Q3 2024 Jumia Technologies AG Earnings Call

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Good morning, ladies and gentlemen, thank you for standing by welcome to Jimmy as results.

Conference call for the third quarter of 2024, there will be an opportunity to ask questions. After today's presentation, if you'd like to ask a question. Please press star one on your telephone keypad at any time with US today are Francis to Fe, CEO of Julia and Antoine Maillet, Missouri, Executive Vice President Finance and operations.

I will start by covering the safe Harbor.

We would like to remind you that our discussions today will include forward looking statements actual results may differ materially from those indicated in the forward looking statements.

Moreover, these forward looking statements may speak only to our expectations as of today, we undertake no obligation to publicly update or revise these statements.

For a discussion of some of the risk factors that could cause actual results to differ from the real forward looking statements expressed today. Please see the risk factors section of our annual report on form 20-F as published on March 28, 2024, as well as others are other submissions with the SEC. In addition on this call.

We will refer to certain financial measures not reported in accordance with I F or S.

You can find reconciliations of these non ifr S financial measures to the corresponding Ifr S financial measures in our earnings press release, which is available on our Investor relations website with that I'll hand, it over to Francis.

Francis: Good morning, everyone. Thank you for joining us.

Francis: I will start today's call with a brief overview of hold Q3 performance.

Francis: We didn't focus our discussion on our plans for the use of proceeds from our completed H M offering before turning the call over to want one for a deeper dive into our financials.

Francis: The third quarter marked a continuation of Hawaii starts to strengthen the underlying fundamentals of our business.

Francis: We made tangible progress in advancing civil structural updates to our operations.

Francis: The progress we have made over the last several quarters.

Francis: This includes significant improvements to our logistics network as well as the consolidation of several of our warehouse this into larger more tech enabled locations across our footprint.

Francis: While these improvements schools temporary disruptions to day to day operations in the quarter.

Francis: Welcome students that you folks have positioned us well to scale and drive profitable growth.

Speaker Change: Hughes H keep your eyes, a quarter were mixed.

Speaker Change: While we saw improvements in active customer accounts and physical goods orders, we experienced softness in G. M D and fulfill the oldest due to currency devaluations that jeanette the oldest and the aforementioned warehouse consolidation.

Speaker Change: Quarterly active customers grew year over year for the first time since the third quarter of 2022, improving 1% to 2 million.

Speaker Change: We also continue to attract and retain what we believed to be stickier and higher quality customers.

Speaker Change: Our Q2, 90 day repurchase rates increased 304 basis points year over year.

Speaker Change: As the number of new customers, who placed on the older. In Q2 24, and then placed on those are older with 90 days grew to 39% from 36% in Q2 'twenty three.

Speaker Change: Attracting higher quality cohort has been an important proof point for our value proposition.

Speaker Change: Showing we can drive repeat orders from returning customers without the use of promotions or discounts.

Francis: Or does this quarter totaled $5 9 million.

Francis: A 4% yield further improvements.

Francis: This growth was driven by 5% year over year increase in physical goods oldest just.

Francis: He was treating all success, improving our supply price points and the overall value proposition.

Francis: Net cash flow.

Francis: Used in operating activities was $26 8 million driven by negative working capital contribution, notably impacted by third party sales cycles.

Francis: I know one time provision settlement of one 8 million.

Francis: The cash flow wasn't fully impacted by technology subscriptions. He is.

Francis: And lending platform quite again integrity.

Francis: And the continued optimization of our warehouse network.

Francis: We maintained our disciplined approach to cash management, while supporting strategic growth initiatives.

Francis: I will note down the call back over to from Statesville guidance.

Nelson: Thanks Nelson.

Speaker Change: Today, we are reaffirming guidance for the full year 2024.

Speaker Change: We aim to further reduce our cash utilization for the full year of 2024 as compared to full year 2023.

Speaker Change: Additionally, based on the positive impact of our growth strategy.

