Q1 2022 Jumia Technologies AG Earnings Call
Good morning, ladies and gentlemen, thank you for standing by welcome.
Welcome to the Zumiez results conference call for the first quarter of 2022 at this time all participants are in a listen only mode.
After managements prepared remarks, there will be a question and answer session.
I would now like to turn the call over to soccer team here head of Investor Relations.
Presume Yeah. Please go ahead.
Thank you.
Good morning, everyone. Thank you for joining yesterday for our first quarter 2022 earnings call. We that's P day are such that when you make <unk> co founders and co Ceos, absolutely yeah and.
Yeah.
School is also being webcast on the IR section of our corporate website, we will start by covering defeat hybrid do we'd like to remind you that our discussions today will include forward looking statements actual results may differ materially from there as indicated in the forward looking statements. Moreover.
These forward looking statements may speak only to our expectations as of today, we undertake no obligation to publicly update or revise these statements for a discussion of some of the risk factors that could cause actual results to differ from the forward looking statements expressed today. Please.
Please see the risk factors section of our annual reports on form 20-F, I established on April 29, 2022 windows that were other submissions we'd be atkinson in.
In addition on this call we will refer to certain financial measures not reported in accordance with Ias for it you can find reconciliations of these non <unk> financial measures to the corresponding <unk> financial measures in our earnings press release, which is available on our Investor Relations website.
With that I'll hand over to Sascha.
Thank you very much welcome everyone and thanks for joining us today.
Before going into the specifics of performance I would like to briefly remind you of.
Our current strategy on page three.
We are currently focused on scaling our platform and older to build a fast growing and profitable business in E Commerce and Fintech in Africa.
We have built very strong foundation for our platform.
Tailored to the specifics of our markets in Africa.
The marketplace, the logistics platform Julia pay payment and index solutions.
We played the long game from the very beginning to position us for long term growth and profitability with.
With this in place we focused on building robust unit economies.
Sequencing here is very important we wanted to first.
Solid unit economy for the business before accelerating growth.
We reached the important milestone of positive older contribution after logistic cost and it's now been the case for 10 consecutive quarters.
In parallel we strengthened our balance sheet raising $517 million in 2021 and 2020.
And we worked on enhancing the diversity and the relevance of our marketplace and now two thirds of our GMP is coming from everyday product categories.
On that basis the.
The strong platform.
Do you need economies, we are now scaling the business towards profitability.
They are free.
The building blocks to achieve profitability number one.
Reaching usage growth number two.
Actually reaching monetization and number three.
<unk> cost efficiency.
Of course junior pay remains a priority for us to drive the long term value creation.
Now, let's go into our quarterly highlights in Q1 with delivered strongly.
Those building blocks to page four.
Accelerating usage rose in Q1, we posted the fastest.
Year on year G N V and older growth.
Of the past nine quarters.
7%.
And 40% respectively.
Next page.
Accelerating monetization.
Excluding consumer incentives, which are marketing investments revenue and gross profit year over year growth rates also reached their highest levels over the past nine quarters, 56%.
And 31%.
Number three next page improving cost efficiency.
Sheldon advertising for older and as a percentage of gmg.
Both reached their best levels of the past four quarters.
For older and seven 5% of Ginger and this improvement is taking place while we are accelerating usage growth.
Consumer incentive efficiency.
Consumer incentives are accounted for as revenue deductions. This efficiency is also improving.
Sequentially, reaching 15% in Q1 compared to <unk> 18 in the third and fourth quarters of 2021.
This is very much in line with what we communicated to the market.
Our last release back then we said that the focus.
700 tightening over the subsequent quarters would be to increase the efficiency and that's exactly what we achieved in Q1.
Finally before.
Going into more detail as we move to page seven our adjusted EBITDA loss.
We have of course been closely monitoring the fundamental macro and market shifts which have been taking place over the past few months and.
But you are still unfolding, we are very comfortable in our past and execution towards profitability.
In terms of adjusted EBITDA.
We believe we are past the peak of quarterly adjusted EBITDA loss was reached in.
In Q4 2021.
We also reiterate the guidance of $200 million to $220 million adjusted EBITDA loss for the full year of 2022.
Starting from 2023, we expect to begin decreasing.
Adjusted EBITDA loss on a year over year basis.
Now I'll hand over to Jeremy to give more color.
Highlights of our Q1 results.
Hello, everyone.
So we're on page nine we are executing with consistency.
To accelerate the usage goes.
Overarching objective continues to be further enhanced junior.
Digital distribution for everyday needs and because we're known for Tvs in Africa through a combination of marketing commercial logistics and technology reviews.
On marketing, we continue our investments in consumer adoption and retention.
The blender awareness is crucial, particularly as we operate nascent e-commerce markets. We're very pleased to see do not ranked number six in the 2021, most influential brand survey.
