Q2 2022 Jumia Technologies AG Earnings Call
Results conference call for the second quarter of 2022.
At this time, all participants are in listen only mode.
After managements prepared remarks, there will be a question and answer session.
I would now like to turn the call over to software to mirror head of Investor Relations.
Please go ahead.
Yeah.
Thank you.
Good morning, everyone and thank you for joining us today for our second quarter 2022 earnings calls, we yesterday are such that bring your neck engineering.
Co founders and Cookie always absolutely, yeah and Ottawa.
Yeah.
Cool.
Webcast on the IR section of our corporate website, we will start by covering defeat hybrid.
We would like to remind you that our discussion today will include forward looking statements.
Actual results may differ materially from those indicated in the forward looking statements.
Over these forward looking statements speak only to our expectations as of today, we undertake no obligation to publicly update or revise these statements.
For a discussion of some of the risk factors that could cause actual results to differ from the forward looking statements expressed today. Please see the risk factors section of our annual report on form 20-F.
Published on April 29, 2022, as well as our other submission would be excellent.
In addition on this call we would refer to as church and finished a major not reported in accordance with I am correct. You can find reconciliations of these non breakfast you mentioned could be corresponding I have great finish these measures.
Earnings breakthrough.
Which is available on our Investor relations website with that I'll hand over to Sascha.
Thank you very much Sapphire welcome everyone and thanks for joining us today.
I would like to chance you highlights of our Q2 performance and give you an update on our strategy and guidance.
We are committed to taking the business to breakeven and in that regard.
During a strong quarter.
Very good progress on each building block of our path to profitability.
Number one usage goals as you know scaling as a driver of Pops to Egypt.
Orders and quoting the active consumers were up 35% and 25%.
<unk> grew by 21% in Q2.
34% on a constant currency basis.
This happened in the volatile macro context, with increasing pressure on consumer spend and access to supply for our sellers you'd also happened with very strong discipline on marketing investments from our side.
Whereas it's a clear sign that our focus on relevant everyday products competitive prices and consumer experience is paying off.
Number two monetization acceleration.
Revenue was up 42% and.
And 56% on a constant currency basis, we posted the fastest marketplace revenue and gross profit growth rates.
Over the past five quarters at 17% and 14% respectively.
We want larger scale to be a catalyst for when you go.
In the diversified monetization engine, we have built allows us to drive revenue from both consumer usage and the essence of our platform.
And the three cost efficiency.
Discipline is a top priority for us even more so in the current context.
We drove use age girls and monetization acceleration.
With lower than expected marketing investments.
She is an advertising expense reached.
Reached $41 million in each one compared to our guidance of 50 to 55.
G&A was another area of increased efficiency for us.
G&A, excluding share based compensation expense being flat year over year and declining sequentially by 12%.
So overall some very good progress in Q2, the macro picture is challenging however, the fundamentals of our business.
I have never been stronger if.
If we now look ahead I'm turning to page four.
Our strategic focus is to make strong progress on pascua.
We have outlined here, our near term guidance, which reflects this continued focus.
On usage, despite the macro we aim to maintain robust usage grows and we reiterate our guidance of DMV growth in excess of 15% for the full year in.
In USD terms.
On monetization.
We plan to accelerate.
We expect gross profit in H, two of $75 million to $85 million.
This.
Implies year on year growth of 27% up to 44%, which is at least double the growth rate of Q2.
So a significant acceleration.
On the cost efficiency front, we are doubling down on the cost discipline in particular, we expect to drive further marketing efficiencies leveraging the long term investments we made over the past year in brand awareness and consideration for each two we expect sales and advertising.
35 to 45 million, implying year over year savings of 18% to 37%.
So in summary, we're going to keep growing usage, we're going to accelerate gross profit growth.
And do this with even more cost efficiency.
As a result.
And I'm now turning to page five.
We believe that we have turned the corner and are past the peak of adjusted EBITDA losses that was reached in Q4.