Speaker Change: Projects and increasing the golf oldest engine being towards 24, excluding the potential impact of foreign exchange.

Speaker Change: As a reminder.

Speaker Change: Our biggest shopping event of the Euro our annual Black Friday sale is happening this November.

Speaker Change: <unk> kicked off November 1st and runs until November searches.

Nelson: The annual event continues to grow in popularity across countries and plays a pivotal role in promoting nationwide e-commerce adoption.

Nelson: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Once again, please press star one on your phone today, if you wish to ask a question.

Nelson: Please hold while we poll for questions.

Speaker Change: Our first question today will be coming from Brad Erickson from RBC.

Speaker Change: Brad Your line is live.

Brad Erickson: Great. Thanks, guys and good afternoon.

Speaker Change: Thanks for taking the question so I had a few first.

Speaker Change: Yeah, Theres, a pretty big Delta between the G M V growth.

Speaker Change: And kind of the order growth and I'm, just curious like what's going on in terms of like mix or from an <unk> perspective, that's leading to that any drivers you want to call out there that I think theres, a 25 point gap between G. M D and orders here. So just curious what's going on there.

are here. So just curious what's going on there.

Brett: Hi, Brett.

Hi, bros.

Speaker Change: And thanks for asking them. So let me take the question. So indeed, there's a pretty big gap.

Thanks for asking. So let me take the question.

Speaker Change: So, indeed, there's a pretty big gap between order growth on physical goods at 5% and GMB growth in constant currency at 29% this quarter.

Speaker Change: Between all those girlfriend physical goods at 5% and Jim P growth.

Speaker Change: In constant currency to 29% this quarter.

Speaker Change: There are many I mean, there are several different factors impacting that one is definitely.

Speaker Change: There are many, I mean there are several different factors impacting that.

One is definitely the mix, the evolution of the mix.

Speaker Change: The evolution of the mix.

Speaker Change: Across countries, we have different different trends of course, but we have refocused over the past two years, our mix towards all key categories that are fast fashion and beauty.

Across countries we have different

Speaker Change: But we have refocused over the past two years our mix towards our key categories that are fashion, beauty, home and living, electronics and phones that typically have a higher average item value and average order value than what we saw in the past with a higher component of groceries and FMCG.

Speaker Change: Human living electronics and phones that typically have a higher average item value and the average order value than what we saw in the past because a higher component of groceries in the synergy.

Speaker Change: So this is shifting the mix that we're still seeing happening I mean does this still seeing year over year to date is definitely impacting our average basket size, which you can see here.

Speaker Change: So this shift in the mix that we're still seeing happening, I mean that we're still seeing year-over-year to date.

Speaker Change: is definitely impacting our average basket size, which you can see here in those numbers.

Speaker Change: The numbers and then there's a dimension of inflation happening into countries in countries that have like significant devaluations, but not only where it's just driving up the prices of products, especially those manufacturer of the outside of the country. So.

Speaker Change: And then there's a dimension of inflation happening in the countries. Countries that had like significant devaluations, but not only, where it's just driving up the prices of products, especially those manufactured outside of the country.

Speaker Change: So it's a mix of both but definitely shifting the mix is driving hydro venue baskets.

Speaker Change: So it's a mix of both, but definitely the shift in the mix is driving higher value baskets that are helping us to break even at order level.

Speaker Change: Helping us to to breakeven to breakeven at the order level.

Speaker Change: Got it that's great and then just on the order growth, you're obviously lapping a period, where you're kind of intentionally pulling back on marketing and everything so.

Speaker Change: Yeah, you're you're kind of now back to a little bit of year over year growth, what would sort of theoretically be required to maybe see a bigger acceleration just something on the order growth specifically.

Speaker Change: So I think one of the assumptions when we look at the oldest girlfriend uses roofing jewelry e-commerce across the world of marketing rights and its been assumed a junior for many years. That's our oldest grocery is heavily correlated with marketing expense and actually marketing spend how do we increase that could potentially.