Out of a total of 118 international and local brands up from seven position the year before importantly became number one the digital and E Commerce category for the second year in Europe .
He's a very good achievement.
<unk> is our second largest market and one where we operate alongside Amazon does.
This is a testimony to the strong execution of our team on the ground and I want to send them for the airports.
Also incredibly grateful to our customers for their trust and we continue to work very hard on bringing the more convenient and relevant.
On commercial we're focusing our execution on further penetrating everyday product categories.
Q1, 2022, we added almost 1 million skus.
FMC did you get the <unk> the highest number of lease can you just got to go in the past eight quarters. We continue to work very closely with brands and.
An example of that either benefit in partnerships with established with Coca Cola and denim across both our ecommerce and food delivery platforms.
On logistics.
Execution on.
Further improving the speed of delivery and it's good to see the freedom.
For example, we are running out nixdorf, we should bring on generic items for basket sizes with.
The minimum threshold.
You May express.
And logistics service provider centers, where items are stored in our warehouse and people impacted by general.
In Q1 2022, while we're still early days of this rollout we already had 57% of shift strategy, reaching consumers within 24 hours of other places.
That's the big.
Mhm.
To accelerate unit growth.
Okay.
We are accelerating product development and new features where notes in Q1.
We then possession of our homepage, even product description BG through more engaging experience on the platform.
The consistent execution on these four leaders is what's driving the strong growth acceleration that you can see on page 10.
And pitched in first.
Q1, 2020 versus Q1 2021, we had more consumers buying more often that's exactly the kind of growth like we want to send our platform.
I keep consumers reached $3 1 million.
9% year over year.
As those of robust increases in both new and returning customers we have.
Driving a consistent increase in quarterly purchase frequency over the bedside quarters, reaching three orders for quarterly active consumer in Q1, this year compared to two points of and others sequence or the year before.
Second we posted in Q1, the fastest older in GNP growth rates of the past nine quarters.
Accelerating by 40% year over year, reaching 19 3 million.
Also boosted stringent P growth notwithstanding the ethics headwinds, Jim view, reaching $250 million to $70 million up 27% year over year and 35% on a constant currency basis.
Just to give you a bit more color on the dynamics of this quarter, we had 10 of our Midland local currency depreciated against the dollar in particular, the Nigerian Naira West African swine fever, and the more can be done depreciate by nine seven and 6% respectively against the dollar.
One this year compared to Q1 2021.
Regardless of that there is.
Very strong broad based momentum across the business.
On page <unk>.
You can see that we predict it to grow our drilling both Jim and items, Switzerland.
Despite the volatility and discipline to institution for foot and excellence, we drove positive inflection in Q1, and just categories, which contributed to both Jim and items circles.
Everyday product categories continue to be important growth drivers and they'd like to call out.
Did you forget degrees, which really stood out in terms of volume growth in Q1 2022.
As MTGE.
80% year over year, while food delivery was up 86% as we leverage both our e-commerce and food delivery platforms to meet the everyday needs of consumers and food items and staples.
And within those categories is also translating into robust GMT growth resistant into delivery growing by 75% and 61% year over year, respectively.
<unk> everyday product categories over the past two years through from demographic shifts.
Sure.
On page <unk>.
You can see that <unk> went from accounting for two 5% in Q1, 2020% to 33% in Q1 2022 and.
In contrast, boosted the absolutist and food delivery. So the contribution to G&A increased by four percentage points over this period from 9% to 11% respectively. In Q1 2022.
Within the everyday product categories, the home and for some categories remained consistently the largest product categories each element.
Two high teens share of the GMP average order values to the at $27 in Q1, as we further penetrate more affordable smaller ticket size category.
<unk> increased product category diversification and see her of everyday items not only a major driver of growth at solution, which is also providing more resilience to our business model as we increase our exposure to staple categories and Thats a crystal in periods of macro volatility such as the one we're currently doing.
Compared to a couple of years ago outlet from bigger faster growing and much more diversified than movements.
No move them to another key priority for us which is on page 14.
We achieved a major milestone in Q1 as we were granted by the Central Bank of Nigeria of payments service solution for Baidu license or.
Nathan.
This is an instrumental license that will allow us to stop before engineer payment processing solutions platform in Nigeria, we have now obtained relevant licensees and to start off platform payment processing in our two largest markets, Nigeria and Egypt.
Intend to scale, the business progressing and in a disciplined manner to ensure the quality and safety of payment solution for merchants and consumers both on and off platform.
Over the next few months, we will focus on adapting our payment product suite.
Off platform environment and build out additional relevant features for third party merchants.
In parallel we continue expanding the range of digital and financial services available to consumers on the genetics we.