Last year in 2021.
Each too we expect.
Losses of 87 to 107.
Which implies.
The reduction versus each one.
Oh, 5% to 22%.
And versus last year, a reduction of 12 up to 29%.
Finally, we reiterate our yearly guidance for 2022 of 200 to 220 million.
And we expect adjusted EBITDA loss to start decreasing on a yearly basis, starting next year.
The result, the results of our clear strategy and consistent execution are coming nicely together, allowing us to reduce adjusted adjusted EBITDA losses going forward.
And now Jeremy and our plan will give us more color on the results.
Thanks, a lot the shop Hello, everyone I'll start with the progress on the first building block of our path to profitability the usage growth and we are on page seven.
User growth is the result of coordinates default across all areas of the business and we've been working relentlessly across the platform to earn and keep the trust and the loyalty of our customers. We have outlined on the page are recent examples of what we're doing on the marketing and commercial logistics and take France to support or to use it cross on the marketing front.
We are investing in both consumer adoption and retention and we're seeing very strong level of engagement on our platform. During the junior anniversary campaign, our video content views reached a record of 116 million.
5% year over year. This demonstrates our sorel understanding of what resonates with customers and our ability to produce engaging content for them.
On the commercial folks we offer consumers a wide range of relevant products and services with a particular focus on everyday categories.
Even more important in a challenging macro context, where consumers can rotate away from higher valued discretionary items to watch steppers and everyday products. While we are seeing sustained volume growth across categories. FMC G was the fastest growing category in terms of items sold in Q2 up 95%.
The logistics site, we remain focused on improving the speed and the cost of our deliveries offering our consumers even more convenience.
In Q2, 60% of ships packages reached consumers within 24 hours of placing the older.
A great achievement, considering the volume step up we experienced as part of the junior anniversary campaign.
And last but not least we're reaping the benefits of our sustained technology investments over the past year to enhance user interface and experience.
<unk> reported a 17% uplift in conversion rate year over year in the second quarter our.
Our consistent and disciplined execution on disposal of yours.
Diving the robust usage growth momentum you are seeing on page eight.
There is on page eight there is broad based growth momentum across all reported usage metrics.
Quarterly active consumers reach for 3.4 million a 25% as we continue to acquire new consumers and improve the retention rate of existing ones boulders reached $10 3 million up 35% driven by both new consumer ads and increased purchase frequency of returning consumers eat.
Developments drove robust Jim G gross bite material FX headwinds Jim.
Zambia reached 271 million up 21% year over year, and so it's 4% on a constant currency basis, and you will note that the ethics headwinds to Jim here are much larger in Q2.
Then in Q1 last quarter was searching points of person teach adverse impacts to GMP gross compared to eight percentage points last quarter.
We had 10 of our 11 local currency depreciating against the dollar in the first half of <unk> 22, compared to the first half of 2021 in particular Egyptian pound the West Africa shifted from Bose depreciated by 10% against the dollar while the naira major yet depreciated by 7%.
Notwithstanding the ethics affect growth momentum in the business remained robust.
We are driving not only in Europe , but also high quality growth with significant improvement in golf and repurchase dynamics as you can see on the page right.
You've heard us talk in the past about the discipline with which we deploy consumer incentives and marketing investments with a focus on cohort.
You've also heard us talk about the importance of everyday product to support repurchase dynamics.
This is now clearly demonstrated by the retention and purchase frequency that are that you see on the beach.
Average ninth day repurchase rate of the new consumers acquired in Q1, 2022 reached 44% or by over five points versus Q1 last year, he's driving and that people can purchase frequency with the number of quarterly orders per quarter, I keep consumers, increasing by 8% year over year, reaching over three orders in.
Sure.
The strategic focus we placed on everyday product categories was an important driver of these improvements.
On page 10, you can see the continued shift of our GMP to work everyday categories, which went from accounting for 57% of our gem in Q2 2022, 66% in Q2 2022.
