Jumia Technologies AG Q3 FY2020 Earnings Call

Good morning, everyone. Thank you for joining us. Welcome to Jumia’s Third Quarter 2020 Results Conference Call. I will now hand the call over to Safae Damir, Head of Investor Relations for Jumia. Please proceed.

Thank you. Good morning, everyone. Thank you for joining us today for our third quarter 2020 earnings call. With us today are Sacha Poignonnec, Co-Founder and Co-CEO of Jumia; and Antoine Maillet-Mezeray, CFO. This call is also being webcast on the IR section of our corporate website. 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 recent 20-F filings. 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 Sacha.

Thank you very much. Welcome everyone and thanks for joining the call. I hope that you are all staying safe and well. About a year ago, we took several decisive actions in order to accelerate our path to profitability and strengthen our foundation for long-term success. Those were not easy decisions to take and implement, but they are now starting to pay off, despite a very volatile environment in Africa, where COVID-19 has rather been a headwind for us so far. Today we bring results which show that we are very well positioned and that our path to profitability is becoming clearer and clearer. I want to thank all our teams, all our partners for their discipline, dedication, and hard work. We are immensely grateful for their continued support. Together, we are on a great mission to make e-commerce successful in Africa as it has been in other parts of the world and drive positive impact in the process. Let’s turn to Page 3. We have been very consistent in the strategy outlined to the markets. I appreciate this may sound a little repetitive to some of you, but I think it’s very important to reiterate that the strategy remains unchanged. It’s the balance of four pillars: growing the usage of our platform, driving the penetration and development of JumiaPay, gradual monetization, and cost efficiency. Obviously, those four pillars are linked to each other and, to some extent, conflicting with each other. And we manage this equation on a dynamic basis, placing more or less emphasis on each pillar as we progress. Everything we do is geared towards building a very strong platform with a solid foundation to create long-term value. If we take a look at some of the key actions, and I’m now on Page 4, some of the key actions that we took about a year ago and how they positioned us for the years ahead. First, we initiated a business mix rebalancing in late 2019 to place more focus on everyday product categories, drive higher consumer lifetime value, and support margins. The result of this action is that we have increased the diversity of our product mix, reduced reliance on phones and electronics, which went from 56% to 43% of GMV in Q3, and gained more than 500 basis points of gross profit. Our gross profit was 7.3% of GMV in Q3 last year, now it’s 12.4%. Secondly, we have made significant progress in terms of operational efficiency, generating substantial cost savings. We reduced fulfillment expense by 20% year-over-year and sales and advertising expense by 55% year-over-year, as we drove improvement in programmatic marketing and leveraged the strength of the Jumia brand. Lastly, one of the key initiatives we undertook last year was the portfolio optimization initiative, aimed at enhancing our business focus and capital allocation, including the decision to exit three geographies and exit the flight and hotel bookings vertical, streamline our organizational structure, and implement overhead rationalization. This is now paying off, with our G&A down 24% year-over-year in Q3. Combined, these initiatives really enhance the fundamentals of the business and set strong foundations for long-term profitable growth of Jumia. If we turn to Page 5, we’ve been sharing that the path to profitability includes milestones. Whenever we reach one of those milestones, we bring it forward. Today, we are pleased to share with you a new milestone in Q3 2020: for the very first time ever, we reached breakeven before G&A cost at group level. I will add that the majority of the countries in our portfolio were breakeven at this level in the fourth quarter of 2020. This is obviously good news. As you know, or at least I will detail, this is not driven by a surge in volume. This improvement is driven by enhancing our unit economics and focusing on the drivers of the P&L. You can see these drivers on Page 6. We are now making $0.10 of profit before G&A on a per-order basis. A year ago, we were losing €2.2 per order. On average, each order cost us 53% less in sales and advertising to generate, drove 29% more gross profit, and was 15% cheaper to fulfill, when comparing the two quarters. And all this without any surge in volume; it is all driven by underlying improvements in fundamentals and efficiency. This positions us very well for the future. A year ago, our losses were increasing as we were growing, and today, the more we grow, the more profitable we become. We expect these unit economics to continue improving as we drive effective monetization, cost efficiencies, and grow while maintaining