We have provided clear example of an E doctor surgeries that we're piloting in May June , allowing consumers to access doctors will be looking for a monthly subscription fee of $1 <unk>.
TV partnership with <unk>.
AP consultancy group to assist the poor a global partnership of more than 30 begin development organizations as well as meeting Dr towards digital health service provider.
No move them to the performance of Jeanette the on platform starting with.
Page 15.
<unk> increased by 37% year over year, and 45% on a constant currency basis. Despite the FX headwind CPE fastest growth rate in terms of the past five quarters supported by the strong growth engine.
<unk> penetration as a percentage of <unk> reached a new high of 28% in Q1 up from 26% in Q1 do you before as we focus on increasing the penetration of juniper and the disciplined and gradual manner.
Turning to transactions on page 16 significant transactions reached $3 2 million in Q1 up 32% year over year supported by accelerating volume growth across the business and industry delivery category in particular.
Also two 4% of orders placed in Q1 2022 were completed using juniper compared to 37% in Q1 'twenty Benjamin.
I want to flag that we did increase <unk> penetration as a percentage of orders across e-commerce and food delivery platform with some very good transaction momentum in our e-commerce and food delivery platform, where juniper transactions growth outpaced the growth of the app transactions because of Geneva. The nutrition is 100% on the generic <unk> up there.
<unk> share of <unk> and the transaction led to a decline in yogurt in debit transactions per nutrition as a percentage of folders.
The growth momentum of genetic wanted some very robust and we are very excited to embark on the next phase of our journey impairments as we prepare to take our payment solution platform.
I now hand over to Antoine we walk you through our financial performance monitoring.
Thank you Jeremy Hello, everyone.
I will start with the monetization performance, which illustrates the progress in the second building block of our path to profitability accelerating monetization.
We want to balance fast usage growth with robust monetization of our platform as we built a diversified monetization engine.
That's exactly what we achieved in Q1 2002.
On page 18, you can see that as we posted strong usage growth, we delivered the fastest revenue and gross profit growth rates.
Yours, excluding consumer incentives.
Which our marketing investments in nature.
56% and 31% year on year, respectively.
FX was a headwind to top line growth this quarter.
So on a constant currency basis. These rates are even higher at 65% and 38% Joe on your respectively.
Let's now unpack revenue growth dynamics on page 19.
As a reminder, we have three main revenue components.
The first one is the first party revenue that we earned on business and we've taken on the first party retail basis.
Second one is the market base revenue, which are the values fees, we generate from a third party activities.
The third component is other revenue, which at this stage mainly includes revenue from all logistics as a service activity launch in 2020.
These bucket will include in the future revenue from off platform payment processing. Once this activity is up and running.
In terms of revenue trajectory, we observed three main things.
First the strong revenue growth at 44% from $33 million in Q1, 21 to 47 6 million in Q1 2012.
The growth was even stronger in constant currency down at 53% year on year.
Revenue growth was supported by a strong acceleration in first party revenue, which was up by effect sector of two five.
We undertook more business on a retail basis within the grocery category.
Second we are seeing very good traction in our newer monetization streams, such as advertising or logistics of the salaries, which is the major part of other revenue.
Third this revenue growth momentum and giving us the flexibility to invest into growth in the form of consumer incentives, including sales discounts shipping discounts and free shipping.
Let's now dive deeper into the various components of marketplace revenue on page 20.
Excluding the impact of consumer incentives marketplace revenue was up 25% year on year and 32% on a constant currency basis.
This was supported by the strong momentum in value added services and marketing and advertising revenue streams.
Value added services increased by 49% year on year, partly as a result of an increase in international logistics revenue.
Marketing and advertising was up 40% John you all supported by an acceleration in the number of advertising campaigns, which was up.
<unk>, 5% year on year as we run over a 480 campaigns.
The asphalt almost 9000 advertising clients.
Advertising clients during the quarter included high profile brands partners, such as Unilever Loy, our Audi does Xiaomi Coca Cola Krispy, Kreme Burger King and many more.
Commission and proofing Entre and you are both impacted by consumer incentives.
Excluding this impact commission revenue was up 29% driven by usage growth wireless fulfillment revenue was up 4% as we choose to reduce the shipping that through to customers.
Moving on to gross profit on page 21.
We drove a significant step up in gross profit before the impact of consumer incentives, which accelerated by 31% John <unk> and 38% in constant currency, while the margin as a percentage of <unk> reached 13, 8%.
Almost 40 bps year on year.
We are leveraging the strong level of underlying monetization, we invest more into price competitiveness and shipping discounts.
Allowing us to increase the amount of consumer incentives.
From $2 1 million in Q1, 'twenty, one to $7 2 million in Q1 2002.
Going forward the growth in monetization will be bulky re invested two found all free shipping initiative.
Even after the impact of consumer incentives the growth trajectory and monetization of our two year period is very strong.