Within the brackets of everyday categories. The lifestyle services, which include food delivery and to get the App service, so they're sharing Jimmy double from 9% in Q2 2020.
218% in Q2, 2022 we see everyday physical good categories, the home and fashion categories remain consistently the largest product categories. Each commanding a mid to high teens share of gyms.
Average order values to the $26 $3 in Q2, as we further penetrate more affordable smaller ticket size categories.
Let's now move onto Juliet by starting with the GTA V. On the Beach Twin 12, Juliet PV increased by 31% year over year and four 5% on a constant currency basis supported by durables GMP gross on platform penetration of junior pay as a percentage of GMP reached 27% in Q2 up from 25% in <unk>.
Two last year as we focused on increasing the penetration of <unk> in a disciplined and graduate out gradual manner.
Turning to transactions on page 13 junior pit transactions reached $3 4 million in Q2, this year up 25% year over year supported by accelerated accelerating volume growth across the business and in the food delivery category in particular.
Overall, 63% of older split on the junior debt from <unk> to 'twenty to 'twenty, two were completed using juniper compared to 35% last year.
The growth in junior debt transactions in our e-commerce and food delivery platform outpace the growth of Julia the App transactions as Julia penetration is almost 100% on the junior pay up the reduced share of June yet they up in the transaction mix led to a decline in yoga rugs and carpet transaction pediatrician as percentage of holders.
Overall, the growth momentum of junior pay on platform remains very robust.
There has been a tremendous driver of convenience and security for consumers, while opening up a broad range of relevant digital services stocks.
Starting from 'twenty to 'twenty, three we expect to be able to turn into a major addition driver as well for just on shrimp third party merchants of platform.
And now I'll hand over to Antoine will walk you through our financial performance in more states.
Thank you Jeremy Hello, everyone.
I will start with the monetization procurements, which speaks to our progress on the second building block of our path to profitability monetization acceleration.
Let's first.
That revenue growth dynamics on page 15.
Revenue rate reached $57 $3 million in.
In Q2, 'twenty, two at 42% year over year, and 56% on a constant currency basis.
The largest contributor to revenue growth was first party revenue, which increased by over 90% John here.
Supported by the strong momentum in the F. M C G in grocery subcategory in particular.
The second observation I'd like to make here is that the newer revenue streams, such as value added services and marketing and advertising are starting to have a material contribution to revenue growth.
The combined contribution of value added services and marketing and advertising to revenue growth.
Surpass the combined contributions of commissions and fulfillment revenue.
The graph across a broad range of revenue streams is allowing us to continue making growth investments in the form of consumer incentives, which were up by 3.6 million USD yellen year in the second quarter.
Let's now dive deeper into the marketplace revenue trajectory on page 16.
Marketplace revenue posted the fastest growth rates of the butt several mcwaters up 17% year on year and 28% on a constant currency basis with a number of revenue streams, reaching record levels.
I'd like to reiterate the point I made on the brighter side, which is the diversification of revenue streams here you see clearly the growing contribution to marketplace revenue from marketing and advertising and value added services.
Which reached an all time high in Q2 at 41% of marketplace revenue compared with 33 yeah.
And this is the result of the very strong growth rates, we've been driving across these two activities.
Marketing and advertising revenue reached an all time high of $4 6 million, surpassing the previous record reach in Q4, 'twenty, one up 76% year on year, the fastest growth rate in over two years.
This was supported by an acceleration in the number of campaigns run which was up by over 140% in Q2 'twenty two.
Versus Q2 'twenty one.
Value added services accelerated by 32%, partly as a result of increased logistics revenue from local and international centers.
On the flip side.
Inventory revenue reached 7.7 million USD down 7% year on year due to a broader deployment of the negative free delivery.
This is a trend we're comfortable Louise as one free next day delivery and the relevant areas is an important driver of convenience supporting consumer adoption and paper Jay and.
