Q3 2023 Jumia Technologies AG Earnings Call

Good morning, ladies and gentlemen, and thank you for standing by.

Welcome to Jimmy as a results conference call for the third quarter of 2023.

At this time all participants are in a listen only mode.

After managements prepared remarks, there will be a question and answer session.

With us today are Francis to Fe, CEO of <unk> and <unk>.

Formerly a Missouri executive Vice President Finance and operations.

We'll start by covering the safe Harbor.

We would like to remind you that our discussions today will indicate forward looking statements.

Actual results may differ materially from those indicated in the forward looking statements.

Moreover, these forward looking statements may speak only to our expectations as of today.

We undertake no obligation to publicly update 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 as published on May 16th 2023, as well as our other submissions with the S E C.

In addition on this call we will refer to certain financial measures not reported in accordance with I FRS.

You can find reconciliations of these non <unk> financial measures to the corresponding Ifr S financial measures in our earnings press release, which is available on our financial on our investors relations website.

With that I'll hand over to Francis.

Thank you welcome everyone and thanks for joining us today.

The third quarter was very important Virginia.

We were able to achieve much of what we had planned when we change both the strategy and the leadership of the company.

We made clear then that the overriding objective was to reduce losses and move towards profitability.

We are happy to report that this quarter Hudson further significant progress you know those predictions as well as cash management well, we now see the impact of our growth strategy.

Let's now look at a few key indicators.

The adjusted EBITDA loss of $15 million in Q3, <unk> was the lowest since.

You know in 2019.

This represents a decrease in adjusted EBITDA losses by $31 million versus Q3 'twenty two.

By 67% year over year and by 70% on a constant currency basis.

For year to date.

Just to be a loss of $61 million down by 61% compared to the hundreds and $58 million in the first nine months of 2022.

Our liquidity position amounted to $147 million at the end of Q3 'twenty three.

Which reflects a decrease of $19 million in Q3 23.

Compared to a decrease by $66 million in Q3, 22 down by 721% year over year.

This is the result of a comprehensive plan to build a leaner organization.

Certain unprofitable activities and capture efficiencies in operations and marketing.

We strive to run our business with a key focus on achieving profitability and positive cash flow.

And Q3, 'twenty, three that's showing great progress industrial golf.

There is of course is still a lot of work.

But we're excited by the next phase of the turnaround of junior.

As also explained Priestley groceries crucial Andrew are not only focused on gifts prediction.

We believe in our growth plan as we're already seeing positive signs what are spending far less than in the past in all areas.

We continue to execute our plan to build stronger fundamentals for growth in all core categories Andrew.

And we're starting to see the impact.

Revenue reached $45 million down by 11% year over year and up by 19% on a constant currency basis.

G M D reached $181 million.

Declining by 25% year over year and by 3% on a constant currency basis.

This compares to a decrease in adjusted EBITDA losses by 57% year over year, and 70% on a constant currency basis and a decrease in citizens advertising expenses by seven 4%, Joe Frazier and 67% on a constant currency basis.

Five countries reported positive Jimmy growth year over your own physical goods, both as reported and on a constant currency basis.

These five countries accounted for 49% of the gym V from physical goods in Q3 23.

The Jim G of our physical platform in all countries was down by 17% year over year and increased by 10% on a constant currency basis.

The countries with positive GNP grew for the first in which we implemented a new strategy.

And the results give us confidence for the other countries in the group.

As you're all aware there are a number of activities in the GMA group and we have decided to focus in particular on physical goods.

This came with clear decisions to de prioritize other areas. So that we could focus on our organization on the right vessels.

For example, within physical goods <unk>.

Those two deep prioritize and streamline a number of categories such as M. C. G.

In food delivery services operates you don't know what Jimmy I Foods platform, we chose to focus less true in our biggest markets and discontinued operations in three countries.

Similarly.

We decided to refocus all working towards building a stronger enabler for e-commerce business, thus, increasing the penetration of junior.

Platforms.

