Lagos, November 10, 2020 – Jumia Technologies AG announced today its financial results for the quarter ended September 30, 2020. Gross profit increased by 22% to €23.2 million in the third quarter of 2020 from €19.0 million in the third quarter of 2019 as a result of the increase in Marketplace revenue.
Results highlights
- GMV was €187.3 million, down 28% year-over-year, as the effects of the business mix rebalancing initiated late last year continued playing out during the third quarter of 2020.
- Gross profit reached €23.2 million, a year-over-year increase of 22%.
- Gross profit after Fulfillment expense reached €6.6 million, compared to a loss of €1.7 million in the third quarter of 2019.
- Sales & Advertising expense was €6.2 million, the lowest quarterly amount since 2017 and a year-over-year decrease of 55%. We continued to increase marketing efficiency as Sales & Advertising expense per Order decreased by 53% from c. €2.0 in the third quarter of 2019 to €0.9 in the third quarter of 2020.
- For the first time at the group level, Gross profit after Fulfillment and Sales & Advertising expenses turned positive, with the majority of countries breaking even at this level during the third quarter of 2020.
- Operating loss reached a three-year low of €28.0 million, decreasing by 49% year-over-year.
- JumiaPay TPV was €48.0 million, a year-over-year increase of 50%, more than doubling on-platform TPV penetration from 12.2% of GMV in the third quarter of 2019 to 25.6% of GMV in the third quarter of 2020.
“We are making significant progress on our path to profitability with Adjusted EBITDA loss in the third quarter of 2020 decreasing by 50% year-over-year”, commented Jeremy Hodara and Sacha Poignonnec, Co-Chief Executive Officers of jumia.com.ng/
“Having established Jumia as the leading pan-African e-commerce platform, we have focused over the past 12 months on firmly advancing towards breakeven. The significant progress achieved was mostly attributable to the thorough work we have done on the fundamentals of our business, with limited support from external factors such as COVID-19.
The business mix rebalancing initiated late last year has increased our exposure to everyday product categories and, combined with enhanced promotional discipline, supported unit economics. In addition, we made multiple enhancements across our logistics and marketing operations that led to a decrease in fulfilment and marketing expenses for the third quarter of 2020 by 20% and 55% respectively, on a year-over-year basis.
The portfolio optimization completed last year, along with overhead rationalization, contributed to a decrease in G&A costs excluding share-based compensation of 24% year-over-year in the third quarter of 2020.
Lastly, we continued to TPV to over 25% of GMV in the third quarter of 2020, a clear sign of our ability to drive pre-payment adoption on our platform efficiently. We believe the fundamentals of our business have never been stronger, setting a robust foundation for the long term, profitable growth of Jumia.” drive robust growth of JumiaPay by more than doubling the penetration of JumiaPay.
REVENUE
- First Party revenue decreased by 53% in the third quarter of 2020 compared to the third quarter of 2019. This was in line with our strategy to undertake fewer sales on a first-party basis as we focus on running an asset-light marketplace model where third-party sellers offer consumers an expanding range of products and services. Shifts in the mix between first-party and marketplace activities trigger substantial variations in our Revenue as we record the full sales price net of returns as First Party revenue and only commissions and fees in the case of Marketplace revenue. Accordingly, we steer our operations not on the basis of our total revenue, but rather on the basis of Gross profit, as changes between third-party and first-party sales are largely eliminated at the Gross profit level.
- Marketplace revenue reached €23.4 million in the third quarter of 2020, up 19% compared to the third quarter of 2019. This was mostly driven by an increase in Commissions and Fulfillment revenue, which increased by 43% and 13% year-over-year respectively.
- Commissions grew due to an increase in the share of higher commission rate categories including fashion, beauty or FMCG as well as lower promotional intensity.
- Fulfilment revenue increased by 13% as a result of continued shipping fees adjustments as well as pricing changes within our cross-border logistics, whereby part of the international shipping fees that were previously charged to sellers were instead passed on to consumers. This change resulted in some of our international logistics revenue being recorded as Fulfillment revenue instead of revenue from Value Added Services.