Between Q1, <unk> and Q1 'twenty two gross profit was up 36%.
We are well very pleased with the strong monetization pro forma in Q1, 'twenty two and are even more excited by the new revenue streams, we are developing.
In this context.
I would like to give you more color on page 22 on one of these new revenue streams, all logistics has established offering.
At the beginning of our journey logistics was one of the most challenging aspect of operating environment with multiple hurdles such as the lack of addresses a lack of organized unreliable capacity.
<unk> space issues, the predominance of cash on delivery and so on.
10 years into our journey, we can configure and can say that we've got most of these issues.
We have built the tech reached asset light logistics platform.
Strong reach across all countries of operation.
On network counts over 700 logistics partners that we manage and integrate to our platform through a dedicated tech stack.
We also have an extensive physical network of 50000 square meter of warehousing space.
About 3000 drop off and pickup stations.
Today, we are in a position to other businesses overcome this influx structures challenges by giving them access to our logistics platform.
We offer end to end logistics services from warehousing and pick packing to door delivery and payment collection with full visibility.
And tracking of the journey of the package.
Our offering is of some modular and can be adjusted in the paddock op basin to suit the needs of all logistics guidance.
We are seeing very good demand from this shows the number of packages shipped in Q1 'twenty two reached a new record of $3 5 million generating over $1 $2 million in revenue.
More than 1250 clients.
Let's now move onto costs, starting with fulfillment expense on page 24.
Fulfillment is largely a viable cost and evolved in line as volumes in Q1 'twenty two.
As we grew orders by 40% year on year fulfillment expense was up 42% and 50% on a constant currency basis.
Here.
I would like to point out that fulfillment expense includes both the costs associated with Julia platform orders and the costs associated with our logistics are established offering the.
The number of packages within activity increased significantly from zero point $8 million in Q1, 'twenty, one to $3 5 million in Q1 'twenty two.
Moving onto sales and advertising expense page 25.
As mentioned by Jeremy earlier marketing investments, our core lever to drive usage growth and we continued increasing these investments on a year on year basis in Q1 2002.
Sales and advertising expense reached $18 $8 million.
94% year on year, and 99% on a constant currency basis.
That's in the context of a very low comp base over the past two years with sales and advertising expense significantly curtailed in 2020 and up until the middle of 2021.
When we take a three year perspective.
Q1, 'twenty 2000 advertising amount is modestly above pre pandemic levels with a three year CAGR of 12%.
The main change is the channel mix of marketing investments with an increased share allocated to above the line channels, such as TV radio video advertising et cetera from 28% in Q1 19.
37% in Q1 'twenty two.
One way to look at the sequential trends over the past nine months, we can see that we are slowing down the pace of marketing investment increases.
For 228% and 159% year on year in the third and fourth quarters of 'twenty, 1% to 94% year on year in Q1 2002.
As we move beyond the initial phase of marketing ramp up of <unk> 21, we are stabilizing the levels of marketing investments and starting to generate better marketing efficiency.
On page 26, we can see different significantly.
Significant improvement sequentially and marketing efficiency metrics.
Sales and advertising expense per order and as a percentage of DMV.
<unk> reached in Q1 'twenty two at their lowest level in four quarters at $2 per order and seven 5% of GMP.
This is an important development in our progress towards profitability as we all know scanning the business, while improving marketing efficiency.
Moving on to technology, and G&A costs on page 27.
Technology continues to be an important area of investment for us to support the long term growth of our business both on the e-commerce and payment fronts.
Technology expenses reached $13 million in Q1, 'twenty, two at 56%, John Euro and 62% on a constant currency basis, as we increase technology it counts.
Fortinet relation and product development.
G&A excluding SBC.
Reached $13.1 million in Q1 'twenty two.
93% year on year, and 30% on a constant currency basis. This is mostly due to an increased hiring in the second the outflow of 21 to strengthen the management team in selected areas to support long term growth of the business.
On a sequential basis G&A, excluding SBC was down 6% compared to Q4 'twenty one.
We believe we have the right team structure at this stage and expect the G&A base to remain relatively stable going forward as we reinforce strong discipline on hiring and overhead costs.
Turning on to adjusted EBITDA loss page 28.
Adjusted EBITDA loss reached $55 $3 million in Q1, 'twenty, two up 70% year on year and 76% on a constant currency.
The year over year comparison is impacted by a low base in Q1 'twenty one.
Our adjusted EBITDA loss was down 17% year on year.
Importantly, as mentioned by <unk>. We believe we are now past the peak of adjusted EBITDA losses, which was reached in Q4 'twenty one.
Let's now move onto balance sheet and cash flow items on page 29.
Capex in Q1, 2002 was $1.7 million, we are yet to see the effect of logistics investments as we guided towards 15% to $25 million of Capex in 2022 for logistics capacity expansion and upgrades, which will be in.
