Jumia Technologies AG (NYSE: JMIA) ("Jumia" or the Company) announced today its financial results for the quarter ended June 30, 2019.
"We continue to deliver on our financial strategy of generating strong growth of our topline drivers, while accelerating monetization, driving cost efficiencies and developing JumiaPay. During the second quarter of 2019, our GMV increased by 69% year-on-year and our Gross profit grew by 94%. Our Adjusted EBITDA loss as a percentage of GMV decreased by 562 basis points (5.62 percentage points) and our Operating loss, amounting to ?66.7 million, decreased as a percentage of GMV by 148 basis points (1.48 percentage points)" commented Sacha Poignonnec and Jeremy Hodara, co-CEOs of Jumia. "These results reflect our continued focus on offering a relevant and engaging online shopping and lifestyle destination for consumers, while providing our sellers with an attractive value proposition and a platform to grow their businesses. We remain focused on all aspects of our growth strategy, particularly JumiaPay, as we continue to drive its usage in our markets."
Business and Financial highlights
Selected Operational KPIs
|
2018 |
2019 |
Second Quarter |
Second Quarter |
|
|
||
GMV1 (? million) |
166.3 |
280.9 |
Active Consumers2 (million) |
3.2 |
4.8 |
1 GMV corresponds to the total value of orders including shipping fees, value added tax, and before deductions of any discounts or vouchers, irrespective of cancellations or returns.
2 Active Consumers means unique consumers who placed an order on our marketplace within the 12-month period preceding the relevant date (i.e., June 30, 2018 or June 30, 2019), irrespective of cancellations or returns
Selected Financial Information
The following table shows a breakdown of revenue, for the second quarters of 2018 and 2019.
For the three months ended June 30 |
YoY |
||
(? million) |
2018 |
2019 |
Change |
Marketplace revenue |
9.2 |
17.5 |
89.7% |
Commissions |
3.0 |
5.8 |
91.8% |
Fulfillment |
2.8 |
5.7 |
102.6% |
Marketing & Advertising |
0.2 |
1.3 |
489.5% |
Value Added Services |
3.2 |
4.7 |
47.4% |
First Party revenue |
15.5 |
21.6 |
39.2% |
Platform revenue |
24.7 |
39.1 |
58.0% |
Non-Platform revenue |
0.0 |
0.1 |
265.9% |
Revenue |
24.8 |
39.2 |
58.3% |
2. Gross Profit
|
For the three months ended June 30 |
YoY |
|
(? million) |
2018 |
2019 |
Change |
Gross profit |
8.9 |
17.3 |
93.6% |
As % of GMV |
5.4% |
6.2% |
|
Gross profit increased by 93.6% from ?8.9 million in the second quarter of 2018 to ?17.3 million in the second quarter of 2019, as a result of increased platform monetization.
3. Fulfillment Expense
For the three months ended June 30 |
YoY |
||
(? million) |
2018 |
2019 |
Change |
Fulfillment expense |
(10.3) |
(17.6) |
69.8% |
As % of GMV |
6.2% |
6.3% |
Fulfillment expense includes expenses related to services of third-party logistics providers, expenses related to our network of warehouses and pick-up stations, including employee benefit expenses. Fulfillment expense grew by 69.8% in the second quarter of 2019 compared to the second quarter of 2018.
Fulfillment expense is influenced by a number of factors including:
4. Sales & Advertising Expense
For the three months ended June 30 |
YoY |
||
(? million) |
2018 |
2019 |
Change |
Sales & Advertising expense |
10.3 |
15.3 |
48.3% |
As % of GMV |
6.2% |
5.4% |
Our Sales & Advertising expense increased by 48.3% to ?15.3 million in the second quarter of 2019 from ?10.3 million in the second quarter of 2018, while we were able to increase our Active Consumers by 51.4% and our GMV by 68.9% over the same period. As a result, Sales & Advertising expense as a percentage of GMV, decreased from 6.2% in the second quarter of 2018 to 5.4% in the second quarter of 2019, demonstrating the relevance of our marketing strategy as well as the continued user adoption of our platform.