And we have built a strong and diversified monetization and giant that makes us less reliant on consumer shipping fees.
Last but not least commissions revenue reached a six quarter I at $10 6 million USD, surpassing the prior peak of Q4 'twenty one.
This corresponds to a 13% year on year increase supported by the rubbers Jimmy growth. This is net of consumer incentives.
If we exclude the impact of consumer incentives commissions revenue was at 21% year on year.
I'd like to point out here that the increase in commission revenue is yet to fully reflect the impact of commission increases which were undertaken in May and June 22.
We expect the impact of these increases to materialize in the second half of 2022.
The strong marketplace revenue growth, you're driving an acceleration in gross profit growth.
Gross profit growth reached a five quarter high at 14% year on year supported by the robust growth in marketplace revenue.
On a constant currency basis gross profit growth reached 24% Julia.
We continue to invest in to drive competitiveness and free shipping with an increase in consumer incentives from $4 5 million USD into 'twenty, one to 8.2 in Q2 'twenty two.
Excluding the impact of consumer incentives gross profit accelerated by 23% year on year and.
36% in constant currency, while the margin as a percentage of <unk> increased to 14, 2%.
While we have meaningfully accelerated monetization goes in Q2, we are working on a number of initiatives that will allow us to drive even faster growth in the second half of 'twenty two.
We have outlined some of these initiatives on page 18.
We are working across all revenue streams to drive even faster growth in margins or a combination of both with.
With respect to first stop the activity first party revenue grew at a rate north of 100% year on year, although the past three quarters.
Thanks to strong volume growth in the FMC Jeep and grocery categories.
This is allowing us to negotiate volume rebates with our suppliers, helping us external first party gross profit margin.
Within marketplace revenue, we are working on a number of levels to further accelerate growth and expand margins.
On the commissions front as mentioned earlier, we implemented commission increases in May and June 'twenty, two leveraging the rubber volume growth experienced over the past year we.
We expect the full impact of these increases to reflect into the gross profit in the second half of 'twenty two.
Other services revenue also has meaningful growth potential.
The deployment of negative free delivery in Dubai experts items for consumers is allowing us to better monetize Julia extra salaries that we provide to sellers et.
Et cetera.
Saw the Saudis.
The revenue associated with Jimmy I Express is booked under value added services.
Last but not least we remain in the very early days of marketing and advertising monetization on our platform.
Flooded the values looking to reach African consumers online with the purchase intent and drive measurable results July yet who doesn't that pharma choice. We are leveraging the human positioning to drive increased daycare before I'd solutions by all sellers and third party advertisers.
In addition.
We are currently in the process of monetizing the assets of our platform.
Given the allowing third party participants to make use of them stocking with our logistics platform.
18 months into the launch of our logistics of the service offering we are now generating over 1 million USD in quarterly revenue from this activity.
Our offering sold the material pain point for companies across a broad range of industries.
We intend to leverage our position to further optimize our pricing and extend both revenue and margin from this activity.
While we expect these various initiatives to drive sustained growth over many years to come they will positively impact gross profit as early as the second half of 'twenty two.
We expect gross profit of 75 million USD 85 million USD in the second half of 'twenty, two implying year on year growth of 27% to 44% and the C cushion sequential increase of 29% to 46%.
I would like to point out here that our near term guidance does not reflect any material contribution from off platform payment processing activities of Jimmy abate.
Which are in the very early days of their development.
And then to drive of petrol rollout in a very disciplined and gradual manner and we do not expect any relevant revenue contribution before 'twenty three.
Let's now move onto costs, starting with fulfillment expense on page 20.
Fulfillment expense reached 27.8 million USD.
46%, John you're in a 62% on a constant currency basis.
These trajectory driven by robust volume growth and high inflationary pressures.
With respect to volume growth drivers fulfillment expense includes both a cost associated with our e-commerce orders and logistics of the established packages.
The former reached $10 3 million or 35% year on year, while the latter more than doubled year on year to $2 6 million.
