Good morning, ladies and gentlemen. Thank you for standing by. Welcome to Jumia's Results Conference Call for the Second Quarter of 2023. At this time, all participants are in a listen-only mode. And 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 second 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 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. Thanks for joining us today. I am pleased to report another quarter of significant reduction in losses as we execute on our strategy with discipline and focus. Q2 '23 was the fourth consecutive quarter of loss reduction on a year-over-year basis, with a material acceleration in the base of loss reduction. In Q2 '23, we cut both adjusted EBITDA and operating losses by two-thirds, reaching the lowest levels in over four years. This was achieved thanks to significant savings across the full cost structure. We cut our operating expenses by almost half in Q2 '23 compared to Q2 '22. We are reaching record levels of efficiency, particularly in fulfillment and sales and advertising expenses, while improving our customer value proposition. And that's a very important point. We are not driving cost savings at the expense of our standards of operation. We are operating more efficiently with a leaner cost structure, while improving the quality of our supply, expanding our logistics reach and providing our customers and sellers with a better value proposition overall. Having successfully right-sized our cost base, our top priority is now growth. And here, we are taking no shortcuts to drive growth. We are doing the heavy lifting and fundamentals to build what we believe to be a sustainable foundation for long-term profitable growth at Jumia. We are now in the middle of this transition with the added complexity of a very challenging macro environment, which is heavily affecting usage performance. Let's now review the details of usage in Q2 '23. Quarterly active consumers, orders and GMV declined by 28%, 37% and 25% year-over-year, respectively. This was driven by a combination of factors. First, as already mentioned, the macro environment remains extremely challenging. The average inflation level across our footprint reached 14.1%…

Thank you, Francis. Hello everyone. Let's start with a review of our top-line performance on Page 12. Revenue reached $48.5 million in Q2 '23, down 15% year-on-year and up 6% on a constant currency basis. First Party revenue was $21.9 million, down 12% year-over-year, but up 19% on a constant currency basis. FX was a significant headwind to First Party revenue performance, in particular the Egyptian Pound depreciation year-over-year. On a constant currency basis, we saw a strong growth in First Party revenue in Egypt, due to strong momentum in First Party general merchandise sales. We always aim to get the right supply for our customers, and therefore, may do retail business in an opportunistic manner to bridge temporarily any assortment gaps on our platform. Let's now unpack the performance of our Marketplace revenue. Marketplace revenue reached $26.1 million, down 15% year-over-year and stable on a constant currency basis. Commissions revenue was up 7% year-over-year and 24% on a constant currency basis. This was mostly due to commission take rate increases implemented in mid-2022. Marketing and advertising revenue was down 18% year-over-year, but up 5% on a constant currency basis. The challenging macro context is causing advertisers to be more cautious with their ad spends. Value-added services revenue, which mainly includes logistics revenue from sellers, and fulfillment revenue, which includes shipping fees from consumers, decreased by 36% and 23% year-over-year in parallel with decline in volumes. That said, we are significantly improving the monetization of our logistics services and the pass-through of our fulfillment costs. The ratio of the sum of fulfillment and value-added services revenue over fulfillment expense increased from 56% in Q2 '22 to a record high of 80% in Q2 '23. This supports our unit economics and helps reduce our losses. Gross profit reached $26 million in…

Thank you, Antoine. We have a clear objective of reducing losses and accelerating our path to profitability, and we are delivering strongly on that. Considering the good progress made on loss reduction in H1 '23, we are now updating our adjusted EBITDA loss guidance for the full year 2023. We expect adjusted EBITDA loss of $90 million to $100 million compared to the previously communicated range of $100 million to $120 million. This implies over 50% year-over-year reduction in adjusted EBITDA loss. We expect also our cost efficiency efforts to continue paying us in 2023. We are updating our sales and advertising expense guidance to reflect lower marketing spends. As I mentioned earlier, we are focused on enhancing business fundamentals to drive growth. We're directing our marketing spend towards the most relevant and cost effective channels. As such, for the full year 2023, we expect sales and advertising expense of $20 million to $30 million versus the previously communicated range of $30 million to $40 million. This compares to $76 million in 2022. Last but not least, given the good progress made in H1 '23, we're also updating our G&A guidance. Excluding share-based compensation, we expect G&A expense of $85 million to $95 million versus $90 million to $105 million previously. This compares to $118 million in [2023] (ph), and is essentially a reflection of headcount reduction. We remain committed to driving the business towards profitability. We have made good progress on cost savings so far, executing very strongly despite a very challenging macroeconomic backdrop. We intend to maintain very strong discipline as we work on getting back to growth. As part of that, we will continue making fundamental enhancements to our platform. And this means, securing better supply and pricing while offering a more convenience experience to customers and sellers. We're confident that this approach will pay off in the medium term, and we can see encouraging signs already at country and category levels to support that. Overall, we remain very confident in the long-term growth potential of our markets and our ability to capture this opportunity in a profitable manner. With that, we're ready to take your questions.

Thank you. At this time, we will be conducting a question-and-answer session. [Operator Instructions] Our first question is coming from Luke Holbrook with Morgan Stanley. Your line is live.