5. General and Administrative Expense, Technology and Content Expense
For the three months ended June 30 |
YoY |
||
(? million) |
2018 |
2019 |
Change |
General and Administrative ("G&A") expense |
24.5 |
44.9 |
83.5% |
Share-Based Compensation ("SBC") expense |
(5.8) |
(20.5) |
253.3% |
G&A expense, excluding SBC |
18.6 |
24.4 |
30.6% |
As % of GMV |
11.2% |
8.7% |
|
Technology & Content expense |
5.4 |
6.7 |
22.8% |
As % of GMV |
3.3% |
2.4% |
|
G&A, Technology & Content expense, excluding SBC |
24.1 |
31.1 |
28.9% |
As % of GMV |
14.5% |
11.1% |
General and Administrative expense contains wages and benefits, including share-based payment expense of management, as well as seller management, commercial development, accounting and legal staff, consulting expense, audit expense, utilities cost, insurance and other overhead expense.
General and Administrative expense excluding SBC increased by 30.6% from ?18.6 million in the second quarter of 2018 to ?24.4 million in the second quarter of 2019. As a percentage of GMV, General and Administrative expense excluding SBC, decreased from 11.2% in the second quarter of 2018 to 8.7% in the second quarter of 2019 as a result of operating leverage.
Technology and Content expense increased by 22.8% from ?5.4 million in the second quarter of 2018 to ?6.7 million in the second quarter of 2019. As a percentage of GMV, Technology and Content expense decreased from 3.3% in the second quarter of 2018 to 2.4% in the second quarter of 2019.
6. Operating Loss and Adjusted EBITDA
For the three months ended June 30 |
||
(? million) |
2018 |
2019 |
Operating loss |
(41.9) |
(66.7) |
Depreciation and amortization |
0.5 |
1.8 |
Share-Based Compensation ("SBC") expense |
5.8 |
20.5 |
Adjusted EBITDA |
(35.6) |
(44.4) |
As % of GMV |
(21.4%) |
(15.8%) |
Operating loss increased from ?41.9 million in the second quarter of 2018 to ?66.7 million in the second quarter of 2019 mainly due to an increase in SBC expense.
Adjusted EBITDA loss, as a percentage of GMV decreased from negative 21.4% in the second quarter of 2018 to negative 15.8% in the second quarter of 2019 as a result of a higher Gross profit margin as a percentage of GMV, marketing efficiencies and operating leverage improving General and Administrative and Technology and Content expenses as a percentage of GMV.
On January 1, 2019, we adopted IFRS 16 which changed the accounting for leases. This led to a reduction in General and Administrative expense by approximately ?1.2 million in the second quarter of 2019, an increase in Depreciation and amortization by approximately ?1 million and an increase in finance costs by approximately ?0.3 million resulting in a positive impact on Adjusted EBITDA of approximately ?1.2 million in the second quarter of 2019, a positive impact on Operating loss of ?0.1 million and a negative impact on Net loss of ?0.2 million. Prior period amounts were not retrospectively adjusted.
SBC expense amounted to ?20.5 million this quarter. The increase in SBC expense during the second quarter of 2019 is mainly related to the Jumia Initial Public Offering, completed in April 2019, triggering the vesting of some of the stock options granted under the 2016 Stock Option Plan. The SBC expense of the second quarter of 2019 also takes into account the 2019 grants.
The following table summarizes the forecasts of SBC expense over the coming quarters, based on the amortization of the 2016 and 2019 grants.
2019 |
|||||
(? thousand) |
First Quarter |
Second Quarter |
Third Quarter |
Fourth Quarter |
|
SBC expense |
4,312 |
20,522 |
6,400 |
6,400 |
|
Sales Practices Review
As disclosed in our prospectus dated April 11, 2019, we received information alleging that some of our independent sales consultants, members of our JForce program in Nigeria, may have engaged in improper sales practices. In response, we launched a review of sales practices covering all our countries of operation and data from January 1, 2017 to June 30, 2019.
In the course of this review, we identified several JForce agents and sellers who collaborated with employees in order to benefit from differences between commissions charged to sellers and higher commissions paid to JForce agents. The transactions in question generated approximately 1% of our GMV in each of 2018 and the first quarter of 2019 and had virtually no impact on our 2018 or 2019 financial statements. We have terminated the employees and JForce agents involved, removed the sellers implicated and implemented measures designed to prevent similar instances in the future. The review of this matter is closed.
More recently, we have also identified instances where improper orders were placed, including through the JForce program, and subsequently cancelled. Based on our findings to date, we believe that the transactions in question generated approximately 2% of our GMV in 2018, concentrated in the fourth quarter of 2018, approximately 4% in the first quarter of 2019 and approximately 0.1% in the second quarter of 2019. These 0.1% have already been adjusted for in the reported GMV figure for the second quarter of 2019. These transactions had no impact on our financial statements. We have suspended the employees involved pending the outcome of our review and are implementing measures designed to prevent similar instances in the future. We continue our review of this matter.
