Good morning, ladies and gentlemen. Thank you for standing by. Welcome to Jumia's Results Conference Call for the First Quarter of 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. 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 first quarter 2023 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 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 IFRS. You can find reconciliations of these non-IFRS names 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. So we are now 7 months into the execution of our strategy to accelerate our progress towards profitability. And I'm very pleased to report today very good progress towards this call. In Q1 '23, adjusted EBITDA loss decreased by 51% year-over-year, reaching its lowest level in over 4 years. This is the third consecutive quarter of adjusted EBITDA loss reduction on a year-over-year basis. And we are accelerating the pace of loss reduction after a 30% decrease in adjusted EBITDA loss in Q4 '22. The loss reduction this quarter was supported by significant cost savings as we reduced our operating expenses by 32.9% year-over-year. We are opening the box on every cost line in our P&L and driving efficiencies while maintaining our standards of operation and execution. We are very pleased with the progress made so far on costs and we believe that we still have room to drive further savings on fulfillment, tech M&A costs as our efficiency measures continue to yield more results. I also want to be very clear that although we believe cost reduction to be an essential lever for breakeven, it's only one aspect of our broader profitability strategy. The other very important lever for breakeven is obviously growth. And although growth in Q1 23, sorry, was affected by a number of headwinds, we have significant growth runway in our markets and we are working on the fundamentals of our business and consumer value proposition to capture this vast opportunity. Let's now review the details of usage performance in Q1 '23 quarterly active consumers, orders and GMV declined by 22%, 26% and 22% year-over-year, respectively. Usage dynamics were negatively affected by a combination of factors in Q1. First of all, the macro environment remains…

Thanks, Francis. Hello, everyone. I'll kick off with the review of our top line performance on Page 10. Revenue reached US$46.3 million in Q1 '23, down 3% year-on-year and up 24% on a constant currency basis. Marketplace revenue growth which was 4% and 21% on a constant currency basis was offset by first-party revenue decline. This was mainly a result of the scale back of the grocery subcategory which was largely undertaken on a third-party basis. Other revenue was down 68% year-on-year, mostly due to the suspension of our logistics as a service offering in most markets, except Nigeria, Morocco and Ivory Coast. We took this decision in Q3 last year to reduce business complexity and the low country to enhance their logistics capacity and efficiency before taking on third-party volumes. Let's now impact the growth dynamics of our marketplace revenue. Marketplace revenue reached US$27.4 million, up 4% on a year-on-year basis and 21% on a constant currency basis. This is a robust performance considering GMV was down 22% and 6% on a constant currency basis over the same period. Marketplace revenue growth was supported by strong commissions revenue momentum which was up 40% year-on-year and 61% on a constant currency basis. This momentum was the result of the commission take rate increases we implemented in mid-2022. Marketing and advertising revenue was stable year-over-year and up 32% on a constant currency basis. FX effects resulted in significant headwind to this revenue line due to the high weight of the Egyptian pound in the marketing revenue mix and its depreciation by 87% against the USD in Q1 '23. Value-added services revenue which mainly includes logistics revenue from sellers and fulfillment revenue which include shipping fees from consumers decreased by 11% and 21% year-on-year, respectively. And this was mostly driven by the…

Thanks, Antoine. Our Q1 23 results show strong progress towards breakeven and further support the guidance we provided earlier this year. As such, we are reiterating this guidance and remain committed to further accelerating our progress towards breakeven. For the full year '23, we expect adjusted EBITDA loss to reach between $100 million to $120 million. At the bottom of the guidance range, this means cutting adjusted EBITDA loss by more than half versus '22 in line with what was already achieved in Q1 '23. We expect sales and advertising expense to reach between $30 million to $40 million. At the bottom of the range we're talking about a reduction of 60% versus '22. I will reiterate here that although we are cutting the overall amount of marketing spend, we are extremely focused on driving usage growth on the platform. Our marketing spend, although lower, is much more efficient as we tap into more relevant channels for our consumers. And in parallel, we continue to work on multiple dimensions of our value proposition in consumers and selection, price and convenience. Lastly, we expect G&A, excluding share-based compensation to reach between $90 million and $105 million compared to $118 million in '22. And this is essentially a reflection of the headcount cuts completed already in Q4 '22 and does not incorporate the benefits of ongoing initiatives such as office space rationalization. We are encouraged by the good progress made this quarter towards breakeven. Going forward, we to maintain the cost discipline and drive further efficiencies by redoubling our efforts on the growth front to scale the business towards profitability. With that, we are ready to take your questions.

[Operator Instructions] And our first question this morning is coming from Luke Holbrook from Morgan Stanley. Please go ahead.