Mostly carried out over the second half of 'twenty two.
Net change in working capital resulted in an outflow of $23 4 million.
In Q1 'twenty two.
Historically working cap at a relatively neutral cash flow impact on a yearly basis that said it can be impacted quarter on ebay cutoff effects and upfront prepayments.
This was the case in Q1, 'twenty, two where we paid upfront cost of yearly hosting services to take care of better pricing.
Cash utilization for the quarter was $78 2 million in Q1 2002 impacted by the working capital outflow during the quarter.
At the end of March 22, we had a liquidity position of 421 million comprise of.
89 million of cash and cash equivalents and $333 million of down deposits and other financial assets with that.
Analog to <unk> for concluding remarks.
Thank you Anton and thank you Jeremy I think very strong quarter of execution on our strategy to scale the business towards profitability and Goldman P.
The quarter, where we can see some complete results on the three building blocks of our path to profitability and we have clear initiatives underway to make even more progress on each one.
On usage growth.
No there is no possibility without bigger scale, you've heard us say it multiple times in the past in Q1, we accelerated growth very nicely fastest older growth fastest GMB growth rates of the past nine quarters and as we look ahead, we intend to maintain this good momentum that we currently have on.
Usage growth.
By continuing our execution on all relevant areas of the business and here, it's not just maintaining marketing investments and improving their efficiency. It's about keeping the great work that we've been doing on the everyday product categories. It's about.
Going to the next level on the logistics front with the rollout of the next day free shipping and free delivery on.
Under the express and of course, it's about continuing to be a great technology to offer even more seamless and engaging experience for the consumers on the platform.
And when utilization, we want bigger scale to drive more revenues and gross profit dollars we.
We do not believing the growth model that frontload scale without a robust monetization model in place in Q1, excluding consumer incentives, we recorded the fastest revenue and gross profit growth rate in over two years and.
And we still have great of science to accelerate monetization.
Leveraging the diversified engine that we have built.
On first party revenue, we grew first party revenue by over 80% year over year over the past nine months. This is now, allowing us to further enhance our margins.
And regularly negotiate volume rebates with our suppliers on the marketplace same logic apply we're leveraging the accelerating use HBO to extract more monetization.
We brought a lot of growth over the last nine months or third party sellers and today, we have room to increase commission take rates in a number of categories. We've already started doing that then of course, there's always in a gradual and discipline manner.
And as we have referred earlier to the rollout of the free next day delivery on <unk> Express.
This is an enabler for us to increase the monetization of <unk> Express so lots of opportunities in the marketplace Robyn.
In addition, further monetization of signed an advertising logistic as a service which are still nascent today, because we have very good traction as you have seen and we have potential also here for a lot of growth and finally, we have now obtained the license in Egypt, and Nigeria to take junior off platform.
And this is a long term very exciting meaningful revenue growth opportunity and it's not a prerequisite for us to reach breakeven, but it will be incremental monetization of sites and to give us even more flexibility and optionality in our cost of processing.
And finally on the search building blocks cost efficiency in Q1, we've seen our marketing efficiency improved.
LOE on a per order basis and percentage of JMP, reaching their lowest level in the past four quarters.
Still have meaningful potential to drive further efficiency gains in marketing generate operating leverage on tech and G&A will reinforce cost discipline across the cost structure and the overheads in particular.
For the full year 2022, we continue to focus on those three building blocks and here, we take the opportunity to reiterate and add on the guidance that we provided during the last quarter release, which is that we expect further acceleration in year on year Gms growth in 2022.
Compared to what we saw in <unk> of last year, where the growth was 15%.
We're stabilizing the level of marketing investments and we confirm that we expect to invest between 50 and $55 million in sales and advertising for the first half of 2022.
And this compares with $65 million in H two of 2021, so very similar level of investment and this is why we call. This stabilization.
Then we expect we confirm I would say to expect between 15 and 25 million of Capex. This year.
Of course, we are very cognizant that we're committed to investing in the long term strength of the platform and the Capex investment will be focused on the largest platform of UC and will allow us to increase our reach increase our speed of delivery and drive also cost efficiency going forward and we also confirm that we expect an adjusted EBITDA.
For the full year between 202 hundred 20 <unk>.
Compared with 197 last year.
And on a quarterly basis, we believe that we are past the peak had just any gain loss, which was reached in Q4 and starting from 2020, we expect to begin decreasing the interest and the loss on a year over year basis.
And now before going into Q&A. Those this was a lot of numbers, but let's just remind ourselves for a second of the huge opportunities that we're pursuing here and.
As well as the great impact that we're having on the continent and beyond.
We believe we have decades of growth ahead of us there.
Hundreds of millions of potential consumers, who will enter the market over the coming decades.
