Jumia Technologies AG

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to Jumia's Results Conference Call for the fourth quarter and full year 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. With us today are Francis Dufay, CEO of Jumia, and Antoine Maillet-Mézaret, 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 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 20-F 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 the 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 will hand over to Francis.

Thank you.

Welcome everyone and thanks for joining us today. 2023 has been a transformative year for Jumia. Upheavals on the global stage have had a significant impact on African economies and its people. High inflation rates Currency depreciations have led to scarcity of supply and have adversely impacted the purchasing power of consumers. These have been very challenging times for tech and retail businesses across the whole continent. Against that unsettling backdrop, we embarked on a fundamental transformation of our company in order to rapidly improve our financials and establish a stronger foundation for e-commerce business. This transformation obviously came with a painful short-term impact. as we discontinued activities with poor growth prospects, stopped expensive marketing practices, and radically streamlined our organization. These bold and early decisions have paid off in 2023, yet we still have some way to go. We closed 2023 in a much stronger position, looking at both financials and business fundamentals. Our adjusted EBITDA loss for the full year of 2023 decreased to $58.2 million. versus $182.1 million in 2022, and steadily improving quarter after quarter. Our loss before tax from continuing operations for the full year of 2023 decreased to $98.6 million from $206.2 million in 2022. Most importantly, we saw a reduction in the pace of the decrease of our liquidity from $227.4 million in 2022 to $106.9 million in 2023, leaving us with a liquidity position of $120.6 million at the end of 2023. Although GMV for the full year of 2023 declined by 20% and all those by 22% year-over-year, we have undergone a deep transformation of the company. We believe that this transformation will enable us to achieve growth again during 2024 with improved unit economics and lower cash utilization. We believe that we can meet these goals in 2024 thanks to the lessons we learned in 2023, particularly in the two following areas. First, we have seen that efficiency and better unit economics do not come at the expense of future growth. We believe that Jumia is now a much leaner, more agile, and more focused company. We have re-evaluated our portfolio and made tough decisions regarding business activities that did not bring the right value. Recently, we discontinued our food delivery operations as we concluded that the growth prospects did not justify the complexity it created. We believe our focus and resources will be better invested in our physical goods business where we see more opportunity for revenue growth and higher margins. We have achieved savings across the whole organization by shrinking general and administrative expenses well as significantly improving operational efficiency. We believe that these changes are enabling better output and laying the foundation for growth in 2024. We experienced positive year-over-year growth in GMV of physical goods in five of our 11 operating countries over the full year of 2023, accelerating over the second half while significantly improving our unit economics. Overall, Year-over-year GMV growth trends are improving quarter after quarter, and we expect to be back to GMV and orders growth in 2024. Second important lesson that we've learned, I think we have proved that we can grow without disproportionate marketing spend. Based on our experience across 11 operating countries for over 10 years at Jumia, we believe that there is a lot of demand from African customers. However, this demand remains poorly served due to inconsistent supply and prices across different countries and cities. Our mission at Jumia is to bridge this gap between brands and suppliers on one hand and customers on the other hand. We are committed to building better supply in our priority categories, which are phones, electronics, home and living, fashion and beauty, by working closely with local and international sellers and global brands. With our strategic focus to improve supply in those priority categories, we have deliberately reduced our sales and advertising expenses by 68% in the full year of 2023 and cut customers incentives such as vouchers and free shipping. This strategy has come across as quite unusual as many took for granted that growth in the e-commerce business is more or less a function of marketing costs. We believe that 2023 results and more specifically the improvement over the latest quarters, have shown that our strategy to reduce marketing expenditure while also pursuing top-line growth is working in our African markets. Indeed, now looking at Q4 23, after four consecutive quarters of consistently low marketing expenditure, we believe that we have proven our case. In addition to GMB growth in selected countries, we have successfully run our usual Black Friday promotional events with very lean marketing budgets. This led to a significant quarter-over-quarter uplift in GMV orders and number of active customers. GMV reached $233 million, down 8% year-over-year, but growing significantly on a constant currency basis by 21%. Similarly, Revenue reached $59 million, down 2% year-over-year, but up 28% in constant currency. On an important note, the sales trends were achieved while reducing sales and advertising expenditure by 63% versus Q4 of 2022. Economics have shown further improvement in Q4, with loss before tax income from continuing operations down to $17 million, decreasing by 62% year-over-year and 66% on a constant currency basis. The adjusted EBITDA loss was positively impacted by a significant reduction in tax provisions in Q4. Our liquidity position decreased by $27 million over Q4, compared to a $57 million reduction in Q4-22. Q4 variation includes a negative $3.2 million impact from foreign exchange only. Continued improvement in growth trends quarter after quarter in 23, combined with further reduction in operational losses, give us confidence that our strategic choices are paying off. Looking at 24, we are fully committed to further reducing cash utilization versus 23, while following our strategy of bringing our business back to top-line growth in both orders and GMV, excluding potential foreign exchange impact. To implement our strategy, We will continue to focus on our growth priorities in 2024, which are consistent with our efforts in 2023. In particular, we believe that there is still a significant amount of untapped potential for growth in all of our priority categories over the next several years. By executing consistently over time, we believe that we will be able to unlock substantial amounts of value. We see on the ground that the macro situation in several of our African markets is starting to recover. And the latest IMF forecast confirmed improving GDP growth trends across our footprint in 24 and 25. In this context, we are confident that Jumia has never been in a better position to capture the unique opportunity of e-commerce in Africa.