profitability. The result of all these improvements can be seen on Page 7. A year ago, we clearly stated that our objective was to reduce our loss in absolute terms, and we are delegating strongly against that objective. We reduced our adjusted EBITDA loss by 10% in Q1 year-over-year, 26% in Q2, and by 50% in Q3. All this has been achieved thanks to structural enhancements to our business rather than support from external factors. As you know from the previous release, COVID-19 provided limited to no tailwind to the business; in many respects, it has actually been a headwind from a P&L perspective. On Page 8, you can see an update on COVID, reminding you that across most countries in our footprint, governments opted for partial movement restrictions or localized lockdowns rather than nationwide or all-encompassing lockdowns. This did not lead to drastic changes in consumer behavior on our platform or any meaningful acceleration in consumer adoption of e-commerce at a pan-African level. Instead, COVID drove localized supply chain and logistics disruptions, with significant disruption in restaurants during Q3 2020. We don’t know the future development of the virus and its impact, but we expect it to drive continued uncertainty in our operating environment, which could weigh on consumer sentiment. We believe that all the actions we took a year ago, which I just detailed, and our current strategy have enhanced our resilience and positioned us very well for the long-term, whatever happens. Let’s now delve deeper into the Q3 performance, starting with the trends on usage. We are now on Page 10. As previously mentioned, we look at the usage dynamics in the context of efficiency and monetization. One major driver of usage is, of course, our marketing investment. Over the last eight years, we have built one of the strongest brands in Africa, allowing us to drive usage with record levels of marketing efficiency. We reduced sales and advertising expenses by 55% year-over-year; a year ago, we were spending about €2 on sales and advertising to drive each order. Now we spend €0.9; that’s an improvement of 53%. From a 12-month perspective, our spending per active consumer was around €10 a year ago, now down to €5.6, marking an improvement of 43%. GMV was down 28%, orders down 5%, but active consumers grew by 23%. These trends should be assessed in the context of the actions we are taking, including the business mix rebalancing. Let’s turn to Page 11 to further review those usage dynamics. We're making significant progress in the cancellation, failed deliveries, and return rates, which we refer to as the CFDR ratio. This ratio as a percentage of GMV decreased from 31% to 23% in Q3 2020; on an order basis, it went from 23% to 14%. Typically, this ratio tends to be lower for orders, as higher average item values tend to show higher cancellation rates. While quarterly fluctuations can occur in this ratio, we can drive improvements in this metric as we promote operational efficiency and JumiaPay penetration; this is excellent news for us, as it leads to a higher proportion of usage on our platform being monetized and greater marketing investment efficiency. Regarding GMV and orders after CFDR by category, food delivery is growing by 37% in value and 48% in volume, despite headwinds from night curfews impacting dinner deliveries. Digital services are growing by 14% in value, with a concentrated decline in airtime recharge transactions, thus impacting orders, which contracted by 20%. While physical goods outside electronics were flat in value, they grew by 15% in volume terms, thanks to categories like beauty, fashion, and home goods. Phones and electronics declined by 41% in value and 8% in volume due to the effects of our business mix rebalancing. Overall, we drive usage as a balancing act between marketing efficiency and profitability gains on one hand and long-term platform relevance on the other hand, focusing on categories that support consumer lifetime value. We are pleased with the diversity achieved in the marketplace and the meaningful step up in unit economics observable on Page 12. Here, I will go quickly, as we’ve covered these numbers previously. We see the evolution of reliance on phones and electronics decrease from 56% to 43%, translating to improved profitability as our average order value decreased by 24%. After G&A and sales and advertising on a per-order basis, we are now in a positive position; a year ago, we were losing over €2. The diversification of our mix and assortment is substantial, paired with significant improvements made on the supply side of the marketplace. Page 13 details how we’re reinforcing Jumia’s positioning as the preferred destination for brands in Africa. In Q3 2020 alone, we onboarded over 60 brands, hosted the Jumia Brand Festival for a full week in September with more than 200 participating brands offering attractive promotions. Notable brands like L'Oréal, Nivea, Johnson & Johnson, Reckitt, Nestlé, and Pernod Ricard participated, spanning multiple geographies. Impressively, in Egypt, orders grew by over 70% during this promotional week compared to the prior six-week average, with