- Value-Added Services increased by 4% as adjustments to our shipping fees led to an increase in shipping contributions from local sellers, which more than offset the effects of the aforementioned pricing changes in our cross-border logistics.
- We manage monetization pressure on our sellers in a very disciplined manner and, during the third quarter of 2020, reduced pressure on the advertising front leading to a decrease of 2% of this revenue stream while placing more focus on fulfilment costs pass-through.
Fulfilment Expense
- Fulfilment expense decreased by 20% in the third quarter of 2020 on a year-over-year basis as a result of operational enhancements across our logistics operations. These included the optimization of our cross- border shipping matrix, staff costs savings in our fulfilment centres and a change in our volume pricing model from cost per package to cost per stop.
- During the third quarter of 2020, Gross profit after Fulfillment expense reached €6.6 million compared to a loss of €1.7 million in the third quarter of 2019, demonstrating continued unit economics improvement as we drive usage on our platform.
- Lastly, we are able to pass-on an increasing proportion of our Fulfillment expense to the combination of consumers and sellers via our Fulfillment and Value Added Services revenue streams respectively. The pass-through of our Fulfillment expense, measured as the ratio of the sum of Fulfillment and Value Added Services revenue over Fulfillment expense, increased from 58% in the third quarter of 2019 to 79% in the third quarter of 2020.
Sales & Advertising Expense
- Sales & Advertising expense decreased by 55% from €13.8 million in the third quarter of 2019 to €6.2 million in the third quarter of 2020, its lowest level in more than 3 years. This is driving strong marketing efficiency with Sales & Advertising expense per Order decreasing by 53%, from €2.0 per Order in the third quarter of 2019 to €0.9 in the third quarter of 2020. This development was partly attributable to continued enhancements to our performance marketing strategy across search and social media channels, notably through more granular segmentation of our target market with differentiated campaigns and content for each segment.
- While quarterly fluctuations in this metric may occur, we reached during the third quarter of 2020 the milestone of breakeven at a Gross profit after Fulfillment and Sales & Advertising expenses, with the majority of countries reaching breakeven at this level.
General and Administrative Expense
General & Administrative expense, excluding SBC, reached €19.3 million, down 24% on a year-over-year basis. This was partly a result of staff costs reductions and professional fees savings, largely attributable to the portfolio optimization and cost rationalization initiatives undertaken in late 2019.
Operating loss
Operating loss was €28.0 million in the third quarter of 2020 while Adjusted EBITDA loss was €22.7 million, decreasing by 49% and 50% on a year-over-year basis respectively, demonstrating meaningful progress on our path to profitability.
Cash Position
At the end of September 30, 2020, we had €147.1 million of cash on our balance sheet. During the third quarter of 2020, cash utilization was €27.2 million due to a net decrease in Cash & Cash equivalents of €22.1 million, down 52% year-over-year, and effects of exchange rate changes on Cash & Cash equivalents of €5.1 million largely attributable to translation effects on cash held in USD.
THIRD QUARTER 2020 – SELECTED BUSINESS HIGHLIGHTS
Brand momentum
- We continue to position Jumia as the destination of choice for brands in Africa and onboarded over 60 brands on the platform during the quarter.
- We hosted the Jumia Brands Festival over a seven-day period in September. More than 200 participating brands offered consumers special promotions, including free shipping, across product categories. Participating brands, some of whom across multiple geographies, included l’Oreal, Nivea, Johnson & Johnson, Reckitt Benckiser, Nestle, Pernod Ricard, Mondelez, Pepsi, Nike and many more. In Egypt, Orders during the Brand Festival week surged by more than 70% compared to the prior 6- week average. Fashion, Beauty and FMCG categories accounted for more than 80% of items sold with a number of brands in these segments experiencing triple-digit volume uplift during the event compared to their prior 6-week averages.
Cost efficiencies
- For physical goods logistics, we completed the migration of our delivery pricing model from a price per successfully delivered package to a price per successful stop. This new pricing model generated freight & shipping costs savings of more than €1 million from its implementation in April to September 2020.