With respect to input cost inflation as you know pure cost increased significantly although the batch human because of packaging also went up and there is obviously your wage inflation.
In this context, we are working on a number of initiatives to mitigate the impact of inflation ranging.
Ranging from scared of incentives to drive.
Great and shipping cost savings from productivity enhancement in our warehouses to reduce ending and packaging costs.
Moving on to sales and advertising expense on page 21.
After a period of marketing investment ramp that started in June 21, we all know stabilizing the level of investment sales and advertising reached $22 2 million in Q2 'twenty two.
And the year on year growth rates decreased from one of them and 15% in Q2, 'twenty, 1% to 30% in Q2 'twenty two.
You will note here that the affecting back even more moderate than sales and advertising expense compared to other lines of our P&L with only 6% points.
That's because a large part of our fab in advertising expenses denominated in USD corresponding to online marketing costs, including search and social media cost.
H 122 sales and advertising expense came in lower than expected at 41 million USD.
<unk> 12 guidance of 50 to 55 million.
Resilient usage growth allowed us to remain very disciplined and lower than expected in marketing.
Building on that we intent to drive more marketing efficiencies in the second almost 22.
We expect sales and advertising of 35 to 45 million euros in H 222.
Implying an year on year decline of 18% to 37%.
Moving on to technology, and G&A cost on page 22.
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 expense reached $14 3 million in Q2, 'twenty, two up 70% year on year and 83% on a constant currency basis.
This is largely a result of head count increases completed in the second half of 'twenty one.
On a sequential basis, the technology expense increase was much more moderate and 10% quarter on quarter.
G&A, excluding share based compensation reached $26 6 million in Q2, 'twenty, two flat year on year and 11% on a constant currency basis.
On a sequential basis G&A, excluding share based compensation was down 12%, mostly as a result of local tax efficiencies.
We remain very disciplined when it comes to G&A and overhead cost in box each at all.
We are currently on the hiring freeze, which is driving get gone decreases since we are not replacing leaders.
This will allow us to keep G&A cost base relatively stable going forward.
I want to make an important distinction here.
Eight of the pandemic, our E <unk> 2020, one was not the periodic capacity expansion and G&A cost overruns for us quite the opposite.
G&A, excluding share based compensation was $120 million in 19, and we brought it down by 11% to 107 million USD in 2020 and kept it stable in 'twenty, one at 108 million USD.
We have already done a fair amount of work right psychogenic off base.
We will continue further optimizing our organizational structure and cost base.
Turning to adjusted EBITDA loss on page 23.
Adjusted Yellow reached 57 2 million in Q2, 'twenty two demonstrating that we are past the peak of adjusted EBITDA losses.
It was reached in Q4 'twenty one.
Adjusted EBITDA loss in Q2, 22 was up 37% genre and 49% on a constant currency basis.
This is a clear deceleration compared to Q1, 'twenty, two where adjusted EBITDA loss was up 17% year on year.
While the second half of 'twenty, two we intend to start reducing adjusted EBITDA loss in the Yellen y'all basis.
We expect <unk> to 'twenty, two adjusted EBITDA loss of 87 point fall to 107.4 million USD.
This implies a year on year reduction of 12% to 29% year on year.
Let's now move onto balance sheet and cash flow items on page 24.
Capex in Q1, 'twenty, two was 3.7 million USD, mostly relating to technology equipment purchases.
We are reducing our full year 'twenty to get guidance from.
15 to 25 million USD.
10 to 15 million USD as we are slowing down the phasing of logistics capacity expansion.
Net changing working capital had a neutral impact during the quarter as an increase in trade payables related to the Japan universally campaign was offset by increases in trade receivables and inventory.
Cash utilization for the quarter was $63 7 million USD.
With the main difference there since adjusted EBITDA losses relating to Capex and cash of discipline from Providence.
