Good day, ladies and gentlemen. Thank you for standing by. Welcome to Jumia's Results Conference Call for the Fourth Quarter of 2022. 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 Safae Damir, Head of Investor Relations for Jumia. Please go ahead.

Thank you. Good morning, everyone. Thank you for joining us today for our fourth quarter 2022 earnings call. With us today are Francis Dufay, CEO of Jumia; and Antoine Maillet-Mezeray, 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 defer 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 April 29th, 2022, 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, Safae. Welcome everyone and thanks for joining us today. I would like to start with a brief update on our strategy. Antoine and I took on our new roles over four months ago now. Our mandate is very clear taking Jumia to the breakeven and building a growing and profitable business in Africa. We took swift action to support our path to profitability, and while it is still early days and there's a lot more that we're working on, the first results are very encouraging. In Q4 '22, we made good progress on our strategic priorities. One, we have significantly reduced our losses. Two, we have enhanced business focus terminating a number of non-core activities to support our unit economics. Three, we have driven meaningful cost reduction. In Q4, it's mostly visible on fulfillment and marketing expenses, but we're working to drive more savings across the whole cost structure. And four, we have accelerated on monetization, which has reached all-time highs in Q4. Let me start with the reduction in losses on Page 5. Operating loss was down 41% year-on-year reaching $49.8 million. Operating loss as percentage of GMV decreased by over 8 percentage points year-on-year to 17.6%. Similarly, adjusted EBITDA loss was down 30% year-on-year reaching $49.2 million. This takes full-year '22 adjusted EBITDA loss to $207 million near the bottom end of the guidance range we provided of $200 million to $220 million. So while this is good progress, we believe that we can do much, much better and this is reflected in our guidance. We expect adjusted EBITDA loss for 2023 to decrease by up to 50% versus 2022. We'll come back to that at the end of our presentation. To accelerate our progress towards profitability, we need to be much more focused and disciplined…

Thanks, Francis. Hello everyone. I'll start with the review of our top line performance on Page 13. Despite the major challenges we are facing in the macro front, we posted very strong top line performance in Q4 '22. Revenue was up 7% year-on-year, and 23% on the constant currency basis. This was driven by market based revenue momentum, which accelerated by 27% year-on-year and 45% on the constant currency basis. On the other end, first-party revenue was down 15% year-on-year and flat on a constant currency basis. This was largely a result of our decision to scale back the grocery category to reduce operational complexity and support our margins. Other revenue was down 9% year-on-year and up 2% on a constant currency basis, partly due to the suspension of our logistics-as-a-service offering in a number of geographies. Let's now unpack the gross dynamics of our marketplace revenue. Marketplace revenue reached an all-time high of $41.2 million in Q4 '22. Commissions was the fastest growing marketplace revenue stream up 81% year-on-year and up 105% in constant currency reaching a record of $16 million. This was the result of commission take rate increases implemented in Q2 and Q3 '22. Marketing and advertising was the second fastest growing revenue stream up 76% year-on-year and up 96% in constant currency reaching an all-time high of $7.4 million. This was driven by the strong momentum in third-party advertisers revenue, which more than double year-on-year. Value-added services also reached record high at $9.5 million, up 11% year-on-year and up 27% in constant currency as a result of a strong increase in warehousing service revenue. On the other hand, fulfillment revenue was down 23% year-on-year and down 11% in constant currency as a result of the selected deployment of next day free delivery earlier in 2022. We…

Thank you, Antoine. We remain fully committed to accelerating our progress towards breakeven. For 2023, we expect adjusted EBITDA loss to reach between a $100 million to a $120 million. At the bottom of this guidance range, this means cutting adjusted EBITDA loss by more than half versus 2022. The progress we made in Q4 '22 alongside the initiatives we're currently working on gives us confidence in our ability to hit this trench. We have baked into this guidance realistic assumptions in terms of usage dynamics. The micro situation remains a headwind, so we essentially assume the continuation of the same usage trends observed in Q4 '22. What's supporting the adjusted EBITDA loss reduction is significant cost savings that results from efficiency initiatives that are largely underway. With that in mind, we expect sales and advertising expense to reach between $30 million to $46 million. At the bottom of the range, we're talking about the reduction of over 60% versus 2022. Antoine made an important distinction earlier in the call, and let me stress that again. The thing marketing does not mean neglecting growth. In fact, we're doing solo work on supply, logistics, and customer experience to drive sustainable growth for the long-term. However, in the near-term, the macro remains challenging, which is likely to continue to affect usage on the platform, and this cost for even more caution and discipline in the cost management. In that spirit, we expect G&A including share-based compensation to reach between $90 million and $105 million compared to $122 million in 2022. The organizational changes conducted in Q4 '22 will help us drive meaningful staff cost savings in 2023. Antoine and I took a number of decisive actions in the very first days of our mandate. Some of these were difficult, such as headcount cuts and business exits, but we believe they were necessary to set the business and the solid foundation to reach profitability. We're also driving a number of cultural changes at Jumia. Fostering a culture of innovation with a such sharper focus on cost discipline. We have also removed layers of central management and business complexity to empower management in Africa to own and drive the country's agenda with a clear focus on profitability and long-term sustainable growth. There is very strong buying and commitments across the organization to deliver on our strategy. And we look forward to updating you on our progress on the next call. With that, we are ready to take your questions.

At this time, we will be conducting a question-and-answer session. [Operator Instructions]. Your first question for today is coming from Luke Holbrook at Morgan Stanley.

