Jumia Technologies AG

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to Jumia's results conference call for the second quarter of 2020. At this time, all participants are in a listen-only mode. After management's prepared remarks, there will be a question and answer session. Please note, the conference is being recorded. If you require operator assistance, please press star then zero. I would now like to turn the conference over to Safa Damir, Head of Investor Relations for Jumia. Please go ahead.

Thank you. Good morning, everyone. Thank you for joining us today for our second quarter 2020 earnings call. With us today are Sacha Poignonek and Jérémy Odara, co-founders and co-CEOs of Jumia, as well as Antoine Maillet-Nezret, CFO. This call is also being webcast on the IR section of our corporate website. We 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 forward-looking statements expressed today, please see the risk factors section of our recent 20F filing. In addition, on this call, we will refer to certain financial measures not reported in accordance with IFRS. You can find reconciliations of these non-IFRS financial measures to the corresponding IFRS financial measures in our earnings press release, which is available on our investor relations website. With that, I'll hand over to Sachin.

Thank you very much. Welcome, everyone, and thanks for joining the call. I hope that you are all staying safe and well. We're pleased to share with you today results that I think demonstrate meaningful progress on our path to profitability. And before diving into the details, we would like to acknowledge the hard work and dedication of all our employees, all our logistic partners, all our sellers, restaurants, J-Force agents who have been collaborating together in order to keep serving consumers in these very unique and turbulent times. And we are very thankful and we thank them all for this. Our mission of providing consumers with access to goods and services, helping sellers and SMEs reach consumers and grow, while making a positive impact on the African continent, has never been more relevant. We explained during our Q1 results all the actions that we have been taking to adapt our operating model, of course, including social distancing, contactless delivery, work from home, and many others. as well as all the actions that we have been taking in order to support the communities. For example, introducing price control mechanisms on essential goods, supporting the delivery associates throughout the Junior Heroes program and many others. It goes without saying that we will continue to carry on with all those initiatives as long as the situation remains, and we're very happy to take questions on all this at the end of the call. Now let's talk about the results and I am now on page three of the presentation. We will start today with the bottom line since it's been a big part of our focus lately and also something that we all wanted to see. I think in Q2 we made great progress on our path to profitability. We had set for ourselves a strong objective to deliver a clear trend in reducing our loss in absolute terms. In Q1, we achieved the 10% reduction year over year of the adjusted EBITDA. In Q2, adjusted EBITDA was 33 million, a loss of 33 million. This is the best level in absolute terms of the past six quarters. You may also have noticed in our press release that we have successfully entered into an agreement concerning the settlement of all ongoing class actions, which is also good news. And without the one-off expense related to this, the adjusted EBITDA loss would have been $29 million, meaning a 34% reduction year-over-year. We are very happy about is that this improvement is driven by strong fundamentals. And those fundamentals are growth of the usage of Jumia, orders and consumers, improved unit economics, strong discipline on costs, both on marketing and GNA. One very good way to see this is through the evolution of our unit economics, which you can see on page four. Our strategy to increase the focus on what we call the everyday categories, gradually monetize the marketplace while driving cost savings is really yielding very good results. We are now generating almost one euro per order of gross profit after fulfillment. And in fact, we are almost break even after sales and advertising. With the business mix rebalancing, that we initiated last year, we are shifting more business towards categories like beauty, fashion, or fast moving consumer goods, which have higher commission rates and are less promotionally intensive than categories like phones and electronics. In parallel, our monetization keeps improving as we roll out new revenue streams, our fulfillment efficiency keeps improving as we continuously roll out new projects, new technology features, as we increase the volumes as well. And you can see these dynamics playing in the average order value, which is now €34, and in the gross profit after fulfillment, which, like I said, is now €0.9 per order in Q2. If you continue going down, the marketing efficiency has never been as good during the quarter. On the one hand, we have been very cautious in our investments, given the level of uncertainty, as well as some of the disruptions in the operations that we faced in Nigeria, South Africa, food delivery, and we had mentioned those in Q1. But most importantly, we are able to meaningfully reduce our sales and advertising expense today because we have spent eight years building one of the strongest brands in Africa. A good example of that is Jumia was featured in the top 10 of the 100 most admired brands in Africa in May. according to the ranking of Brand Africa. And that is just one example and something which makes us very confident for the future. Finally, our tech and G&E keeps improving too, thanks to our cost discipline, but also all the restructuring actions that we had initiated last year and are now starting to pay off. So overall, very pleased with the evolution of the unique economics and the adjusted EBDA trajectory. And what makes us very confident about the future is that those improvements are not caused by a sudden surge or a spike in volume during the quarter. Instead, they're really driven by improving the underlying drivers of the P&L. And that, I think, is very important to note. If we turn to page five, we thought it was very important to comment on the measures taken by the governments so far as part of the COVID response in order to understand the behavior of consumers, in particular towards e-commerce. So far, what we've seen is that in most countries of our footprint, they did not implement broad nationwide lockdowns like the ones we have seen in most Western countries. In fact, only four countries imposed nationwide lockdowns. And these countries represent about 24% of our addressable market. Everywhere else, confinement measures consisted in either localized lockdowns or partial movement restrictions like curfews during evening hours. This is very important consideration to keep in mind because localized lockdowns, partial curfews led to less drastic changes in consumer lifestyles and behavior. In other words, in those countries, we have not seen a surge in demand. In terms of supply disruption, certain parts of our business, as you know from our Q1 release, were strongly impacted, mostly Nigeria, South Africa, food delivery, as well as the cross-border marketplace. We've been gradually returning to a relatively normal course of business over the course of the quarter. So once again, As you read the Q2 results, you have to keep this in mind and appreciate that our progress on the path to profitability, in particular, our record gross profit after fulfillment is driven by strong fundamentals rather than a surge in volumes. And it's taking place also despite some significant disruption in some countries. Where we continue to see positive impact is with the sellers and big brands in particular. and how they look at e-commerce if you please turn to page six we have seen both small sellers and large brands turn to e-commerce as a important route to market on the brand side in particular we have been deepening our partnerships with many brands and many brands are now putting in place dedicated commercial and marketing strategies for e-commerce in africa we've had very strong engagement from those as part of our Jumia anniversary. And more than 100 brands across many sectors joined us for the event. We're very encouraged, of course, by this momentum because more sellers means more choice, means better prices for the consumers. And it, of course, validates Jumia as the platform of choice to reach consumers online in Africa. With this, let me now hand over the call to Jeremy, who will give you more details on the Q2 performance.