Legal Proceedings
Since May 2019, several class action lawsuits have been filed against us and certain of our officers in the U.S. District Court for the Southern District of New York and the Kings County Supreme Court in New York. The claims in these cases relate to alleged misstatements and omissions in our initial public offering prospectus and statements made by our company in connection with our initial public offering. These actions remain in their preliminary stages.
Conference Call and Webcast information
Jumia will host a conference call today, August 21, 2019 at 8:30 a.m. U.S. Eastern Time to discuss Jumia's results. Details of the conference call are as follows:
Participant Dial in (Toll Free): 1-888-317-6016
Participant International Dial in: 1-412-317-6016
Canada Toll Free: 1-855-669-9657
A live webcast of the earnings conference call can be accessed on the Jumia Investor Relations website: https://investor.jumia.com/
An archived webcast will be available following the call.
(UNAUDITED)
Consolidated statement of comprehensive income as of June 30, 2019 and 2018
For the three months ended | For the six months ended | |||
June 30 2019 |
June 30 2018 |
June 30 2019 |
June 30 2018 |
|
In thousands of EUR | ||||
Revenue | 39,234 |
24,786 |
71,076 |
53,134 |
Cost of revenue | 21,954 |
15,858 |
38,130 |
35,611 |
Gross profit | 17,280 |
8,928 |
32,946 |
17,523 |
Fulfillment expense | 17,578 |
10,349 |
32,805 |
19,899 |
Sales and advertising expense | 15,301 |
10,314 |
27,614 |
21,255 |
Technology and content expense | 6,692 |
5,447 |
12,560 |
10,539 |
General and administrative expense | 44,887 |
24,459 |
72,664 |
41,830 |
Other operating income | 618 |
(4) |
679 |
101 |
Other operating expense | 91 |
263 |
131 |
303 |
Operating loss | (66,651) |
(41,908) |
(112,149) |
(76,202) |
Finance income | (85) |
(28) |
521 |
556 |
Finance costs | 845 |
141 |
1,676 |
416 |
Loss before Income tax | (67,581) |
(42,077) |
(113,303) |
(76,062) |
Income tax expense | 181 |
228 |
261 |
342 |
Loss for the period | (67,761) |
(42,305) |
(113,565) |
(76,404) |
Attributable to: | ||||
Equity holders of the Company | (67,674) |
(41,789) |
(113,411) |
(75,390) |
Non-controlling interests | (87) |
(516) |
(154) |
(1,014) |
Loss for the period | (67,761) |
(42,305) |
(113,565) |
(76,404) |
Other comprehensive income/loss to be classified to profit or loss in subsequent periods | ||||
Exchange differences on translation of foreign operations - net of tax | 1,366 |
(10,874) |
(10,506) |
(4,286) |
Other comprehensive income / (loss) on net investment in foreign operations - net of tax | (1,444) |
11,189 |
10,785 |
4,550 |
Other comprehensive income / (loss) | (78) |
315 |
279 |
264 |
Total comprehensive loss for the period | (67,839) |
(41,990) |
(113,286) |
(76,140) |
Attributable to: | ||||
Equity holders of the Company | (67,753) |
(41,442) |
(113,133) |
(75,184) |
Non-controlling interests | (86) |
(548) |
(153) |
(956) |
Total comprehensive loss for the period | (67,839) |
(41,990) |
(113,286) |
(76,140) |
(UNAUDITED)
Consolidated statement of financial position as of June 30, 2019 and December 31, 2018
As of | ||
June 30 2019 |
December 31 2018 |
|
In thousands of EUR | ||
Assets | ||
Non-current assets | ||
Property and equipment | 16,740 |
5,020 |
Intangible assets | 70 |
180 |
Deferred tax assets | 175 |
175 |
Other non-current assets | 1,536 |
1,263 |
Total Non-current assets | 18,521 |
6,638 |
Current assets | ||
Inventories | 14,057 |
9,431 |
Trade and other receivables | 20,113 |
13,034 |
Other taxes receivable | 6,083 |
4,898 |
Prepaid expense and other current assets | 8,539 |
7,384 |
Cash and cash equivalents | 332,980 |
100,635 |
Total Current assets | 381,772 |
135,382 |
Total Assets | 400,293 |
142,020 |
Equity and Liabilities | ||
Equity | ||
Share capital | 156,816 |
133 |
Share premium | 1,018,276 |
845,787 |
Other reserves | 91,232 |
66,093 |
Accumulated losses | (983,871) |
(862,048) |
Equity attributable to the equity holders of the Company | 282,453 |
49,965 |
Non-controlling interests | (275) |
(117) |
Total Equity | 282,178 |
49,848 |
Liabilities | ||
Non-current liabilities | ||
Non-current borrowings | 6,549 |
- |
Total Non-current liabilities | 6,549 |
- |
Current liabilities | ||
Borrowings | 3,543 |
- |
Trade and other payables | 63,125 |
47,681 |
Income tax payables | 10,055 |
10,882 |
Other taxes payable | 5,752 |
7,288 |
Provisions for liabilities and other charges | 21,472 |
19,829 |
Deferred income | 7,619 |