The market opportunity is massive Nigeria will be the third most populous country on the planet in planning 30 years, just after China and India, Egypt is an amazing market we have seen.
10 years building a platform to serve those consumers. This is very hard and this is very much there.
Very strong position in our markets and you've seen Egypt number one e-commerce plant.
We are doing today is both addressing our ongoing path to profitability and lay ground to capture the long term opportunity.
And last but not least we are impacting the lives of millions of consumers and sellers across the content. Thank.
Thank you very much for your attention and we're now ready for questions.
Ladies and gentlemen, the floor is now open for questions.
You have any questions or comments. Please press star one on your phone at this time.
We ask that while posing aircraft Gen. You. Please pickup your handset listening on speaker phone to provide optimal sound quality.
These hold while we poll for questions.
Thank you.
Our first question is coming from Aaron Kessler with Raymond James.
Please pose your question.
Great. Thank you a couple of questions maybe first just on the consumer incentives now that you've been running a consumer incentives for couple of quarters. Now can you just talk about maybe the effectiveness of that conversion rate in <unk>.
<unk> of those customers that are unique and customer incentives.
European shopping et cetera, and then just maybe on the lower sales and marketing spend in the quarter are you finding more marketing efficiencies kind of versus prior quarters or is that just maybe a step down more due to Q1 seasonality.
Thanks, Aaron and very good questions on.
On the consumer incentives consumer incentive is for us and completely integrated into our marketing strategy.
Which is to drive the customer lifetime value for the long term right. So here, we have different stages of the funnel for the consumers and from driving the awareness of the existence of junior to driving the adoption and then as we drive the adoption to drive loyalty and repeat purchase which to me.
Conform the customer lifetime value.
In terms of consumer incentives, we have different types of course right. So there is certain consumer incentives, which are price reductions of certain products, where we are.
It will tend to lower our products for example, they lowered the price of the product to drive adoption to drive repeat theres certain coupons and vouchers, which can be distributed to various segments of consumers based on the objective that we have for those for example to make them discover a new category or to make them discover Julia express or to make them.
For the first time.
So different types of <unk>.
Strategies to engage the various segments, which are there and then of course there is.
The shipping fee reduction that we are financing for the free shipping program. So here, we have a I would say a wide range of.
Our strategies, which are at play when it comes to consumer incentives.
And there as I said, a integral part of our strategy to drive the long term CMV and as you pointed out we started to ramp up the investments in consumer incentives together with the ramp up in sales advertising I think it was more or less during the Q2 of last year right. So I think here we are.
We have a lot of learnings and we optimize we continue to optimize we see strong efficiency.
We're quite happy with what we're saying and I think it's and it's driving a lot of CMV overall in terms of sales and advertising.
Here you know I think we are maintaining and we're standardizing the investments from each too.
And there's certainly a little bit of seasonality, which is always happening in Q1, because it's a it's the new year its post.
Post Christmas exposed to the year and span and so on and so forth, but I think here, we're seeing some some pretty good improvement of efficiency and certainly there is going to be.
Always some inflect or some learning some variation in the amount of selling everything that we spend I think we will always expect to spend a little bit more in Q4 than in Q1, but I think the efficiency levels that we're seeing we are confident that we can.
Changing to gradually sustain them in driving improve them over time. So they are not the increased efficiencies in that.
In particular any related spending less and we think that we will in.
In the long term continue to drive efficiency.
Great. Thank you.
Thank you.
Our next question is coming from the month Williams with Stifel. Sir Please pose your question.
Hi.
Thanks for taking my question. The first question I have is what are you what are you seeing.
From your buyers on our platform.
And in the midst of some of the macro challenges with high inflation and whatnot and what do you expect youll see kind of as we go through the balance of the year.
And then I have a follow up.
Yeah, I mean, it's a very.
Very important question and I think it's still.
And folding in many ways right because when you think theyre happening almost on a daily basis and impacting the consumers the supply the prices in and as you say and whatnot as you said right. So theres a lot look I think at the end of the day.
Amazingly well positioned because we are offering a very wide range of assortment and we are offering solutions and access to consumers.
Products, which are very relevant with our positioning in the everyday categories and with very good prices. So at the end of the day, we are a reflection of the supply and whatever disruption that's happening in the supply of course, you know will defend the supply everywhere, but the beauty of junior is that we bring this amazing assortments, we bring this amazing.
<unk> experience and we bring the asset so consumers will still need to buy everyday products, they will still need to.
To do that and if at all when there is more pressure I would say on prices are on the wallets consumers are more picky and consumers compare more and I think that positions us very well liked so I think where we're pretty confident that whatever happens.
Are relevant and we will be relevant given our positioning and given our value proposition and now of course, some categories will suffer right in some categories consumer will trade down and more consumers will delay some purchases. So in all I think not all categories will do well this year, but we will do well because we are well positioned on everything and all that.
