Key Highlights from the Earnings Call

• Company Transformation
• Financial Performance
• Strategic Shifts
• Market Positioning

A Year of Transformative Mettle

Operator

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-Mezeray, 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.

Francis Dufay — Chief Executive Officer

Thank you. Welcome, everyone, and thanks for joining us today. 2023 has been a transformative year for Jumia. Upheavals on the global stage had a significant impact on African economies and its people.

High inflation rates and 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.

Positive Momentum in Financials

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 ’23 decreased to $58.2 million versus $182.1 million in ’22 and steadily improving quarter after quarter. Our loss before tax from continuing operations for the full year of ’23 decreased to $98.6 million from $206.2 million in ’22.

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 ’23 declined by 20% and orders 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.

Strategic Shifts and Market Adaptation

We believe that we can meet these goals in 2024, thanks to the lessons we learned in 2023, particularly in two key 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 reevaluated 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 on 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, as well as significantly improving operational efficiency. We believe that these changes are enabling better output and laying the foundation for growth in ’24.

We experienced positive year-over-year growth in GMV of physical goods in five of our 11 operating countries over the full year of ’23, 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 fully 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 the 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.

Jumia’s E-Commerce Growth Signals Positive Rebound and Strategic Shift in 2024

Despite a challenging macroeconomic environment, Jumia, the leading e-commerce platform in Africa, made substantial strides in Q4 ’23, demonstrating notable growth and a strategic pivot. In the face of a tough market, the company managed to pull off a significant quarter-over-quarter uplift in Gross Merchandise Value (GMV), Orders, and active customers, indicating a potential positive turnaround for the brand.

Strong Financial Performance

While GMV witnessed an 8% year-over-year decrease, it grew impressively by 21% on a constant-currency basis, reaching $233 million. Similarly, revenue, though down 2% year over year, surged by 28% in constant currency. Notably, these promising sales trends were achieved while drastically reducing sales and advertising expenditure by a staggering 63% compared to Q4 ’22. Additionally, the company saw a remarkable 62% year-over-year decrease in loss before tax income from continuing operations and a 66% reduction on a constant-currency basis, highlighting significant improvement in economics.

Enhanced Operational Efficiency

The company’s strategic choices have resulted in a positive impact on the adjusted EBITDA loss, primarily driven by a substantial reduction in tax provisions in Q4. Moreover, Jumia’s commitment to reducing cash utilization and bringing the business back to top-line growth in both orders and GMV, excluding potential foreign exchange impact, reveals a strong focus on operational efficiency and sustainable growth.

Promising Outlook for 2024

Given the ongoing improvement in growth trends and the reduction in operational losses, Jumia is optimistic about its strategic direction and is confident in its ability to deliver value and sustainable growth in 2024. With a focus on strengthening its growth priorities, the company aims to capitalize on the vast untapped potential for growth in its priority categories over the next few years. The successful execution of its strategy positions Jumia to capture the burgeoning e-commerce opportunity in Africa.

Usage Trends and Strategic Shifts

In Q4 ’23, Jumia witnessed a 16% quarter-over-quarter growth in active customers, signaling a positive trajectory for user engagement. The company recorded a substantial uplift in orders during the 2023 Black Friday campaign and the subsequent holiday season, with physical goods driving quarter-over-quarter growth. While there was a decrease in quarterly active customers and orders compared to Q4 ’22, this was attributed to strategic shifts aimed at boosting profitability and targeting high-value orders, indicating a prudent refocusing strategy.

Growth Strategy for 2024

Jumia has outlined a robust growth strategy for 2024, emphasizing the expansion of its supply in priority categories, improved marketing efficiency, and outreach to customers in secondary cities. With a keen focus on Nigeria and Egypt, the company is keen on leveraging the potential in these markets, foreseeing significant growth opportunities. By making management changes and restructuring its supply chain operations in these countries, Jumia aims to enhance efficiency and reach a wider customer base.

Navigating Macroeconomic Challenges

Despite the challenging macroeconomic environment across Africa, Jumia remains resilient, displaying its ability to operate, grow, and reduce losses even in demanding conditions. The company’s confidence in its operational capabilities, coupled with signs of stabilization and recovery in several markets, reflects its ability to navigate through economic headwinds effectively. The expected improvements in GDP growth and purchasing power in key markets further bolster the company’s prospects for sustained growth.

Building Stronger Priority Categories

Jumia’s focus on developing robust priority categories, including Phones, Electronics, Home and Living, Fashion, and Beauty, underscores its commitment to offering a diverse range of products to its consumers. By identifying and investing in these categories, the company aims to solidify its position as the preferred choice for consumers across its markets, reflecting a strategic approach to capturing market share and driving sustainable growth.

As Jumia forges ahead into 2024 with a renewed strategic focus and a resilient operational stance, the company is poised to capitalize on burgeoning e-commerce opportunities in Africa, driving sustainable growth and delivering value to its stakeholders.

The Resurgence of Jumia: A Financial Triumph Amidst Unusual Tactics

Riding the Supply Chain Wave

The e-commerce powerhouse, Jumia, has witnessed a dramatic shift in its category mix in 2023, with a substantial increase in the share of Gross Merchandise Volume (GMV) from Home and Living as well as Electronics. This transformation is attributed to the company’s unwavering focus, impeccable execution, and robust relationships with global brands and local distributors. The fashion and beauty categories have emerged as the frontrunners, accounting for over half of the items sold and playing a pivotal role in driving frequent usage with healthy profit margins. Jumia’s strategic move has led to a remarkable surge in the average order value, escalating from $40.6 in Q4 ’22 to $45.5 in Q4 ’23, thereby catalyzing enhanced profitability per order post-logistics.