6,492 |
Total Current liabilities | 111,566 |
92,172 |
Total Liabilities | 118,115 |
92,172 |
Total Equity and Liablities | 400,293 |
142,020 |
(UNAUDITED)
Consolidated statement of cash flows as of June 30, 2019 and 2018
For the three months ended | For the six months ended | |||
June 30 2019 |
June 30 2018 |
June 30 2019 |
June 30 2018 |
|
In thousands of EUR | ||||
Loss before Income tax | (67,581) |
(42,077) |
(113,303) |
(76,062) |
Depreciation and amortization | 1,778 |
496 |
3,473 |
976 |
Impairment losses on loans, receivables and other assets | 1,588 |
1,226 |
2,048 |
1,544 |
Impairment losses on obsolete inventories | 149 |
(35) |
353 |
(71) |
Share-based payment expense | 20,522 |
5,808 |
24,834 |
9,457 |
Loss/(Gain) on disposal of property, equipments and intangible assets | (169) |
5 |
(165) |
12 |
(Gain)/Loss on disposal of financial assets | - |
- |
6 |
- |
Net accrued interest and similar (income)/expense | (48) |
(17) |
197 |
(26) |
Net unrealized foreign exchange (gain)/loss | 961 |
176 |
887 |
(218) |
(Increase)/Decrease in trade and other receivables, prepayments and VAT receivables | (5,090) |
(969) |
(12,435) |
(375) |
(Increase)/Decrease in inventories | (3,127) |
(455) |
(4,790) |
375 |
Increase/(Decrease) in trade and other payables, prepayments and VAT payables | 1,480 |
523 |
9,526 |
(4,201) |
Change in provision for other liabilities and charges | 942 |
1,647 |
1,546 |
1,634 |
Income taxes paid | (1,073) |
(638) |
(1,126) |
(491) |
Net cash flows used in operating activities | (49,667) |
(34,310) |
(88,951) |
(67,447) |
Cash flows from investing activities | ||||
Purchase of property and equipment | (1,449) |
(703) |
(2,127) |
(1,192) |
Proceeds from sale of property and equipment | 8 |
12 |
8 |
13 |
Purchase of intangible assets | (1) |
(10) |
(1) |
(35) |
Proceeds from sale of intangible assets | 219 |
- |
219 |
- |
Consolidated securities investment | 23 |
- |
- |
- |
Purchase of financial assets | 22 |
- |
(2) |
- |
Financial interest received | 488 |
- |
488 |
- |
Movement in other non-current assets | (237) |
147 |
(177) |
(107) |
Net cash flows used in investing activities | (928) |
(554) |
(1,593) |
(1,321) |
Cash flows from financing activities | ||||
Proceeds from borrowings | (3) |
- |
- |
- |
Financial interest paid | (444) |
- |
(767) |
- |
Payment of lease liabilities | (558) |
- |
(1,336) |
- |
Capital contributions | 254,172 |
64,000 |
329,172 |
88,000 |
Expenses reclassed to Equity | (1,008) |
- |
(3,747) |
- |
Net cash flows from financing activities | 252,159 |
64,000 |
323,322 |
88,000 |
Net increase in cash and cash equivalents | 201,564 |
29,136 |
232,778 |
19,232 |
Effect of exchange rate changes on cash and cash equivalents | (812) |
521 |
(432) |
108 |
Cash and cash equivalents at the beginning of the period | 132,229 |
19,411 |
100,635 |
29,728 |
Cash and cash equivalents at the end of the period | 332,980 |
49,068 |
332,980 |
49,068 |
Forward Looking Statements
This release includes forward-looking statements. All statements other than statements of historical facts contained in this release, including statements regarding our future results of operations and financial position, industry dynamics, business strategy and plans and our objectives for future operations, are forward-looking statements. These statements represent our opinions, expectations, beliefs, intentions, estimates or strategies regarding the future, which may not be realized. In some cases, you can identify forward-looking statements by terms such as "may," "will," "should," "expects," "plans," "anticipates," "could," "intends," "targets," "projects," "believes," "estimates", "potential" or "continue" or the negative of these terms or other similar expressions that are intended to identify forward-looking statements. Forward-looking statements are based largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy, short-term and long-term business operations and objectives, and financial needs. These forward-looking statements involve known and unknown risks, uncertainties, changes in circumstances that are difficult to predict and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statement. Moreover, new risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this release may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements. We caution you therefore against relying on these forward-looking statements, and we qualify all of our forward-looking statements by these cautionary statements.