Off platform extension of Jeanette Bay remains prototype, specifically in Egypt, and Nigeria, where we have the relevant licenses.

Let me now remind you of what we outlined when we took over leadership of the business.

But to just for cost control and profitable growth.

And our approach to making Jimmy added a preeminent e-commerce business in Africa.

One year ago.

We made a conscious decision to reorganize the company and focus on a few key priorities in order to establish a stronger foundation for growth.

Today, we are pleased to see clear progress.

Not only in terms of costs and cash management.

But also in terms of what we consider to be growth fundamentals.

Our plan does not and there's nothing new here.

And we still have a lot of work to do to execute on those projects. This is just the start.

Looking at the long term.

We believe that this strategy will give us a unique advantage in capturing the growth of consumption in E Commerce in Africa.

With the African population expected to increase by did you earn from $1 5 billion in 2023 to $2 5 billion in 2015.

We are looking at an amazing opportunity.

We need to build the right assets for the long term and we believe that our strategy is doing just that.

We focus on creating a better value proposition for customers that we can sustain in the long run as well as creates a barrier to entry.

Let me outline some of the activities and initiatives that have produced a significant turnaround in the fortunes of junior.

First our supply side, the strategy and execution.

As previously stated.

We believe that demand you know African market is loves but largely unfulfilled.

And it is our goal to address this issue for our customers.

We intend to do this by collaborating with vendors and brands to provide the greatest selection at competitive price points.

Consumers in all markets are price sensitive and we will seek the best deal with online or offline.

Our efforts to create a stronger value proposition in core categories.

Would you finance phones electronics home and living fashion and beauty.

Have resulted in better repurchase rates from new customers acquired in those categories.

And increased the average order value for physical goods.

We seek to continuously improve our assortment and price points working with both international brands and local vendors.

Second achieving operational efficiencies.

Operational efficiency continues to improve.

With fulfillment expenses, but older excluding Jeanette base, reaching $2, one zero down by 26% year over year and 8% on a constant currency basis.

Efficiencies were achieved while extending our footprint in secondary cities throughout 2023.

This expansion is being driven by the growth of our branded pickup stations network, which now accounts for 44% of physical goods deliveries, increasing by eight percentage points with that too.

Third.

Improving marketing efficiency.

While focusing on stronger supply bits of outreach to customers and an overall improved customer value proposition.

We continued shifting the focus away from costly marketing channels in Q3 23.

This led to a decrease in sales and advertising expenses from two three to $4 $3 million down by 74% year over year and 67% on a constant currency basis.

As well as a reduction in consumer incentives, such as vouchers and free shipping.

Both.

Being a leaner organization.

We have built a leaner organization with G&A expenditures, excluding stock based compensation.

At $15 $9 million down by 43% year over year, and 33% on a constant currency basis.

This was primarily driven by savings in South coast.

After right sizing our structure earlier this year.

So to date, the head count and G&A functions was reduced by 317.

Which corresponds to a 19% headcounts prediction.

As part of the organizational changes, we have meaningfully reduced the size of faulting in Dubai.

And relocated leadership positions to our African offices.

Roosevelt's where our consumers our sellers and our operations.

Moving on let's look into all usage trends in Q3.

Quarterly active customers reached $2 3 million down versus last year, but nearly stable quarter over quarter at minus 3%.

We see this near stabilization inactive customers versus Q2 as a positive development.

Q3 seasonality with long holidays and back to school expenditures weighing on household budgets.

Is typically less favorable favorable than Q2 in our core categories.

Additionally.

We had a major commercial events called Jimmy anniversary in June, but no similar promotional activities took place in Q3.

The company received a total of $7 2 million orders in the last quarter, which is down 23% compared to Q3 'twenty.

Zero refrigerant decrease is largely driven by actions taken to recalibrate all products and services portfolio.

Moving away from the most unprofitable categories with limited consumer lifetime value.

This has impacted juice age, but it was the right thing to do since we want to drive profitable growth.

However.

<unk> were up by 11% compared to Q2 'twenty three.

