Q4, 19, and it represents the 49% of the grid year over year.

Cash and cash equivalents position at the end of December 2020 was $304 9 million euros.

We completed a follow on offering in December 2020, as part of which when you raised 203 million in gross proceeds.

We strengthened the balance sheet and increase our brush and the flexibility as we scale the business the loss profitability.

With that I'll handle the session for concluding remarks.

Thank you. Thank you guys.

So if we step back once again.

Our strategy has been true.

Of the sustainable platform.

To capture of this great opportunity of ecommerce in Africa and price.

The form of wing to bring those facts of evidences that the business model positions us well to become possible and here why is that sort of important to us.

Because as we've discussed in the past we operates.

And we think is a completely proven business model very successful everywhere in the world and I can tell you bring alibaba.

Amazon.

Two.

We have a great macro opportunity, we'll break some of the huge continents, which we see as untapped with amazing growth plus the growth prospects and.

And three we have proven that weekend of operationally overcome the major challenges in Africa Penguins, they'll just think of consumer and building a marketplace and so the only remaining point the only remaining point is to make sure that as the business scales. It is profitable.

And this is why for US we are so engaged in this phase.

And the fact that I don't think we are still bringing over the last few quarters.

Our I think very goods and they are very clear we have reduced our adjusted EBITDA loss you can see 47% of mass culture. This was the clear objective of them with daily build on it.

True.

We are making money.

I would say almost structure of the aster fulfillment interest in 2019, we were not making money, yes true fulfillment and Nelson cultures in the world. We are doing that the more usage of junior the more profit I think it's pretty clear that the model works.

Free we're still growing and we're growing the profitable usage, where we put our focus the genes of the older is post the cancellations and CSD all have been growing by 15% of 19% of all of the business outside of swung in the electronics.

And we have grown the consumers by 12% of this year.

We have.

In Q4 of the majority of our countries.

Our now breakeven.

For profitable before taking G&A expense.

And as you have seen the P&L bionics for knowing the profitable use of H, we are increasing the gross profit after the procurements and we are doing this while decreasing G&A in children under guidance. So we are in a very.

Good positioned to reach breakeven if we continue to do that.

That's been the strategy. This is what we are focusing on and this is what we intend to continue to do until the job is done on the cost of easy question.

At some point.

We expect that we will have enough of those indisputable fact for.

The call the profitability milestones to put the profit to meet the question behind Us and at this point, we are going to invest more in older true accelerates the usage growth and at that point in time, we will be very comfortable of doing so.

We have a huge opportunity of heads e-commerce delivery payments logistic.

In Africa the accounts.

With more than 1 billion people, we have an amazing platform to capture those opportunities and with those recent results, we feel more confident than ever about the strength of our business.

We are clearly seeing its financial performance coming together.

Thanks for listening in and we are now revenue for questions.

We will now begin the question and answer session to ask a question you May Press Star then one on your telephone keypad. If you are using a speakerphone. Please pick up your handset before pressing the keys.

To withdraw your question. Please press Star then two at this time of a pause momentarily to assemble our roster.

Our first question is from Aaron Kessler with Raymond James.

Please go right. The thank you guys.

Couple of questions, maybe first just maybe from a macro perspective, what do you think it will be kind of the catalyst for maybe an inflection of e-commerce adoption across some of your key markets. We've I've only seen smartphone adoption increased meaningfully over the last couple of years, which has been kind of accounted for in other kind of market for more E. Commerce adoption. So what do you think the what kind of lead.

The key cost over the next couple of years, and then I think you mentioned kind of leaning back into marketing a little bit should we start to see that in early 'twenty. One of late 'twenty, one or what how are you thinking about timing of winning back into marketing. Thank you.

Thanks, Alan and thanks for the question I think of on the macro it's as you know and the way. It's it's you can call. The other 1 million dollar question.

Some way and the what's important here is to share with you for us number one.

And with net build the business expecting or hoping an inflection.

We've built our business so that as we continue to scale is there is never an inflection that you can just continue to grow in works out it's not like we have here in their sales and we must hit that inflection point or is that J curve or the hockey stick or however, you call. It we are geared so that's if we continue glad.

Like this for the years to come we will be in the very good place. So that's one thing which is due impart to the.

Secondly, and.