At the end of March 22, we had the liquidity position of 351 million USD comprised of 54 million of cash and cash equivalents and 297 million short term deposits and other financial assets.
With that.
In order to search out for concluding remarks.
Thank you Jeremy Thank you Anton.
Inc.
We have clearly made very good progress over the first half of this year that he rang very strongly on each building block of our past, possibly be key we have very strong momentum to double down on those proximity efforts DMV growth in H, one was the highest in the past two years.
Last year in the 10-Q2 earnings call.
As to the market that we would accelerate as a trough.
And that's exactly what we did looking ahead, we intend to maintain growth and we have reiterated our guidance in.
In Q2.
Marketplace revenue growth was the highest of the past seven quarters.
Gross profit growth was the highest of the past five quarters.
And in H two of this year, we intend to double if not triple.
The growth rate of gross profit.
To reach 27% to 44%.
Importantly, we expect to drive the growth of the usage and the accident rate.
Duration of the monetization with strong cost discipline.
In particular, H, two cranes to higher marketing efficiency.
You've already seen the pace of our southern advertising investments slowed down sequentially in the first half of this year for the second half, we intend to reduce sales and advertising.
By 18% to 37%.
We're also working of course on initiatives to drive efficiency across the full cost structure on fulfillment. We are focused on generating scale efficiencies and productivity enhancements to mitigate the impact of inflation.
We also remain very disciplined on the G&A Hans you have seen our G&A expense, excluding share based compensation come down over the past two quarters and we intend to maintain the discipline.
As a result, we expect adjusted EBITDA loss year over year Star.
Starting to reduce in the second half of this year and beyond that we expect the loss to decline on a yearly basis starting next year.
We are very much aware of the increased market focus on path to meeting our strategy and business execution are very much in line with that I think our performance and the guidance we have provided speak clearly to that.
Importantly, there is no disconnect here between the near term Pops you meet your objectives in the long term attractiveness and strengths of our platform.
As we pursue our scale and profitability objectives, we are building, an even more attractive and relevant platform for our for our consumers.
As well as win win partnerships with our centers.
And brother ecosystem participants.
Thank you for your attention and we are now ready to take your questions.
Ladies and gentlemen, the floor is now open for questions. If you have any questions or comments. Please press star one on your phone at this time.
We ask that while posing your question you. Please pick up your handset if listing on speaker phone to provide optimum sound quality. Please.
Please hold while we poll for questions.
Thank you. Our first question is coming from Aaron Kessler with Raymond James. Please go ahead.
Great. Thank you a couple of questions first I was just thinking about kind of a plan to further drive gross profit less attentive.
Growth over the next several quarters and maybe specific to incentive payments.
Payments going forward as well.
Second increase on the marketing revenues I think as you highlight if you have any more color around that as we think about this increase was pretty sustainable going forward as well kind of changed.
Revenues and maybe a third just on <unk>.
Commission inquiry I can't quantify it for Mustang.
As a percentage are thank you.
Thanks, Aaron I think many it was need that you were breaking in and intimate so I'll try to answer, but if I'm off topic. Please lithium price. The first question is on the gross profit in the incentives aren't right.
Yeah, So gross profit less ophthalmic and our plans to expand that in the second part of that question yeah until the mouse.
So the first one is on the gross profit down or in the gross profit.
To hear about the incentives, yes, gross profit minus fulfillment and our plans to expand that amount over time.
Yeah, Yeah. So look I think and then on this one I think we give <unk> guidance and then the gross profit because there is a lot of unknowns in the fulfillment efficient team and the inflation that is underlying right. So that's why we give guidance on that on the gross profit for H two.
And it's a bit harder for us to give a guidance on the gross profit after fulfillment because as you know.
Fulfillment right now as it is impacted by inflation of course, as we said we have a lot of initiatives to drive efficiencies and savings in procurement that.
It's a harder I would say two to predict definitely in order to drive the EBITDA reduction or the loss reduction that we aimed for H two we want to expand the gross profit after fulfillment right. That's our objective.
