Jumia Technologies AG

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to Jumia's results conference call for the first quarter of 2023. At this time, all participants are in a listen-only mode. After management's prepared remarks, there will be a question and answer session. I would now like to turn the call over to Safa Demir, Head of Investor Relations for Jumia. Please go ahead.

Thank you. Good morning, everyone. Thank you for joining us today for our first quarter 2023 earnings call. With us today are Francis Dufay, CEO of Jumia, and Antoine Maillet-Mézret, Executive Vice President, Finance and Operations. 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 annual report on Form 20F as published on May 16, 2023, as well as our other submissions with the SEC. 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 Francis.

Thank you, Stéphane. Welcome, everyone, and thanks for joining us today. So we are now seven months into the execution of our strategy to accelerate our progress towards profitability. And I'm very pleased to report today very good progress towards this goal. In Q1 23, adjusted EBITDA loss decreased by 51% year-over-year, reaching its lowest level in over four years. This is the third consecutive quarter of adjusted EBITDA loss reduction on a year-over-year basis. And we are accelerating the pace of loss reduction after a 30% decrease in adjusted EBITDA loss in Q4 2022. The loss reduction this quarter was supported by significant cost savings as we reduced our operating expenses by 32.9% year-over-year. We are opening the box on every cost line in our P&L and driving efficiencies while maintaining our standards of operation and execution. We are very pleased with the progress made so far on costs and we believe that we still have room to drive further savings on fulfillment, tech and DNA costs as our efficiency measures continue to yield more results. I also want to be very clear that although we believe cost reduction to be an essential lever for breakeven, it's only one aspect of our broader profitability strategy. The other very important lever for breakeven is obviously growth. And although growth in Q123 was affected by a number of headwinds, we have significant growth runway in our markets, and we are working on the fundamentals of our business and consumer value proposition to capture this vast opportunity. Let's now review the details of usage performance in Q1 2023. Quarterly active consumers, orders, and GMV declined by 22, 26, and 22% year over year, respectively. Usage dynamics were negatively affected by a combination of factors in Q1 2023. First of all, the macro environment remains very challenging. High inflation is affecting consumer spending power and restricting sellers' ability to source goods. We also faced a challenging operating environment in Q1 in Nigeria, with protests related to the withdrawal of high-denomination currency notes. There were also security concerns around the election period in February 2023, but as of today, these disruptions in Nigeria have subsided. Second, we took very deliberate actions that we knew would affect usage in the short term, but at the right things to do for the long-term growth and profitability of our business. We recalibrated our product and service portfolio, moving away from unprofitable categories with limited consumer lifetime value. As part of that, we have seized our first-party grocery offering in most countries and significantly reduced promotional intensity behind the number of services on the DreamAPay app. In fact, DreamAPay app services accounted for over 25% of GMV decline, and over 40% of orders declined. JumiaPay app services, combined with the FMCG category, which includes grocery products, accounted for a total of 55% of the decline in items sold during the quarter. Lastly, for GMV specifically, FX was a significant headwind and contributed 15 percentage points to the 22% GMV decrease in Q1 23. 9 out of 10 local currencies depreciated against the U.S. dollar. The Egyptian pound and Ghanaian CDI, for example, depreciated by more than 80% against the dollar, while the Nigerian Naira, Kenyan Shilling, and South African round depreciated by over 10%. We view these headwinds as temporary, and we are working on a comprehensive plan to drive long-term profitable growth on Junia.