I've just got a couple of questions from my side. The first is, it looks like you've raised commission rates quite significantly over the past year now. If I exclude, I guess, cancellations from your GMV, it goes from to 19%. I'm just wondering what the reaction has been from merchants over that time. Do you think you're reaching a maximum for the monetization efforts that you put into there. And then, the second one is your actives are down quite significantly year-on-year. I just wondered if you could just talk a bit about the trends through the quarter and into April and May particularly in light of your sales and advertising falling about 70% quarter-on-quarter?

Sorry, Luke, I didn't get the last -- the second question. You mentioned something was down which I…

Yes, your active space is down about 1/4 year-on-year. So just wondering how it trended through the quarter given your sales and advertising reduction.

So let me start with the first question then. So indeed, we increased take rates through commissions and value-added services last year quite significantly. I think the reaction from sellers was fine. I mean, of course, they were not cheering for that but [indiscernible] with sellers understand that we bring value and we're creating a business for them. We made sure that the new commissions were not endangering their business. And they understood that they were -- I mean, they had to pay a fair price for the value that we are creating for them. So we had no backlash, no bad reaction, no bad [indiscernible] that kind from the vendors. The question about whether we've reached the maximum, it's very hard to tell when you reach the maximum until you overstep it. The decision we've made relatively at this stage is that we don't want to push further on the mandatory take rate to commissions mostly because a large part of our growth plan relies on improving the consumer value proposition which mostly comes in our markets where consumers are cash constrained, if I can put it this way which mostly comes from improving the assortment, the price points, the availability of goods and this depends on vendors. So we don't want to be pushing them too hard at this stage because we absolutely need them to improve the value proposition of our platform and drive long-term growth with low marketing costs. So we're not planning on going to further than where we are today. We believe it's a fair take rate that brings value -- I mean that creates value for both vendors and for Jumia. And we're satisfied with that level of monetization. I don't want to take the risk to push it too far. Then on…

Perfect. Just do you disclose grocery as a percent of your GMV or not then IC?

There's big growth front? So you can

Yes. Yes, grocery in the GMV mix. Do you disclose that given its significance this quarter?

No, we did not disclose it. I can -- I mean, what we mentioned earlier on is that in the GMV decrease that we saw this quarter, JumiaPay app and grocery accounted for 34% of the total decline. That's 1/3 of the whole decline at the group level. But grocery was definitely not the biggest back category by far. It was certainly the most complex but definitely not the biggest.

Your next question is coming from Aaron Kessler from Raymond James.

Maybe just a couple of questions. First, you mentioned kind of opportunities for additional expense cuts in kind of the P&L. Can you just give us a sense -- it doesn't seem like there's much room left on advertising should we see that's kind of more G&A or just other areas that you can discuss? And then, it sounds like the biggest impact to revenues on kind of a sequential basis was product mix or maybe you just rate quarter kind of macro product mix and FX for us.

Okay. So correct me if I'm wrong. But on your first question on the opportunity for further savings across the cost base. I think I mean the good news in a way is that we see more opportunity for savings, right? I think we've already had quite some impact on costs. But when we keep -- we keep on looking every day and we're waking up every morning thinking of how we get to profitability. If you look at the different items in the P&L, on the fulfillment part, we're just at the beginning of a very long process. So our cost per -- our CPO cost per order on fulfillment is at US$2.5 now, excluding JumiaPay app. But the measures that we started a couple of months ago are just starting to yield impact. We still have very diverse levels of impact across countries and when all countries will be aligned with best practices, we believe we can still get more savings. Then on marketing costs, I think we've already done quite a lot. We're confident that it is a sustainable level given the actions that we started on building better value proposition and driving better penetration across the country. Then on G&A, we have been reducing costs while also reducing complexity and streamlining the organization, reducing number of business lines I mean simplifying the lives of everyone and we believe that we can still get more savings, especially because what you see in Q1 here does not reflect the full extent of what we've done. Lots of the salaries are still -- still present in Q1 P&L and will no longer be in the P&L in Q2 or Q3 so we're yet to see the full impact of headcount and broadly speaking, of all G&A savings in that P&L. And then we also believe that we have some gains to make in tech. And so the tech teams and tech products, we are making some progress on infrastructure and we also believe that we can get more efficiency from teams. So we're really not at the end of the journey. I mean, as I said earlier, cost is not only dimension of the plan but I want to make it clear that we're not at the end of the journey when it comes to making Jumia a leaner and more efficient company. And then, Aaron, sorry, would you mind repeating the second question?