What are today the barriers for the adoption of E. Commerce. When you look at it we have published some data and knowledge since about a year ago, but I think it remains very true about the barriers to use age for the people who have never used E. Commerce and we took you know in our largest markets. Some people who have never shopped on.

And we ask them do you know Julien.

And the answer was 70 to 74 per cent of the people new Julia we.

We ask those people do you consider trying and 66% said that they were keen to try it so very good awareness consideration.

And then when we asked them why are you not shopping online for the free answers, which we're coming out the most work.

Because I don't know how to shop.

Because I don't think products for genuine for it because they cannot check the quality of the products.

And when we look at those facts.

The consumer survey the good news is that all of those barriers or mental barriers. They don't have infrastructure. It's not like people say, Oh, I don't have internet or I need something that they don't have today, it's something which is you know getting used to it becoming comfortable with it gaining the trust to transact with the platform.

Understanding that well people can actually check the quality of the product with the reviews. They can return the product and you know and so on and so forth. So it's really about this this education now having said those two things look we the.

May hit the inflection point, there may be a point, where suddenly a lot of people and start buying online and.

For example, some some some people say that the the generation, which is digitally born you know the day that people, who are 18 years old 20 years old tween tween years old, let's say the ear now born with the mobile phone and when they will become kind of consumer in our consumer targets and maybe for God sakes.

Seven years, well they will be comfortable they would know how to shop. They will you know.

The new how to check the quality of the product so those mental barriers as the new generation and sort of enters into the consumer segment market. One can argue that all of those young people. They will not happens barriers right and by the time, we may find this inflection point, but again.

We can hope for that we can and sort of construct it but for US we we do not and let's say, we do not want to create the company that neither the inflection no we need to continue what we're doing last 12 months, we had 7 million monthly consumers transacting on junior we operate in the 11.

Markets, where there are 600 million people and are growing so you know there's a lot of consumers that we can go after and if he has to continue for some time with the same growth then I think we're in the very good place if there's an inflection even better.

In terms of marketing, we manage it very dynamically and.

And so this is something that it's a bit.

Hard to give I think the the points and where the where I sense. Your question is when do you enter this next phase where you feel more comfortable investing more for faster growth and and Hmm.

When are you done with the focus on profitability.

It's hard to tell but certainly we start to feel good about it and when you look at the fact that I mentioned during the fall and then the fifth cultures and the rural where we're making money on an after fulfillment of a bunch of countries. The chart profitable before G&A, we're getting there. So I think a few more quarters, but the I think you know what.

Get them there.

Great. Thank you.

The next question is from Cornell and the Permian with Renaissance capital. Please go ahead.

Hi, everyone. Thanks for taking my questions.

Two questions for me. Please firstly could you comment on your growth outside phone and electronics category I think it was about 15% up to see MTR, which last year, which doesn't look particularly high given the stage of market development. So I'm just wondering what prevents the foster growth in your view and how.

Do you see trends evolving going forward.

That's the first one and secondly could you update us on the competitive situation in Egypt, how does the growth that compared to the overall market or your main rival and generally given adopt the competitor of that versus other countries do you do need to do anything differently in Egypt.

Versus your other markets in terms of marketing investments or logistics or anything else. That's it for me. Thanks.

Thanks for those questions and.

I think of the first one we will you know over the quarters and over the years always wanted to appreciate the the growth to be ever with the with the I would say equation of the efficiency both from the markets and the efficiency and from a unit the economy perspective, right and I think of this U S.

Seeing that we have the.

A lot of emphasis on marketing efficiency that we've reduced the several other type of them all.

Almost a third right a day, 34% between between the two quarters and we are comparing with reduced.

And of course and will increase the efficiency with that right. So I think it was.

One two to appreciate that and as well you know the the growth can be.

The function together with the marketing efficiency with the I would say monetization pressure that you're applying right you can see that our pass through of the fulfillment expense for the consumer than the other theres been continuously increasing so we are really being very disciplined in terms of the free.

Free shipping discounts Ah price subsidies, and you know and marketing campaigns and tons of work right and I think we are definitely happy to see that we're growing 16% considering the the amount of efficiency improvements that we are generating on the sales and advertising.

As well as of the amount of efficiency that we have driven primarily gross profit perspective.

And the as.

As we think about the future and you know when we enter the next phase we think that we can we need some of the efficiency constraints nights and that of course the growth will will do also faster. So I think it's in the equation here and again it has to be appreciating together with the other component of the of the equation.