This positive development is driven by an increasing Jimmy I pay app oldest thanks to some promotional activity.

Physical goods orders remained at nearly stable quarter over quarter declining by 1%.

Similar to the trend in active customers, we see the stability in physical goods holders as a positive evolution with regards to seasonality effects and lower promotional intensity in Q3.

G M V reached $281 million.

Done by 'twenty five for sensor over here and by 3% on a constant currency basis.

This is a significant improvement versus Q1, and Q2 2003 when that.

James you decreased respectively by 20% to 25% year over year.

Six and 11% on a constant currency basis.

This trends.

It's primarily driven by physical goods with G. M B, a physical goods down by 17% year over year, but up by 10% on a constant currency basis, primarily as a result of our efforts to focus on core categories.

As we have explained in more detail for the best quarters.

Microeconomic trends remain challenging.

High inflation across markets and currency devaluations have an impact on both customers and vendors.

However.

We believe that our strategy, which places a strong emphasis on securing supply and better price points.

Is very effectively mitigating these challenges.

For example.

<unk> was one of our fastest growing countries in Q3 in terms of Jimmy.

This happened against the challenging macroeconomic backdrop.

68% year over year inflation in Ghana.

The highest level across our 11 countries very negatively impacting purchasing power.

Despite this despite this.

Our team did an outstanding job of making our product lineup more competitive in the electronics appliances and fashion categories.

Especially with entry level brands.

This was combined with very efficient marketing strategies, focusing on price leadership.

And targeting cost conscious consumers.

Let's now look at our progress in building stronger core categories and physical goods.

We have identified key categories in which we want to succeed and become the top choice for consumers across markets.

Phones electronics women living fashion and beauty.

These categories with Citic did back in late 'twenty two.

Based on simple criteria.

Relevance to our consumers and market size.

Ability for Jimmy that's with full supply based on our experience across 11 countries.

And the expected profitability of each segments.

Especially taking into consideration challenges in logistics.

This exercise led to the de prioritization of some categories such as groceries.

I still think it's complex and he couldnt makes a very challenging for e-commerce.

Our focus in 2003 has been on developing a better supply chain across these categories using a variety of methods in all countries.

Such as.

First.

Improving vendor experience.

Working particularly on spinning of payments and fixing or personal pinpoints for marketplace vendors.

Second we are providing better support and planning for key partners in different countries.

Really known brands or the authorized distributors.

Third.

We aim to secure more partnerships to distribute international brands in Africa.

For example, with.

We signed an agreement with Starlink back in October 23.

We'll soon be distributing the residential kits in nature to start with.

We are thrilled to join forces us to keep our Starlink two expenses groundbreaking technology across Africa.

This aligns perfectly with our mission of using technology to improve lives across the continent.

Fourth we are also strengthening our cooperation with long term partners by enabling them to extend through the continent with junior Sioux Falls.

We are pleased to share that we have a great new partnerships in Q3 with renowned brands.

But he was l'oreal and Adidas.

And fifth.

We improved the management of all vendors based in China.

As part of the Junior Global program.

Chinese vendors are able to address the unfulfilled demands in categories like home products and electronic accessories across all markets.

For example, we are.

Have taken steps to improve the profitability of all vendors.

And to reduce the old professional leakage, what securing more supply from them.

These actions are starting to bear fruits.

We've seen Q3's devote important transmitter zinc.

Our mix is changing in significant ways.

The share of JV in items sold from all core categories is increasing.

Particularly women living categories have demonstrated strong progress.

With JMP growing 24% year over year, and 62% on a constant currency basis.

The shelf items sold from noncore categories, primarily including FMC GM groceries decreased from 21% in Q3, 22% to 13% in Q3 23.

As a logical consequence.

Average order value for physical goods is improving.

From $37 in Q3, 22 to $39 in Q3 'twenty suite.

Increasing <unk> is an important enabler for profitability, while we also decreased our fulfillment expenses per order.

We have a great case example of the relevance of your strategy in Senegal.

While we had historically struggled with volatile or insufficient supply of course, all core categories in Senegal.