Yes. Second question, just kind of on the relative magnitude of the impact to the kind of growth in Q1, the revenue maybe revenues in Q1 versus Q4 obviously declined, just maybe the impact of macro product mix and FX which we called out. Just should we assume product mix was the biggest impact and then kind of macro on that FX or just if you can rank those?

So I will answer directionally. So product mix is changing slowly. I mean product mix is, by definition, something that takes time to evolve so from Q4 to Q1, you don't have radical changes to the point that it has an impact. A visible impact on revenue. Although we're gradually evolving towards the top categories that we're working on being fashion beauty, TV, home appliance phones and electronics then the macro situation is pretty much the same that we discussed 3 months ago. FX is still not helping us with significant headwinds. I would say, no major change on that front at this stage.

Great. And just maybe finally, anything you would call out in terms of geographic performance? Any major differences you saw among your kind of main regions?

So I will remain a bit directional, so we're not disclosing [indiscernible] data on an ongoing basis. But directionally speaking, we see that -- I mean, macro is the main driver of that performance for the worst cases, if I can put it this way. We're starting to see some bright spots in some countries where the early actions of the turnaround plan are starting to pay off. So for example, we're seeing very strong resilience and good performance on top line and also one of the best performance on marketing efficiency in Iberica Senegal we're seeing a brighter spot in Morocco, where top line is improving after a couple of rough quarters. And that's the main -- I mean that's a few highlights and then the countries were when macro is the most deteriorated, obviously, the ones that are [indiscernible] but overall, the same level of execution. Same quality of execution and same consistency in the actions that we're rolling out, deliver more or less the same results across countries provided we have the similar macro environment. Thank you.

Your next question is coming from Catherine O'Neill from Citi. Catherine, please proceed with your question.

Great I've got 3 questions, if that's okay. The first one is on Jumia Global that you mentioned in terms of bringing overseas sellers on board. I just wondered if you could provide a bit more detail on that in terms of how meaningful you think that could be over time in terms of broadening the proposition and the impact on GMV and whether those sellers come on at the same take rates, whether we see sort of impact there? Then secondly, within SG&A, I just wondered how much sort of one-off restructuring cost you'd expect this year and you saw in the first quarter? And then the final question is -- if you're talking about there's more efficiencies come from fulfillment and tech and the savings in SG&A were fully reflected in the 1Q. I just wondered why you didn't maybe upgrade your adjusted EBITDA guidance. Do we expect to sort of ongoing quite challenging top line is that sort of what prevented that?

Okay. Sorry, Catherine, may I please ask you to repeat the second question.

Yes. The second question was just within SG&A or within your OpEx, I just wondered how much one-off or restructuring costs you saw in 1Q and you'd expect for this year that obviously won't repeat then when we go into next year.

Okay. Okay, sure. So let me start with Jumia Global. So Jumia Global, I mean, it's a business line that's, I guess, quite well known to everyone in the call, all big platforms in the world have that kind of overseas e-commerce activity. Jumia Global for us is a huge advantage as we discussed several times, I mean, in the previous calls. We deeply believe that our markets are constrained by supply rather than demand. The daily challenge of the African consumer is about finding the right product at the right price in the market where there's just not enough supply or poorly distributed for us being able to access that tap directly the vast pool of Chinese suppliers, mostly Chinese, is a huge advantage. It means we can bring to our 11 markets products that are often not available or way too expensive or fully distributed at the right price because we would have cut off like layers of intermediaries with very good service with some check on quality which will increase trust from the customers and in the process since we're creating a lot of value for both customers and vendors. We're able to capture a sizable take rate that's really enables us -- I mean, that makes it a very variable business for us to put it this way. So it's a business that's, I think, even more relevant for us in emerging markets in Africa than it can be for other players in other places in the world. That is financially strong and viable and that we aim to keep on developing. We have countries with fairly high penetration rate of Jumia Global and we're trying to replicate -- I mean, we're not trying, we are actually busy replicating the same good practices across most of our 11 markets. So a very strong asset for us and a very important part of the plan. Then your question on one-off restructuring costs. So we had we did not separate it in the numbers that we're presenting here because it was not meaningful. Maybe Safe, Antoine, do you want to comment on that?

No, you're right. It was not material answer. We have not disclosed what was more material is the fact that we have kept in Q1 series of people who now have left and will decrease the staff cost in the coming quarters.

And Catherine to your last question. So indeed, we did not upgrade the guidance. We would be happy to do it in the future if we confirm the good progress. Yes that can be a topic for the coming quarters. Right now, we're still -- we're working within the guidance in this quarter, and we consider that we're going to see further improvement in costs.

Yes.

Thank you. We have reached the end of the question-and-answer session. This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.

Thank you, everyone.