They've got to go into especially.
Okay, and then on more of on a longer term question.
You talked about a couple of interesting.
Off platform initiatives with Jimmy how are you thinking about the monetization over time is there any kind of timing around that and kind of what can we expect to see that how we can expect to see that to develop over time.
Yeah.
I think I mean, we're starting to see on the to a platform that we have to we have advertising and more of them.
On platform, but then we have advertising and then we have to pay and then yes, Jeanette logistics on advertising I think it's moving well you can see very good growth rate for this quarter and we are rolling out a lot of solutions to to help brands.
Tyler Junior and I think this is an area that we.
We'll continue its starting to show some good impact and we will continue in the future. The second one of course logistics, we start to display some numbers and we.
You've seen the number of packages that we that we shipped this quarter that we have over 1000 clients and that we start to generate over 1 million of revenue. So I think this is moving well and we.
We see here the long term opportunity, which is very big and logistics of course.
It's not a secret that largest thinking Africa very hard and I think we've developed something that is absolutely unique and 67% of our ship packages reached custom consumers within 24 hours and Africa right. I mean this is I think exception also this asset I think we're going to continue to.
Develop it and bring you bring you the numbers.
We don't give specific guidance because it's still early days and as we have more visibility and so on will bring more guidance I think for now we bring the numbers as they are and we are.
Committed to continuing to grow it without giving particular guidance I think on junior bank.
<unk> maintains a is it.
As a long term very very important asset for us and here you don't go likely into starting.
Starting to process.
Third party payments right. This is.
This is <unk>.
New era and the first step is to get the license and this is already a huge achievement in its own right. So together license you have to develop a number of.
Of processes and you have to of course supply to the Central Bank and then.
As a number of audits and various vacations and so on and we have obtained debt, which speaks very highly of the quality of the product that we feel our level of compliance our level of <unk>.
Execution on junior bait and now that we have those licenses we are going to.
To tailor our solution to the merchants and start rolling it out right. So I think we are still.
Several quarters away from showing meaningful revenue because we are now in the phase of adapting the product to take it to the market right. So this is more something that I think will start to be paying.
At least in a few quarters.
Okay, great. Thank you.
Thank you.
Our next question is coming from Sarah Simon with parent Burke Ma'am. Please post your question.
Yes.
A couple of questions.
First one was on working capital.
There was a comment in the release about.
Taking a more first policy inventory so I'm just wondering.
How we should think about working capital in that context going forward, because I see them.
You've got to pay for the goods before you start selling them.
That was the first thing the second one was on.
The repeat purchase rate.
Can you give us an idea you've ever told assess what proportion of your customers, let's say in the current quarter the active customers.
People, who have previously shopped on Gmail or well, maybe the other way, which is what percentage of the customer Grace.
I'm from completely new customers.
That would be helpful. And then the final one was just in terms of the phasing of advertising, obviously youll guidance H, one implies quite a lot and the increase in spending Q2 can you just remind us.
What sort of promotional week there are in Q2 versus Q1, if it's if it has to do with kind of advertising to the event or if there's something else behind that phasing. Thanks.
Yeah, no. Thank you Sarah I think to start with the last one because it's kind of kind of the easiest.
As we usually do the junior anniversary in June or sometimes in July depends on a number of things.
Canada data around Ramadan, and and the rainy season in some countries and so on but it's in this year. It will take place in June and this year. The 10 year anniversary of joining us or this is typically a good a good.
A good opportunity for us to bring lots of good.
Good prices good deals and just good momentum for our sellers and our consumer. So that's why in Q2, you will see more investment in Q1 as for the specific anniversary right.
Okay think about working capital investors last year yet.
When did you may lose service ethylene.
Yeah, Yeah, you have to refresh them exactly the data I believe last year was also fully in June but to some countries overlapping in July I would say most of the country's food in June and some of them June and July .
We can follow up separately to make sure you have that Williams <unk> Catherine will provide such comparison to make sure that there is no calendar effect.
And then working capital, yes, well you know I think we.
We are conducting more first party because I think it's the market requires it and it's a good opportunity for US I think we are going to see the inventory levels continue to increase but at the same time. We're getting also increased payment terms over time right. So I'm not sure. The net net impact on the cash would be significant if inventory was two <unk>.
Or will increase I think we would also.
Payment terms and we tend to have you know.
To do retail on them.
Hi, turning Skus right. So we don't tend to buy let's say for next year as.
Fashion collection, we would buy.
Some <unk> for the next few weeks or we would buy some and electronics for the 10 year anniversary or something like that right. So.
I don't think that we would see meaningful meaningful impact on working capital because the increased inventory would be compensated by increased payment terms or by by just short sell.