Our team based in Deca managed to build a much better assortments.

Due to robust year over year growth in both Gmg and orders in Q3 23.

For example.

In the home and living categories, we have built stronger relationships with local suppliers and agree on a journey supply plans.

With a huge figure inconsistent assortments across the whole year.

We have also worked to grow specific categories with several Pan African and European brands willing to enter this market.

Such as Blue Moon.

A leader in the home improvement category in Europe, which said is exclusively and Julia in Senegal.

What you see here is just the beginning of a very broad transformation.

We're happy to see this early impacts, but there is still a lot to be done and the high unmet demand to be serviced.

The priorities set for 2023 on supply on core categories will remain at the top of the agenda for 2024 as well.

Progress on supply in our core categories is a critical part of our strategy and enables us Sam.

The way we drive growth.

In the past, we invested a lot of money and management attention and stimulating demand.

We spent heavily on expensive online marketing marketing channels as.

As well as customer incentives, such as free shipping veterans and other customer discounts paid by junior.

These often generated unprofitable volumes.

Well now building on what we believe to be Mitch as Jeff fundamentals.

First.

We believe that improved assortments and price points that will enable us to drive more free traffic from being top of mind destination for consumers.

As well as improve repurchase rates.

We're pleased to see early impact on alcohol behavior as.

As the 30 days repurchase rate of our Q3 23 cohorts of new customers.

<unk> from our core categories has already increased by two percentage points compared to the same period last year.

Second.

We have been extending our logistics reach and marketing actions outside of the capital switches.

We seek to penetrate markets historically underserved by both physical retail and e-commerce.

In the cities.

We run a very efficient marketing activities, resulting to mostly offline actions and leveraging our allowance J false network of commission to agents.

And search.

Our marketing teams have focused their efforts on green free channels.

Such as customer relationship management, CRM and search engine optimization issue.

And improving the efficiency of the other channels such as paid online marketing.

For example, the <unk>.

Yeah, Ryan in total visits to physical goods on our platform in Q2 'twenty three.

Increased by 25% year over year.

Thanks to better customization of push notifications same store app users.

Similarly, the shelf, if you increase by 36% over a year.

This strategy enables us to secure significant efficiencies in marketing.

Yeah.

At group level stays in advertising expenses decreased by 74% year over year.

And 67% on a constant currency basis, as we are particularly as we particularly scale them on online marketing channels.

On the physical goods, we also significantly scaled down the virtuous campaigns free shipping and other discounts centered bedroom yep.

Leading to a decline in the shelf oldest benefiting from such consumer incentives from 44%.

27% Joe for you.

Let's look at how the strategy is working out and none of the chemistry Uganda.

While we made progress on all three dimensionless nishu.

Looking at supply improvements.

We have recorded strong year over year growth in beauty home and living and electronics. Thanks.

Thanks to our efforts aimed at building more consistent supply and price leadership.

Increased sales from these categories more than offset the decline in the FMT segments.

We also started a major plan to extend our distribution footprint across Uganda at the end of 2022.

Andrew we are now reaping the benefits with a greater share of new customers and the oldest coming from cities outside of the capital.

For instance.

Our team achieved great results in the northern regions and cities like glue in lira.

Thanks to faster delivery.

The very relevant offline marketing campaigns industry. It is.

Looking at the marketing channels, we focused on improving youll CRM routines, sending more customized offers to various segments of apps users and just driving more visits to our platform.

All in all.

Strong execution of the group's strategy in Uganda led to robust year over year growth in Q3, 'twenty three on both gmg and the oldest.

Sharply reducing marketing costs and improving our economics.

We see similar stories across countries with physical goods.

Already enabling five countries to report positive year over your GMP growth in Q3.

We see this as very positive evolution, which.

Which we believe confirms that our strategy enables us to build a long term growth while preserving our cash.

Let's now look at recent developments in GMP.

As explained previously we.

We have decided to focus primarily on making Jimmy <unk> and effective enabler of E Commerce.