Good afternoon. And just two questions from me. The first is just on the fact that orders were down 37% in Q2. That worsened from 28% in Q1. So, I'm just wondering if you can just comment on where the trends were heading during the quarter and perhaps where the exit rate was for order declines by the end of the quarter or maybe on post quarter trends. And then the second one is, have you seen merchants pass on kind of the high commission rates that you're now charging them to consumers that maybe weakened perhaps [indiscernible] proposition and demand from that side? Thank you very much.

Thanks, Luke. So, let me take your questions. So, on the orders trends first. So, there are several things to be taken separately, I would say. A lot of it is due to the very deliberate actions, right? We deemed that share of the business was not sustainable with healthy economics, and that's why we've been sharply reducing categories that required very high promotional intensity and -- or yielded very bad economics. For example, JumiaPay app services or our groceries and FMCG. Just that, FMCG and JumiaPay app services is -- the two segments are responsible for 45% of the decline in items sold, which is a good proxy for orders decline. So, nearly half of the loss is coming from very deliberate action and sustainable segments. Then most of the rest is, heavily driven, I would say, by the macro environment. I mean, one thing that I will never be -- I will never stress enough is that we're facing right now in emerging markets and especially in Africa possibly the worst macroeconomic situation in a decade or more, high inflation, very restrictive economic policies, [indiscernible] and so on. It's heavily impacting the supply -- the quality -- the quantity and quality of supply that we can get and the purchasing power of consumers. So all that is sharply driving the trends in usage as you can see. Then when we look at the intra-quarter trends, there was no meaningful difference between the months. When we look at post-quarter trends, we're starting to see some encouraging signs on volumes in a number of countries after -- starting Q3. I cannot comment very much in detail yet, but we're seeing that countries have started the transformation a bit earlier and that have now stabilized macro environment, I will not say…

Perfect. Thank you very much.

I hope this answers the questions.

It does. Thanks.

But basically, this is not the main driver -- I mean, this is not a key driver for volume decrease.

Thank you, sir. Our next question is coming from Catherine O'Neill with Citi. Your line is live.

Great. Thanks very much. I've got a few questions actually. Firstly, I just wondered if you could provide a bit more detail on what you're doing when you around the high quality and lower price supply that you're talking about as a key driver for the business or key focus at the moment and where in particular you're seeing those gaps either geographically or by category and just sort of how long that process might take. That's the first question. Second, I guess sort of linked to that is, when do you think we should start to see maybe a return to growth again in terms of the number of active customers? Then thirdly, on JumiaPay where you were talking about some of the off platform opportunities, I don't know if you're able to provide a bit more detail on how you think about the size of those opportunities and the sort of revenue streams or revenue models associated with those? And then finally, just on your cash balance, I just wanted to understand a bit more about whether there's any trapped cash and what the composition is?

Sorry, I didn't catch the last question, Cathy.

On your current cash balance or cash and equivalents, just a bit more detail on, is there any sort of trapped cash and just what the composition of that cash balance is and the accessibility of that?

Okay, sure. All right. Let me try to take the first three questions and Antoine, if you don't mind, I'll leave you the fourth question. So, on the concept of improving supply and prices, which is a huge part of our plan to return to growth, let me try to give you more details. Your first sub question was, where do we have a gap? We have gaps pretty much -- I mean, in many places, if I can put it this way. So in most countries and most categories, what happened is that in the past, Jumia relied heavily on stimulating demand, mostly for marketing actions and promotions, while we actually operate in markets where the most challenging part of the equation is actually supply. There is demand in all of our markets. There is plenty of demand. It's just poorly served. And you need to -- I mean, we need to figure out a world where you cannot buy everything you like at any time. If you need a fridge, there's only one brand on the market. If you need shoes, well, there's only one color at the shop or the only half of the sizes. So, our consumers in the markets where we operator are mostly faced with issues to access supply. So the right way to grow, that's my very deep belief and that's how we shaped the plan, is to work on supply rather than demand. We have traffic. We have demand. We need better supply for our consumers, and this is what has worked in the past in the selection of countries at Jumia. So, we ended up in cases where we were [ingesting] (ph) quite heavily in marketing on categories where, clearly, we didn't have the right assortment where competition offline and online…

Yes. But can you please repeat the question? Because my line is not very good and it wasn't clear to me.

Yes, no problem. I was just wondering if you could give a bit more detail on the current cash situation in terms of whether there's any trapped cash anywhere and what the composition of [indiscernible] cash balance is?

Yes. So, you know that are operating in 11 different jurisdictions, and they all have their own ForEx regulation. Some of them -- in some of them, it's very easy to repatriate cash, some of them are a bit more difficult to deal with, because the regulation is a bit complex. What I can tell you is that as we speak, we have -- there are no countries where we have material amount of cash from which we cannot repatriate. And we have already started to repatriate for more than a couple of countries. There is no, as you speak, cash trap in any country where we would have cash that we are not going to use. And maybe an additional point, the recent evolution in Nigeria, which is probably a very good move in terms of macro, will help to rest our confidence in the ForEx market and makes it easier to repatriate cash from the country.

Great. Thank you.

Thank you, ladies and gentlemen. At this time, we have reached the end of our question-and-answer session, and this concludes today's conference. So, you may disconnect your lines at this time, and we thank you for your participation.