And we have not given a precise guidance over that because of the nature of the deficiencies at the moment, but definitely we want to to drive that forward.
Now advertising revenues.
As we said in the call and.
We are still we believe in the early days to some extent of this revenue stream and we have very big edition for those in the long term, we think that we.
We have a very unique value proposition for both the big brands. The Big Sellers. We are also a lot of smaller sellers, who are using our solutions.
Concert add them and sponsored products and then we have also a lot of third party advertisers will come to Julia in order to reach consumers.
And this revenue stream being in the early days and also being to some extent dependent on in our campaigns I think you see that over time, there has been some volatility so theres going to be some fluctuation of growth over time, but we believe that overall, it's one of the revenue streams, which is in.
In the midterm going to grow very well and very fast right. So there will be fluctuation as you know you've seen the last to look at a few quarters. In 2021 of course Q4 was much bigger because of Black Friday right and so.
Here, we'll see.
Q3, Q4, but generally speaking this is one that we intend to grow fast and we believe we're still in the early days of this one.
And then commission increases we are very careful about that so we have passed on increases.
And we're going to keep doing that.
At the same time, we want to do that in a very thoughtful way because of the marketplace of course. The commission level is very important for the sellers and we want to do that in a thoughtful way and I would say almost in partnerships with tableau shrank. So bringing in I think continue to see some commission and growth driven by the volume growth and.
The commission increases that we're passing that we wanted to do that in a thoughtful way.
Got it Craig a couple thank you. Thanks.
Thanks Aaron.
Thank you. Our next question is coming from the month Williams with Stifel. Please go ahead.
Hi.
Thanks for taking my question.
First question I have is on when do you think your consumer base is.
The macro.
Are you seeing trade down fewer orders anything you can point to there.
What is your guidance contemplate any comment from a macro standpoint.
For the back half of the year.
Into 'twenty.
Thanks Lamont look.
Thank you.
It's a it's a big question I wish I wish I would know what's going to happen right I think.
What we're seeing in terms of consumer.
And I would say I'm going to sneak also dump the sellers because both are impacted by the macro right. So of course, the consumers are impacted by then by the inflation across the board and in particular commodity input prices.
And the consumer sentiment is under pressure and the spending is under pressure.
On the seller side.
The sellers are also under pressure because of weaker local currencies, Mike and a lot of the sellers dependent on access to hard currency and another to trade in order to imports in order to operate in.
So we see also some sellers struggling with access to supply and ability to do.
Two important products or to even just to go into production right. So we see that at the same time.
I mean, I don't want to make it sound like nothing is happening the challenging macro for US is you know is nothing new it's something that we have been exposed and pretty much from day, one and we are used to navigating periods of <unk>.
High volatility hyperinflation and in the past we have.
Sometimes it's fared better than over channels in periods of hyperinflation or increased consumer price sensitivity because at the end of the day, we have a lot of competitive advantageous to two to appeal to the consumers. We have price transparency, we have a very healthy marketplace flywheel, where the consumers can be.
And if it's from multiple sellers competing together, we have the ability to offer and also in <unk>, where we can decide to price ourselves and intervene if you will on the on the market.
And we have access also to cross border channels, we have a very attractive base of sellers in China that we can work with when we see.
Gaps of supply and gaps in certain categories. So.
I think what we're seeing now and what we've seen in Q2, and what we're seeing and what we're saying for H. Two is that we're going to keep growing and we're going to keep growing while.
Accelerating monetization and.
Saving in marketing. So I think we are quite confident we're quite confident that despite the macro.
In all people can trade down, but so as long as they need to buy products. They will come to junior and they will look for options and we will be well positioned so I think.
The guidance, we gave them keep keeping growing in a context of macro challenges and savings and investments in marketing combined with monetization I think.
<unk> is a very strong sign of confidence.
Okay, great. Thank you.
Thank you. Our next question is coming from Catherine O'neill with Citi.