We are working towards these objectives. These objectives sorry in several ways.

First.

We're integrating more relevance payments methods for customers to complete the autism platforms.

Although we already have a broad range of payment methods, such as credit cards and mobile money wallets.

We keep on adding new solutions based on the needs of customers in each and every country.

The Kent.

Railroading out Jimmy up a undelivered.

This feature allows customers to pay digitally upon delivery of the older thus, reducing the need for cash and simplifying our operations.

In Kenya.

80% of physical goods transactions in Q3, 23 were completed using Jimmy I E.

Compared to 28% in Q4 2002.

Driven by the introduction of <unk> pay on delivery.

So it's.

We are developing buy now pay later solutions in partnership with third party credit providers to support purchases on our platform.

So Virginia P <unk>.

Our customers can access consumer finance options offered by third party partners.

We're responsible for credit underwriting and loan disbursements.

As a result.

We see constant progress in the shelf transaction space with GMP.

17, 8% in Q3, 2022 sorry to 27, 1% in Q3 'twenty three for physical goods.

And from 23, 9% to 34, 2%.

For food delivery.

Total Jimmy I pay transactions increased by 8% year over year in Q3 23.

By an increasing orders under Jimmy I pay App.

Thanks to promotional activities.

Jimmy <unk> is down by 28%, Georgia.

Reflecting foreign exchange devaluations in Nigeria, and Egypt, and obey trip by 3% on a constant currency basis.

Looking at the off platform opportunities.

We believe that Jimmy I pay has shrunk development potential to process payments on behalf of third party merchants.

We want to drive off platform developments in a disciplined manner.

Nothing in Egypt, and Nigeria, where we have already obtained the relevant licensee students.

I will now hand over to Antoine who will walk you through our financials.

Thank you for all of Us.

Hello, everyone.

Let's start with a review of all top line performance on page 11.

Revenue reached $44 $9 million in Q3, 23 down 11% year over year and up 19.

Percents on a constant currency basis.

FX was a significant headwind to revenue performance.

Third party revenue was 21 point.

Millions of dollars, a 33% year over year and 85% on a constant currency basis, we experienced significant growth in first party revenue from business opportunities in Egypt.

This is consistent with our focus on improving supply from retail whenever relevance.

Turning now to gross profit.

Gross profit reached 25 point to $1 million in Q3, 23 down 23% year over year.

2% on a constant currency basis.

Gross profit margin as a percentage of G. M. D reached 13, 9% compared to 13, 5% in Q3 22 supported by improved retail margins and reduced spending on consumer incentives and promotions.

Let's now move to cost, where we continue making significant progress.

We will send them at the expense amounted to $12 million.

48% year over year, and 35% on a constant currency basis.

Importantly, we continue achieving record levels of logistics efficiency.

Please state aren't expense per order.

Excluding gum, yet they app orders, which do not include logistics cost.

Decreased by 26% year on year to 2.1 dollar from two nine in Q3, 22, and 8% on a constant currency basis.

As a percentage of G. M D fulfillment expense improved from nine 6% to six 6%.

This consistent improvement reaffirms the significance of our ongoing logistics information as we continue to build upon the success of our logistics optimization initiatives.

These include a higher share of speak up station deliveries, which increased from 36% of shipped physical good orders in Q3, 22% to 44% in Q3 23.

We pursue our strategic expansion of the pickup station network to penetrate under that radios of the market.

On a cost effective manner.

We've expanded our footprint beyond 90 days and then the warehousing staff productivity reduced packaging costs, along with many other initiatives.

This improvement in efficiency illustrate our ability to get through savings across our logistics chain, while strategically expanding our logistics footprint outside of the main cities and improving our customer experience.

Sales and advertising expense amounted to $4 $3 million in Q3 23 down.

74% year over year, and 67% on a constant currency basis, as we continue bringing discipline through our marketing investments.

We see a clear improvement in our marketing efficiency ratios with sales and advertising expense the order decreasing by 66% from 1.7 dollars in Q3, 20, 220 point, taking two or 323.