The forward-looking statements included in this release are made only as of the date hereof. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that the future results, levels of activity, performance or events and circumstances reflected in the forward-looking statements will be achieved or occur. Moreover, neither we nor our advisors nor any other person assumes responsibility for the accuracy and completeness of the forward-looking statements. Neither we nor our advisors undertake any obligation to update any forward-looking statements for any reason after the date of this release to conform these statements to actual results or to changes in our expectations, except as may be required by law. You should read this release with the understanding that our actual future results, levels of activity, performance and events and circumstances may be materially different from what we expect.
Non-IFRS and Other Financial and Operating Metrics
Changes, percentages, ratios and aggregate amounts presented have been calculated on the basis of unrounded figures.
This release includes certain financial measures and metrics not based on IFRS, including Adjusted EBITDA, as well as operating metrics, including GMV and Active Consumers. We define GMV, Active Consumers and Adjusted EBITDA as follows:
GMV corresponds to the total value of orders including shipping fees, value added tax, and before deductions of any discounts or vouchers, irrespective of cancellations or returns.
Active Consumers means unique consumers who placed an order on our marketplace within the 12-month period preceding the relevant date, irrespective of cancellations or returns.
Adjusted EBITDA corresponds to loss for the period, adjusted for income tax expense, finance income, finance costs, depreciation and amortization and share-based payment expense.
Adjusted EBITDA is a supplemental non-IFRS measure of our operating performance that is not required by, or presented in accordance with, IFRS. Adjusted EBITDA is not a measurement of our financial performance under IFRS and should not be considered as an alternative to loss for the period, loss before income tax or any other performance measure derived in accordance with IFRS. We caution investors that amounts presented in accordance with our definition of Adjusted EBITDA may not be comparable to similar measures disclosed by other companies, because not all companies and analysts calculate Adjusted EBITDA in the same manner. We present Adjusted EBITDA because we consider it to be an important supplemental measure of our operating performance. Management believes that investors' understanding of our performance is enhanced by including non-IFRS financial measures as a reasonable basis for comparing our ongoing results of operations. By providing this non-IFRS financial measure, together with a reconciliation to the nearest IFRS financial measure, we believe we are enhancing investors' understanding of our business and our results of operations, as well as assisting investors in evaluating how well we are executing our strategic initiatives.
Management uses Adjusted EBITDA:
Items excluded from this non-IFRS measure are significant components in understanding and assessing financial performance. Adjusted EBITDA has limitations as an analytical tool and should not be considered in isolation, or as an alternative to, or a substitute for analysis of our results reported in accordance with IFRS, including loss for the period. Some of the limitations are:
Due to these limitations, Adjusted EBITDA should not be considered as a measure of discretionary cash available to us to invest in the growth of our business. We compensate for these and other limitations by providing a reconciliation of Adjusted EBITDA to the most directly comparable IFRS financial measure, loss for the period.
The following tables provide a reconciliation of loss for the period to Adjusted EBITDA for the periods indicated:
For the three months ended June 30 |
||
(? million) |
2018 |
2019 |
Loss for the period |
(42.3) |
(67.8) |
Income tax expense |
0.2 |
0.2 |
Finance costs |
0.1 |
0.8 |
Finance income |
0.0 |
0.1 |
Depreciation and amortization |
0.5 |
1.8 |
Share-based payment expense |
5.8 |
20.5 |
Adjusted EBITDA |
(35.6) |
(44.4) |
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