Yes, good afternoon everyone. Thanks for letting me on the call. You've made a significant reduction in staff 900 positions. You're harboring yourselves on advertising expense this year. I think you discussed consumers facing macro pressures. So I guess putting that all together, what are the assumptions that you all are making from a top-line perspective to hit the adjusted EBITDA guidance for this year?

So as we just said in the call outlook. Thanks for the question. As we said in the call we are not giving the guidance on top-line for this year. But in our assumptions, we basically do not see -- we do not forecast or foresee material changes to the trends that we've seen in Q4. We put it this way. However, we are working very, very hard to reverse the trends and to deliver much better term plan that's what we've seen in the past quarter working on fundamentals of supply, fundamentals of customer experience, UX and distribution.

Okay, understood. And just historically, we've had, I guess supply chain issues and macro conditions blamed on underperformance in terms of profitability. From what you are saying, if there is a deviation on top line trajectory from what you're expecting, you'll take further actions. Is that correct? Just make sure that you're hitting that adjusted EBITDA kind of lost guidance, is that right interpretation?

We will make sure that we hit the guidance definition.

Perfect. Thank you.

Your next question for today is coming from Aaron Kessler at Raymond James.

Great. Thank you. A couple of questions. One, just the decline in customers and orders on a year-over-year basis that you saw. I think you said that was mostly macro. Was there any other factors though, including scaling back some of these initiatives that weighed on the kind of the customer order growth in the quarter?

Sorry, Aaron, I didn't get the second half of the question.

Yes, was there -- is there any other factors besides macro kind of the declining customers and orders such as some of the newer scaling back some of these initiatives?

No, I think that there are many trends to play. I mean definitely macro is the biggest driver. When you talk about macro, there are two big things at play. One is inflation and the other one is supply disruption. So inflation we mentioned, for example, Ghana that has 54% year-on-year inflation. This is obviously impacting purchasing power for our customers. The second big piece is hot currency and missing hot currency in each of our countries that has impacted heavily ability to import in some countries like in Egypt which as a consequence is impacting our ability to get the right supply on the platform and the right lineup of products. So this is by far the biggest driver. There are also some of the drivers, for example, we have made conscious and deliberate decisions to optimize and rationalize some categories such as SMCG, or JumiaPay App. So we are seeing negative trends on those segments, but we know why, and this is a very deliberate choice. On the other hand, we have some segments and some categories that are growing because we are all that are performing way better than the average because we've already starting the review of fundamentals on those segments.

Got it. And any more details you can provide on the -- saw a nice growth and commission revenues in the quarter. I guess how much of that was kind of from higher pricing that you've rolled out or cutting back the level of couponing you've used previously as well?

Yes, absolutely. So in this quarter we've reached an all-time high of 14.5% of gross profits versus GMV. That's mostly the consequence of commissions increase, that was undertaken mid-'22. We're also hitting a record level of advertising revenues. However, going forward we will be very disciplined on monetization and we'll take it more as a byproduct of scale. So we do not expect further commission increases in the near-term, and we do not foresee material increase in gross profit margin for the future quarters versus Q4.

Got it.

Basically, yes, so a share of that is from [indiscernible], I mean sales contribution from advertising and another share is from kind of mandatory take rate from commissions that, and that we want to be careful about because we don't want to hurt the economic equation of our vendors and we want to make sure that the platform remains attractive for new vendors to join.

Got it, great.

Your next question for today is coming from Lamont Williams at Stifel.

Hi, thanks for taking the question. Can you just as you bring down sales and marketing expense for next year, could you just talk about the shift that you are planning in the marketing mix? I think historically you've done mostly, most of the mix has been performance marketing. Can you just talk about how you're thinking about next year?

So very good question. Thanks a lot, and let me give also a broader answer, it's a very important point. So in this getting back on sales and advertising expense and as Antoine mentioned, we're cutting on significant inefficiency and may I even say waste from the past. And we believe we can do that because we see little correlation between marketing spend and growth of the countries, when you look country by country. So we're quite comfortable going forward with this plan, but we are doing, I mean, we're not just reducing stuff. We also have a very clear plan to enable sustainable growth without the economics. So while reducing marketing budgets, we're also launching much more structural actions, with medium to long-term impact that are of course more difficult to execute than throwing money on marketing. But that will have the best long-term and the biggest long-term impact. So we are rebuilding the value proposition of our platform category-by-category in each country focusing on key categories, fashion, duty electronics, phones, home living. Basically what we're doing is we're onboarding or re-onboarding the right brands and vendors securing best prices and selection. This, I mean, I insist on this one. This may sound a bit basic and obvious thing from Western countries, but this is absolutely critical in emerging markets in Africa where supply is a permanent challenge for both consumers and retailers, and it's a battle for us. Second, we are expanding to reach outside of our capital cities to reach consumers outside of the big cities. So we are expanding the consumer base through a broader distribution network and more relevant marketing channels to target those customers. So to your question, we are adding to our mix, to our marketing mix much more underground activation much many,…

Okay, great. Thank you. Thanks for that. And just you talked about some changes or reductions in business lines and the digital categories. Could you just touch on that and what exactly you did with some of your digital business lines?

So in the past quarter, we've been deliberately more disciplined in marketing investments across the board, of course, and in JumiaPay and JumiaPay App in particular. So we have pulled back spends on some of the heavily promotional categories on the JumiaPay App, such as airtime sales and virtual sales, which as a consequence obviously has impacted the sales in this quarter. But as we're focused on getting better economics, we do not intend to subsidize heavily the growth of such categories in the near-term.

Okay, great. Thank you.

This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.