As a percentage of G M D.

Detaching expense reached 2.4% in Q3 23.

He has more than 400 basis points improvement you're already yeah.

These prediction standardizing expense reflects our strategy to build a stronger customer value proposition that emphasize better supply of physical goods and geographical reach over go skiing marketing campaigns and promotions.

We believe that this is the most relevant and viable approach dwell African market.

We have already experienced positive development across five markets, where physical goods <unk> growing year over year, despite significantly reduced marketing expenditures.

Moving on to technology and content and G&A expense.

Tech and content expense reached $10 $1 million down 26%, although your as reported and on a constant currency basis and down 9% quarter over quarter.

Why do we have meaningfully reduce cost in the last year, we remain committed to driving further savings in the future.

Our efforts to rationalize the cost structure and software cost and staff disruptor are ongoing and we see additional opportunities for efficiency there.

These include locating an increased share of our developers and take personal lending Africa go sell to all customers and centers.

Technology is a core part of fault DNA and we remain committed to developing better products and features to improve the experience of all participants on the platform.

Yeah.

G&A expense excluding share based compensation.

$15.9 million in Q3 23.

43%, Georgia, and 33% on a constant currency basis.

G&A expense included a 6 million USD beneficial impact from a tax provision release.

The impact of this provision release and share based compensation G&A expense was $21 $9 million in Q3, 23 down 22% year over year and 11% on a constant currency basis.

The staff cost component of G&A expense, excluding share based compensation expense decrease.

Decreased by 32% year over year.

As a result of the organizational changes that have been implemented.

Moving on to balance sheet and cash flow items.

Capex in Q3, 23 was 0.3 million USD as we remain committed to an asset light my dad.

Our liquidity position reached $147.4 million comprised of 45.

$44.3 million in cash and cash equivalents and $93.1 million in time deposits and other financial assets.

Q2, 'twenty three liquidity position amounted to 166.

$3 million, marking a decrease of $19 million in Q3 23.

Compared to a decrease of $66 million in Q3 to Institute and a decrease of 39.21 million shares in Q2 'twenty three.

The Reds extending the base of the decrease of our liquidity illustrates all asphalt to preserve our available cash resources.

Net cash flow used in operating activities reached $24 million down by <unk>, 5% in Q3 23 compared to the same period in 2002.

While the third consecutive quarter.

Our working cap remain positive with a cash effect of zero point $4 million in Q3 23.

This positive trend reflects our asphalt to include the efficient management of receivables inventory and payables, which all designed to improve our overall cash position.

I now hand over to policies, who will walk you through all guidance.

Alright to apologize we appear to have lost Francis line.

So maybe you haven't got a do each week, we remain committed to reducing all losses, improving all cash efficiency and progressing towards profitable growth.

Considering the meaningful expense reduction made in the nine months ended September 32023, we currently expect the adjusted EBITDA loss of.

$80 million to $19 million compared to the previously communicated range of $19 million to $100 million.

This implies a 57% to 61% year over year reduction in adjusted EBITDA loss.

Our initial guidance I'll just have to be yellow ranch fall from $100 million to $120 million. As you can see we are well ahead of our projection thanks to strong execution.

This quarter or the importance of audio meal as we believe it showed that we can achieve the ambition that we set about one year ago, when we outlined our new strategy.

We have made steady progress on the cash efficiency and our growth strategies nobody ever being positive signs.

Going forward we.

We are focused on further improving our economy and achieving profitable growth.

More than either we believe that we are doing the right things to grow a profitable business and we have confidence you know a ability to capture the amazing potential of e-commerce across I forget.

Yeah.

Thank you.

At this time, we will be conducting our question and answer session.

If you would like to ask a question. Please press star one on your telephone keypad.

A confirmation tone will indicate your line is in the question queue.

And you May press Star two if you would like to remove your question from the queue.

For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.

One moment, please while we poll for questions.

As we have no questions in queue. At this time. This concludes today's conference and you may disconnect your lines and we thank you for your participation.