Cycle.
Yep.
Right, Okay, and then I think on an cohort, yes, I mean theres a number of questions I think here.
Within publishing in the past some some data point on loyalty and data point on the split of returning and new consumers into here.
I will simply answer qualitatively that we are seeing very good momentum both on the loyalty and the adoption at some point in the future. We we hope or we may decide to publish more data it's hard to to just comment here.
Quantitatively without giving the numbers, but quite did you may I can tell you that we've seen good momentum in both adoption and loyalty.
Okay. Thanks.
Thank you.
Our next question is coming from Luke Holbrook.
With Morgan Stanley Sir please pose your question.
Yeah. Thank you for letting me on the call I was just going to ask you on from a unit economics perspective on the one hand, youre, making quite a few efforts to improve consumer frequency, but on the other hand average order values have declined I think 9% year on year in the first quarter to just basically wondering how that impacts a roadmap to profitability why you think the average order value.
<unk> stabilized.
Just got a follow up after that thank you.
Yeah. Thank you for the question look I think you're right. The average order value is going down 9% and I think this is expected and I think this is a trend that will continue.
It's hard to predict exactly.
We're going.
I understand but certainly simply continuing.
And we will continue to see it coming down over time, maybe not <unk>, but here, it's hard to predict and I think he his team that I mean over the last few years with managed to really build a sustainable unit economics to to drive the profits of the holders.
And you can see the gross profit.
<unk> moved from three 4% to $4 down to seven but I would say this is quite positive that despite going from 33 to 2007, we manage to keep the same dollars for gross profit right. So as a percentage of Vod. We're now almost at 14% of gross profit so with mass to grow by four points as we saw the.
The average order value going down the.
<unk> expense remains to capture slight efficiency of course here there lots of things, which are at play and so we're still generating a $1 out of the out of the 27 after fulfillment so.
I think we're saying that our business model is very adapted and manages to adapt to the to the to the shifts.
Been happening towards the everyday categories and now it's really about rolling out all these initiatives that we mentioned on driving more revenues and driving better margins on retail driving better.
Commissions and pass through on the marketplace driving more monetization of generics price.
Screening advertising revenues now that we also work even more with <unk>, we have the opportunity to tap into the marketing contributions of those suppliers and most sellers and then logistics from our logistics and union pay and as we rollout to all of those we need to see the the dollar value of the gross.
Profit after procurement increase so I think here, we are certainly not worried by the drop of the year over year, something we are actually driving we are in a good place, but we want to be in an even better place and continuing to drive more monetization to improve our gross profit and to grow the absolute dollars that.
We're making after fulfillment.
Understood and also just as a follow up in the last couple of years, you've been impacted a little bit by supply chain issues and sourcing of goods and the current inflationary environment and the issues resulted in across the world. How does that impact you going forward will this result in kind of a buildup in inventories.
Just as another aside point as well could you just comment on the local press reports.
On the possible a bit to acquire the company that'd be helpful. Thank you.
Yes of course, I think the supply chain.
Aye.
Cliffs grainy that I mean, a lot of the negative impacts during the Covid year was about <unk>.
<unk> and local disruptions of not being able to move the product around having our sellers not being able to come in anywhere in our warehouse because of restrictions on movements and things like that which were really re impacted almost like the supply chain, but from a logistics perspective right.
The issues that we see on the supply chain in terms of access.
Products, not arriving are not leaving China or things like that have been happening will continue to happen and this is I think the answer I was.
I was giving too to the earlier question, which is we are a reflection of the market. We are very well positioned with the everyday categories. So whenever there is some disruption in our category, it's going to impact that category, but overall people you know.
Stealing into two functions, if I may use that expression right and they will come and look for the.
For the for the categories that they need.
And for the everyday categories, which are extremely important and extremely.
Any string and.
An extremely relevant right. So I think this is a this is what we what we expect for for that now in terms of the.
The market rumors we.
We didnt comment on I would say that's speculation.
And and Asbury you know the U S Securities law, and shoulder, who who has more than 5%.
Making itself known so I guess.
I guess.
Yes, now that's what we would expect so here, we cannot comment on speculation like that but.
Again, if any one person passes the 5%.
They will have to make themselves known.
Understood. Thank you.
Ladies and gentlemen, if there'll be any final questions. Please indicate so now by pressing star one.
Yeah.
Sir there appear to be no further questions in queue do you have any closing comments you'd like to finish with.
And just want to thank everyone for their support and looking forward to a great Q.
Q2, great Jimmy anniversary 10 years, and we will reconnect together in three months and in the meantime, we are always available to talk to discussing and and connect thank you everyone take care.
Thank you ladies and gentlemen, this does conclude today's conference call. You may disconnect. Your lines at this time and have a wonderful day. Thank you for your participation.