Go ahead.
Okay.
My first question.
And monetization.
L J.
How you're thinking about.
The timing is.
Alright.
And how meaningful that could be.
Thank you Terry.
And then secondly.
Sort of advertising marketing spend and incentive.
I guess, you're fairly comfortable that when you cut.
Marketing spend.
That way.
And then on the other side, how should we think about incentives.
Second half.
On Capex I know you.
Taking down your Capex guidance for this year.
Sort of pathogen reduction.
Cushing connect capex spend out into 2023.
Thank you. Thank you very much for that.
And.
Jeanette the monetization of that is a very big strategic priority that we.
We are you know as you as you as you mentioned undertaking at the moment so in the past.
Full of cultures, we obtained our license is to offer merchant payment processing services in Nigeria, and Egypt, which is great. Because those are the two largest markets right and.
Within.
Over the last few months preparing the launch and starting to pilot it right. So we.
We are actually lives in Egypt, with a number of pilot merchants and.
We are about to realizing in Nigeria with some pilot merchants.
You know we were operating community for our platform and so we.
We are undertaking a number of changes and adaptations in order to to operate a third party merchants and are creating features and product specific deals, which which work for that.
And it's a bit too soon for us to meet guidance in terms of how.
How much room do we expect it to chart in 2023, but its already lives it's something that.
The first step for US was to obtain the license, which is a very big achievement the second step.
Was to adapt the product and start piloting it which is ongoing and the first step will be to scale right. So I think probably in the coming maybe one or two quarters, we'll be able to give some data on the pilot and then probably more precise guidance, but again, we don't expect.
News yet this year, probably next year and how much is a bit too soon to tell we are also of course are looking at more countries to to be in a position to offer those services in the other countries and I think we are very uniquely positioned to offer payment processing services because.
To me that he has been processing the payments for junior after all and we believe we are on one of the biggest merchants online and so we believe that community is very very attractive and providing a very good service for merchants and we know it because it's providing the service to junior.
So we look forward to two <unk>. This as soon as we can.
In terms of consumer incentives and southern advertising.
You are right that we want to we want to drive that very meaningfully and very carefully or there is flexibility I should say.
And we certainly want to continue to invest and to continue to support the the consumer adoption and the consumer loyalty and we want to continue to see some growth of the use H and so I think here those those levels are still amortizing consumer incentives there to some extent.
Discretionary right. So we decide what we think is the right amount to invest based on what we think is the best return that we can get them the best and output that we can get in terms of consumer uptake and so on and I think we feel good with this level for H two N.
We changed and we can change those on a dynamic basis I think you'll see the strength of the brand.
You see the strength of the cohorts that we had disclosed and brought you. Some numbers. During this quarter you see the strength of the value proposition in terms of assortment in the degree. So we believe that the amounts reached two are appropriate and will lead to two you know continued growth and in our in <unk>.
Good and healthy way, we are able to accelerate or to decelerate. If we see that we can or we need to.
For now we believe that this is the right.
Right amount and then in terms of Capex I think to some extent those capex I mean, all of those capex are in local currency right. So I think here.
Some of that.
The reduced guidance some of the reduced guidance is due to the fact that in dollar terms, we can invest less and we get this thing in local terms I think it's more something that it's not a permanent reduction you have seen we are generally are asset light and we are generally low capex and so I think.
It's not a permanent reduction it's something that we assess all the time and those capex are mainly about fulfillment centers equipment and certain new locations that we decided to upgrade for our sellers, who will drop off and so on and so forth and so we are generally very flexible with that and.
We can reassess capex almost as we need and we believe that certainly we want to stay asset light in the future and and and and keep that activity.
Okay.
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Sir there appear to be no further questions in queue. So do you have any closing comments you'd like to finish with.
Well. Thank you very much for joining as always and then we are available. If there are any follow ups and we look forward to a great second half of the year. Thank you very much 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.
Okay.