- To drive marketing costs efficiencies, we focus on developing smart algorithms to enhance user experience and ultimately conversion rates. As we increase the depth of our assortment, we are enhancing our product sorting algorithm to improve user experience and product discovery. We have developed an AI-powered algorithm using Learning-to-Rank (“LTR”) technique that leverages user signals (clicks, add-to-carts, orders etc.) and product information to optimize product ranking on category and search results pages. Pilots of the algorithm are showing the improved conversion rate from search/navigation to add-to-cart by more than 5%.
JumiaPay development
- As part of offering an increasing range of financial services to consumers, we are currently piloting in Egypt a pre-paid physical and virtual card, in partnership with Mastercard and ADIB, a leading bank in the Middle East & North Africa region.
- We launched the pilot of Jumia Games on our JumiaPay app across five countries, in partnership with Mondia, a marketing and digital content distribution company. Jumia Games is a subscription-based service offering unlimited access to over 500 games, including in-app purchases. This initiative aims at providing consumers with a varied range of digital services and engaging experiences while creating more payment use cases for JumiaPay.
Commitment to community
- As part of our continued support of businesses affected by COVID-19 disruption, we partnered with the Moroccan Ministry of Handicraft to help Moroccan craftsmen and cooperatives across 16 cities reach consumers online via Jumia. With a rich tradition of craftsmanship, this sector sits at the core of Moroccan culture and heritage. We are proud to support the digital transformation of this industry and make Moroccan craft accessible to millions of consumers online.
(1) Adjusted for perimeter changes: the exit of Cameroon, Rwanda, Tanzania and the travel activities and improper sales practices.
- Annual Active Consumers reached 6.7 million in the third quarter of 2020, up 23% year-over-year as we continued focusing on both consumer acquisition and existing consumers re-engagement.
- Orders reached 6.6 million, down 5% year-over-year on the back of a 20% decrease in digital services transactions on the JumiaPay app, while Orders on the rest of the platform were stable. The trend within the digital services on the JumiaPay app is concentrated in airtime recharge transactions as a result of reduced consumer incentives within this category which has historically been promotionally intensive.
- GMV was €187.3 million, down 28% on a year-over-year basis, as the effects of the business mix rebalancing initiated late last year continued playing out during the third quarter of 2020. To support our path to profitability, we decreased promotional intensity and consumer incentives on lower consumer lifetime value business, while increasing our focus on every-day product categories to drive consumer adoption and usage. This business mix rebalancing drove a c. 24% decrease in average order value from €37.3 in the third quarter of 2019 to €28.2 in the third quarter of 2020, affecting overall GMV performance. We have now reached a diversified category mix where phones and electronics went from contributing 56% of GMV in the third quarter of 2019 to 43% in the third quarter of 2020.
- We are making meaningful progress in the reduction of the overall rate of Cancellations, Failed Deliveries and Returns (“CFDR”) as we drive further operational efficiencies, including due to an increase in prepayment penetration via JumiaPay. While actual rates of CFDR may vary from one quarter to the other, we observed a significant reduction in this ratio between the third quarter of 2019 and the third quarter of 2020.
- The CFDR rate as a percentage of GMV decreased from 31% in the third quarter of 2019 to 23% in the third quarter of 2020. The CFDR rate as a percentage of Orders decreased from 23% in the third quarter of 2019 to 14% in the third quarter of 2020. The CFDR rate is typically lower for Orders than for GMV as higher average item value orders tend to show higher CFDR rates.
- Trends of GMV after CFDR by category showed year-over-year growth of food delivery and other on-demand services of 37%, growth of digital services offered on the JumiaPay app of 14% while physical goods other than phones and electronics remained flat and phones and electronics contracted by 41% year-over-year, as a result of the business mix rebalancing initiated in late 2019. Food delivery recovered in the third quarter of 2020, after being affected by COVID-19 related restaurant shutdowns during the second quarter of 2020.