Speaker Change: In the context of our African markets, we believe it's very different.

Speaker Change: We believe that.

Speaker Change: The greatest fault of growth I mean, most of growth I'm not going to save us.

Speaker Change: 90%, but overall growth was driven by the value proposition, which is heavily driven by supply and prices and the ability to distribute to their customers at very competitive prices with reliable service.

Speaker Change: Nothing fancy, it's not about more ads of Midtown and Google, It's not about delivering thing, it's really I mean fall heavily cost conscious customers. It's really all about getting the best value proposition for the right assortment at the best price. When you look at those growth today I mean, although the numbers are not very impressive yet we're talking 1%.

Speaker Change: That give consumers and 5% in them.

Speaker Change: In our in all of those and we want to get too much but the numbers into the future.

Speaker Change: These numbers I mean being delivered without increasing marketing budgets and we believe we can be more efficient in marketing. So the big drivers to accelerate on both going forward in the coming quarters, and 25 will be basically consistent improved delivery on fundamental topics the biggest one.

Speaker Change: Being improving the supply keeping on improving the supply.

Speaker Change: We've discussed that in the previous quarters, one of the big.

Speaker Change: I mean, one of the easiest example, two examples to explain here would be getting more supply from a Chinese supplier space that weird with tapping through cross border E Commerce and also local fulfillment for all Chinese vendors, we're expanding our teams in China weak spending often debates, we're looking to open new offices across new manufacturing regions in China.

Speaker Change: So we can get more supply that's extremely well priced very competitive for African consumers and that is expected to have it seems can impact on top line growth additional projects would be bitter expansion I mean accelerated expansion of the country. We've mentioned in the past that well, there's a lot of latency.

Speaker Change: Demand. That's 40 served across Africa in particular outside of the biggest cities outside of the capital cities. We believe that we have the right business model to serve people in a very very cost efficient way and as we are able to opened the rights that are free network very very cheap very low cost to serve populations in new areas motor features.

Speaker Change: We're able to tap new markets get new active consumers and and grew our usage on.

Speaker Change: On that front, we shared today, one important number or in very important country, but she's Nigeria, Nigeria, specifically and very importantly, our older of from outside of the two capital cities, which are illegals in Abu Dhabi grew year over year by 22%, which is pretty significant in particular in the context of nature, Yeah, that's been a pretty rough.

Speaker Change: For business over the best Sir So we are really encouraged by those trends. So I'm sorry, it's a long answer to a short question, but all in all accelerated growth is going to come from consistent.

Speaker Change: High quality delivery.

Speaker Change: The fundamental projects that will that could bring compounded impact over time, and we're starting to see at country level, a very very positive signs, although they would say, it's again to 1% I keep consumer groceries, if not the most impressive number.

Speaker Change: When we look more in detail, we see really positive evolutions and impact from fundamental actions and we believe it's going to pay off in the coming quarters.

Speaker Change: Got it that's that's.

Speaker Change: Great color no worries on the lung cancer.

Speaker Change: Appreciate the color.

Speaker Change: And just I just I think that's again, we believe it is not about increasing marketing budgets and we believe we can I mean, we believe we can become even more efficient on marketing the dynamics in our markets are very different from inside the U S. Europe Dubai Hum in the other countries, where there's a more direct correlation with like online marketing.

Speaker Change: <unk> moved it not the case for customer base.

Speaker Change: Just a few more if I could.

Speaker Change: On the you know the exit of South Africa, and Tunisia, I guess, just talking about that if you could kind of what were the main characteristics of the countries that led you to exit or or maybe to put it a little differently, what was sort of different about those countries that compared to your you know your other current incumbent market.

Speaker Change: Sure I will start with South Africa, So I mean.

Speaker Change: First of all it's a tough decision and it was a tough decision.

Speaker Change: Particularly thinking of the teams, but we had to do it it's all about to be useful for location and where business. So that's the kind of the resources of the decisions we have to take at some point and the reason it's been raising gave us the flexibility to take the to make those decisions and take the short term cost impact.