When it comes to Egypt.

And of course, Egypt is the very big focus for US it's of markets that we have been active for many years and overall within the voluntarily excluding the digital is the second largest market for us.

Those two major area and definitely we very much of the power playbook to the competitive situations in the sense that.

And you know we.

When we.

We do not go with the same marketing formula in a country, where we have more competition than the country, where we have less competition. We don't put the same pressure on you need the economies and we adapt I would say two of the competitive situation to two of large extent, but most importantly, we adapt our business model and we tried to for.

Because on adapting to the local Stacy for tickets and our playbook the junior playbook in how we execute and the.

The business with the sellers with the consumers with the local stakeholders with the brands the assortment in very adapted to the local specificities.

And I think for US really GP dollar is our second largest market then and it's in our mind every morning, and every night Dimitry of unit.

As the minutes and I'm not sure through all of our competitors the thing focus right and at the end of the day you win E Commerce, because you win the execution and you win because you have the right assortment of the right pricing the right and brand the rights of way to engage with the with the sale of there's with the consumers with the stakeholders in Egypt recently.

We also announced the junior food, which is our food delivery platform. So this is their new this is the end for a couple of weeks now and we are launching it as we speak and so the consumers you know when you think about junior they think about E. Commerce. They also think about Jimmy of PE right. The load of use age of junior pay too.

The payments in utilities, and so on and they also now can use journey of food and so as we bring this rather than sort of the consumers. This is also for us the differentiating factor for for consumers who prefer using June.

Okay, great. Thank you.

Again, if you have a question. Please press Star then one the next question comes from Sarah Simon with bearing the burden.

Go ahead.

Hum, Yes, hi afternoon, everybody I've got a few questions.

The first one is on marketing spend in Q4 of them see it stepped up the.

Versus Q3, as you'd kind of expect for the seasonality the customer growth didn't increase very significantly. So can you talk about what you spent the marketing money on.

Second one is you know.

Obviously, the gross profit off the fulfillment expenses growing very strongly but even if you keep all of your.

Fixed costs below the gross profit off the fulfillment line slides you need to basically increase that number by a multiple of for to get to breakeven, but you'll not growing that fast at the moment.

So I'm just wondering how you weigh up the the idea of are of such a steady path to breakeven, but maybe slightly farther away for us to say more aggressive growth push the wood.

You know it leaves you more money more quickly, but probably get you that foster because you don't have the balance sheet issue now.

Now you've raised the capital.

Hum just a question that you hope to see you highlighted the GDP sensitivity to the pace of sort of pandemic effects.

Would you agree that your debt the cause of the focus and the the shift in emphasis towards more small of an everyday items it should be.

Sort of less.

Reliant on G D piece of more resistant to the echo.

One of my actual selling small everyday items and if you're selling bank my boss items for example, thanks.

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Thanks, Sarah and I think if we start with this one day I would agree with you right in the end I think.

The the fact that we are well positioned on the every day category is different.

And the positive and helps.

At the same time I mean, you you see the share of business from the tundra in electronics I mean still at 42 per cent rights in 2020 so.

There, there's definitely for us an exposure to the to some higher value items and they think the sentiment among the consumer I mean, you know is what it is right now with all of this uncertainty. So we'll see what happens and I think we have proven in 2020.

They're redeeming debt.

We have relevance for the mirror reflection and of what the consumers do and spend and you can see how diversified we have been showing this in the previous free needs. We have a lot of exposure to fashion fast moving consumer goods and junior food.

The old now with the digital transactions you can each of them et cetera et cetera. So we'll see what happens I would agree with you but at the same time, we still have exposure into high value categories. The niche.

As the market goes down in those categories, we will see what happens right. So I think generally agree with you, but but to take them.

All of those those facts to keep in mind.

Now.

On the marketing spend your first question and the trees I think of the consumer growth we have to be always quite careful as you compare the spend of marketing between Q3 and Q4 and if you look at the last 12 months of consumers because you carry of of course, the last four quarters.

You know and when you compare the last four quarters at the end of Q3 with the last four quarters at the end of Q4, there could be some dynamics from last year that you are carrying on so in general. This is something that you know you one needs to be just careful because you compare two cultures in the case and the other case you compare to training.