The Marketing Metamorphosis

In an unconventional maneuver, Jumia significantly slashed its marketing expenditure and consumer incentives in December ’22, marking a departure from industry norms. Surprisingly, this unorthodox decision yielded remarkable results. The repurchase rate of new customers on physical goods witnessed a surge, even in the absence of substantial consumer incentives. Additionally, the share of visits from free channels amplified consistently, reflecting a paradigm shift in the company’s marketing strategy. Notably, Jumia achieved substantial savings, with a substantial decrease in sales and advertising expense and consumer incentives, while simultaneously witnessing an upward trend in overall usage. The prudent management of resources has positioned Jumia for sustained growth and efficiency in its marketing endeavors.

The JumiaPay Triumph

JumiaPay, the company’s proprietary payment platform, has undergone a strategic metamorphosis, aimed at enhancing its efficacy as an enabler of the e-commerce business. The integration of diverse payment methods, streamlining payment validation processes, and the introduction of JumiaPay on delivery have fortified the company’s operational efficiency and customer experience. The introduction of “Buy Now Pay Later” solutions has opened new avenues for customers to access third-party consumer finance options, particularly in high-value categories such as electronics and appliances. Notably, with a relentless focus on enhancing customer payment experiences, the share of physical goods transactions paid through JumiaPay surged from 18.8% in Q4 ’22 to 27.7% in Q4 ’23, underscoring the substantial progress made in this domain.

Financial Fortitude

In a demonstration of staggering resilience and strategic acumen, Jumia reported revenue of $59.4 million in Q4 ’23, reflecting a 28% year-over-year increase on a constant-currency basis. The company’s gross profit, amounting to $37.1 million in Q4 ’23, surged by 36% on a constant-currency basis, heralding a robust financial performance in the face of challenging market conditions. The growth in commissions within the marketplace revenue and first-party sales, driven by corporate sales to regional retailers and distributors, has underscored the company’s prowess in adaptive and proactive measures in navigating complex economic terrains. Jumia’s exemplary financial performance, coupled with its strategic reformation across supply chain and marketing, has positioned the company for sustained growth and profitability in the foreseeable future.

Jumia’s Shrewd Fiscal Strategy Gains Traction: Key Highlights from the Q4 ’23 Earnings Call

Progress in Reducing Expenses

Jumia, the pioneering e-commerce platform in Africa, continues to forge ahead with its resolute efforts to trim expenses and enhance financial discipline. The company’s Q4 ’23 earnings call showcased significant strides in cost containment, with fulfillment, sales and advertising, technology, and general and administrative (G&A) expenses witnessing remarkable declines. This steadfast focus on financial prudence has sharpened Jumia’s competitive edge and underlined its commitment to sustainable growth in the dynamic African market.

Optimizing Logistics and Marketing

Jumia’s proactive initiatives to revamp its logistics infrastructure have yielded compelling results, with fulfillment expenses plummeting by 37% year on year. Strikingly, fulfillment expense per order exhibited a substantial decrease, down by 26% year on year, underscoring the company’s adeptness in streamlining its operational costs. Jumia’s emphasis on leveraging a higher portion of pickup station deliveries and expanding its network to reach underserved regions has significantly enhanced its operational efficiency, while concurrently enriching the customer experience.

The relentless drive to revamp its marketing outlays has been equally salient, with sales and advertising expenses nosediving by 63% year on year. This concerted reduction underscores Jumia’s strategy to foreground the delivery of physical goods and broadening its geographical footprint over resource-intensive marketing endeavors.

Rationalizing Tech and Administrative Costs

Jumia’s judicious approach to rationalizing technology and content expenses has emerged as another cornerstone of its fiscal prudence. The company witnessed a substantial 28% year-on-year decrease in tech and content expenses in Q4 ’23. Simultaneously, G&A expenses experienced a noteworthy reduction, primarily attributed to a significant drop in tax provisions and staff costs, reinforcing Jumia’s unwavering commitment to maximizing organizational efficiency.

Liquidity Management and Cash Flow

Jumia’s prudent approach to liquidity management and cash flow has played a pivotal role in bolstering its financial resilience. The company’s unwavering adherence to maintaining an asset-light model has been highlighted by its cautious yet deliberate capex of $0.8 million in Q4 ’23. Moreover, despite a decrease in its liquidity position, Jumia’s proactive measures to mitigate the negative impact of foreign exchange movements underscore its astute financial stewardship.

Future Projections and Strategy

Looking ahead, Jumia remains resolute in its commitment to galvanize its financial performance and steers a course toward cash efficiency and profitable growth. The company’s medium-term strategy underscores its concerted efforts to achieve an appropriate cost base, without compromising on top-line growth. Jumia’s unwavering belief in the relevance and viability of its strategy augurs well for its prospects in the burgeoning e-commerce landscape of Africa.

Conference Call: Perspective and Wrap-Up

The resolute outlook espoused by Jumia’s Chief Executive Officer, Francis Dufay, on the earnings call, encapsulated the company’s unwavering dedication to navigating the African e-commerce terrain with sagacity and prudence. Dufay’s affirmations about Jumia’s well-positioned stance to harness the opportunities inherent in the African e-commerce market epitomize the company’s long-term vision and tenacity, positioning it as a discerning player in the regional economic landscape.

The Q4 ’23 earnings call was a testament to Jumia’s financial sagacity and strategic acumen, reaffirming its dedication to unlocking sustainable value for stakeholders and fortifying its stance as a trailblazer in Africa’s e-commerce domain.