Speaker Change: South Africa is a quite it's quite a unique market in Africa for e-commerce, because it's a lot more nature than any other market when it comes to retail and logistics so quite different very different dynamics also a very competitive market with a wedding, what if type players and junior had.

Speaker Change: Operating in South Africa, and the a different brands different business model more street retail and already focused in fashion. So we had to clear in the past that it was noncore and up it was not I mean, the built along the same lines and based on the same assets then that's in the other countries. So it was rich if he straightforward decision Unfortunately and.

Speaker Change: When we look at Tunisia, it's been a it's been a market where I mean local dynamics have been rougher than in the other countries market potential is definitely Lori should we get population and GDP, obviously country dynamics has been tough over the past couple of years.

Speaker Change: In the end, it's it's it's it's a choice and resourceful location. We we could have turned around the country. So it doesn't have to have a better impact on Swan, but we believe it's a better allocation of our resources money people management time and focus to dedicate to dedicate the orange into.

Speaker Change: Two other countries with big potential.

Speaker Change: Got it and then and then last one just on the on the EBITDA.

Speaker Change: You called out some of the onetime stuff that occurred I guess from just a free cash flow perspective losses kind of flat on EBITDA Q over Q I guess, besides just kind of the higher unit volumes, maybe just speak to the algorithm that sort of driving those losses down overtime, which is you know obviously, what you're guiding to.

Speaker Change: Yeah. So.

Speaker Change: The higher level here the judge is the following.

Speaker Change: We've done a lot of the work on the cost base of our over the best during the half right. I mean, we for example, we divided workflows behalf, we're not going to do that again in the coming weeks after Kenny mentioned.

Speaker Change: Going forward it subjects that profitability is going to be the result of both of them mostly in improvement in topline revenue sort of usage growth and from management of op margins and further improvement of efficiency.

Speaker Change: We believe we can deliver on both our we have the first signs of all your ability to grow usage at the end of this year I mean, this quarter and we believe there's still more efficiency to be captured from across the cost base. I mentioned marketing you saw this quarter that we we we moved warehouses to to better fulfillment centers that would be more efficient.

Speaker Change: That's where they have an impact on fulfillment costs. So it could be a long list, but we believe we can still improve in efficiency through innovation scale, and and new processes and ways of working and definitely a win we will.

Speaker Change: Topline revenue groceries.

Speaker Change: If contribution to breakeven.

Francis: Got it that's great color. Thank you.

Francis: Gotcha.

Speaker Change: And there were no other questions in queue at this time I would now like to hand, the call back to Francis do fate for closing remarks.

Speaker Change: Thank you very much so as we said during the call. This is a mixed quarter in terms of results. We of course want to deliver better results.

Speaker Change: But looking at the bright side here I think in this tough quarter, we see positive impact and continued progress on our key growth projects, we see active customers growing we see repurchase rates improving we see continued success in key projects like counter expansion that I mentioned, Nigeria, which is a very important country for us.

Francis: In the very short run and we're also seeing from preparation and the strong build up towards Black Friday, which is an important event to step up our volumes towards 25.

Francis: And most importantly, we have achieved quite a significant impact and progress them big fundamentals that drive medium term impact.

Francis: We have done decisive action and refocusing on simplifying the business that I mentioned, South Africa, Tunisia, we've moved to better fruit she meant bigger better from some incentives in four of our most important markets and we believe it can make lead to work done this quarter confirms our growth levels for the coming years, which.

Francis: It's unimportant Ah is an important data point.

Francis: So as it will be a key component to our path to profitability and this quarter delivered significant improvement on the fundamentals that will help us to Pittsburgh, that's shrunk 25. Thank.

Speaker Change: Thank you very much.

Speaker Change: Thank you. This does conclude today's conference you may disconnect. Your lines at this time. Thank you for your participation.