Months, Terry So just just to keep in mind and where we spend the marketing is very much of it makes sense for the data driven very programmatic tech driven online marketing, which we use to drive both new users new App users who are downloading the app and then you know we use.

And the spend to should take them back to the platform until they can converts and then we use so that the technique to to bring back some old users and we call that would be targeting specific users to bring him back to Julia so that they can discover new products. I mean typically these are for you.

And so on and then we have a lot of the local marketing and local engagement and here of course, we of our J Force program, which is very successful in many countries, where we have the sales consultants and dozens of thousands of consultants for it.

You know, the educating consumers and ginger and helping them discover and how to use. It. We also have the lobs net works of the local and you called out you can pull the influencers against the local key opinion leaders war for.

Hosting the deals about Juneau and explain to their users how to use it in and how to take the quality of the products you know in all of the things I mentioned do I run the about the education and then every once in a while for Black Friday. We had also some typical of offline spend billboards and the end.

And the video campaigns on Youtube or on the <unk> and things like that so it's a it's a it's.

It's how we do it in and the and usually there's a spike of of marketing towards the Q4 as you as you pointed out.

And then how do we get to profitability with the with the various aggregates.

Yes of course.

As many way we can we can get there as you as you pointed out and when you look at the the rate of growth of the gross profit of the protein and versus the amount of costs of course, you have to put the amount of close to the dynamic way and you can see all those costs. The other thing going down right. So and then there's the possibility that those costs can go down of course.

And the there as opposed to needing to go there with a faster growth of growth.

Gross profit that's the fulfillment and this faster growth of the gross profit the simple hyndman can come from of course more usage right more older as more consumers more Dnb 30 also can come from more of monetization of our platform of assets right and typically junior advertising.

Typically junior logistics the revenues that we drive from those of course, when we bring revenue and they bring in a strong increase of the gross profit of the fulfillment, even if it's not relating to the junior consumer right.

I think where we're well we're very confident that we can accelerate the growth of the gross profit I spoke with him and either through more use age.

And or more revenue streams, which are met we need it to the usage because you know with announcing those and true we feel confident that we can either keep article of stable or even if we have to we can still take them out right. So I think we have lots of ways to get there.

And then.

And I think also the at the point that we were trying to make it is we are really focused on bringing the facts and the evidence is of the of the passing of profitability right and the and that's what matters more to us than actually reaching profitability at group level right. We wanted to we wanted to be very comfortable.

That's the the muddled completely works and the evidence and facts are very clear.

And the rather than saying, we must absolutely breakeven for one full year of group level right. It's more about continuing to windows milestones continuing to bring those evidences of that there's nothing in the docks.

For now, but can I ask one follow up question, which is sort of asked about task initially theres been quite a bit of chest about my of shipping cost coming out of China higher freight costs.

Impacting the business the total and if it is how are you passing it on to the consumer.

Yeah, very good question and the yes, there's been an and and.

And you know, our our cross border business from China.

Well, let you know Oh.

Double digit or you know tens of 15% of the items sold right. So that's how much we are talking about for June of this cross border business and the and it's been working very well and the increase in freight costs of course they are.

You know there they are a problem, then obviously and they're not helping right but at the same time look we are that's why I say, we are sort of diversified and this is just one area of the business. So it's it's not been helping definitely and.

Then we use a lot of for them.

We use a lot of data science to define you know the optimal pass through of those trade costs, both for the consumers into the sellers right and there is of course of the relationship between how much you're back to each and the conversion rate of the items sold and the perception of Tso and <unk>.

And so this has been something that I would say the constant optimization when you of a certain amount of free cost you may decide to do Hyde, that's quite important to the price of the product where you sometimes want to put it the as very identified price costs, sometimes you want to give it as much of the teller into the consumer. So it's you know non.

So the shortage of dynamic equation, which are very data driven but something that of course is not are not helping and the impacting but again like you know we.

We are diversified so it's.

Something that we did nuts.

It was worth commenting that piece of proactive me, but we are we are we are the loves hearing of course the.

As an answer.

Thanks, a lot.

This concludes our question and answer session I would like to turn the conference back over to the SASSA for any closing remarks.

Well. Thank you very much as always for your support for a 10 one of them and we're very committed also to explain what we do and talk more so.

Should we we're still a young company and now two years into always do reach out and we will be happy to to to discuss and explain and talk more about what we do thank you very much and stay safe Guy take care Bye bye.

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