fashion, beauty, and FMCG categories representing over 80% of items sold. This was a significant success, leading to many brands experiencing a triple-digit uplift in volumes during the event. Our partnerships with brands, SMEs, and cross-border sellers are immensely valuable; our marketplace aims to deliver value for consumers as well as sellers, developing platforms that enable them to effectively reach consumers across Africa. Our second objective focuses on JumiaPay. Page 15 shows that the total payment volume (TPV) of JumiaPay increased by 50%, with on-platform penetration reaching 26%. We have doubled our penetration of JumiaPay versus a year ago. On Page 16, you can see that JumiaPay transactions increased by 6%. Notably, transactions above €10 grew by 90%, while transactions below €10 declined, primarily due to reduced consumer incentives. To clarify, JumiaPay is operational in eight markets: Nigeria, Egypt, Morocco, Ivory Coast, Ghana, Kenya, Tunisia, and Uganda. Our goal for JumiaPay is to drive gradual expansion across geographies while enhancing its value proposition. Page 17 provides further details, emphasizing that JumiaPay extends beyond digital payments and checkout functions, offering a marketplace for various financial services. In Q3, we launched a pilot for Jumia Games across five countries, partnered with Mondia, a marketing and digital content distribution company, to provide a subscription-based service granting unlimited access to over 500 games and in-app purchases. This initiative aims to broaden JumiaPay’s offering while enhancing payment use cases. Additionally, we offer consumers and sellers access to an expanding range of financial services through partnerships with top financial institutions. In Q3, we launched the pilot of a prepaid card in Egypt in partnership with Mastercard and ADIB, a leading bank in MENA. Our financial services marketplace aims to enhance financial inclusion and enable consumers and SMEs to access essential financial services safely and conveniently. I’ll now pass it over to Antoine, who will walk you through our financial performance starting on Page 19.

Thank you, Sacha. Hello, everyone. In parallel with driving usage, we continue to gradually monetize our platform. In the context of a 28% year-over-year GMV contraction, Q3 2020 marketplace revenue increased by 19%, and gross profit by 22% over the same period. As we drove the usage of Jumia, we sought to monetize this usage to diversify revenue streams that absorbed a growing share of our cost base. Taking a closer look at various marketplace revenue streams on Slide 20, you’ll see that commissions increased by 43% year-over-year due to an increase in the sale of higher commission rate categories like fashion, beauty, or FMCG, as well as lower promotional intensity. Fulfillment revenue increased by 13%, attributed to continued shipping fee adjustments and pricing changes within our cross-border logistics; parts 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, offsetting the effects of pricing changes in our cross-border logistics. We strategically manage monetization pressures on our sellers; during Q3 2020, we reduced pressure on advertising, leading to a 2% decrease in this revenue stream while increasing focus on fulfilling costs pass-through. It is worth noting that we remain in the early stages of our monetization journey. Commissions and fulfillment fees, the core of the marketplace, account for more than 70% of marketplace revenue. We intend to diversify our revenue mix, leveraging untapped monetization avenues, both in the core e-commerce marketplace and the underlying assets that support it, like digital payments and logistics. For core e-commerce, the first phase of monetization was about enabling transactions, earning commissions and fulfillment fees in exchange for facilitating transactions. We expect to grow these revenue lines as we drive more usage on the platform. The next phase of monetization involves unlocking more growth for our sellers—via value-added services like training, marketing, and advertising solutions, as well as data analytics for performance analysis and informed business decisions. As we onboard more brands and our seller base matures, I expect to see growing traction for these services. Payment and logistics have always supported the marketplace; however, these assets hold tremendous growth potential in their own right. JumiaPay’s digital services and financial marketplace activities are still in their infancy. We see vast growth potential from commissions earned in these activities as we increase JumiaPay usage and broaden our fintech offering for both sellers and consumers. The JumiaPay digital payment asset has yet to be monetized, as all payments processed today relate to Jumia e-commerce transactions. We are working on offering JumiaPay checkout attribution to third-party accounts and intend to expand into both digital and offline payments in the future. Finally, Jumia Logistics supports Jumia e-commerce transactions, earning fulfillment revenue primarily to cover fulfillment expenses. We have now launched logistics as a service, allowing third-party businesses to access the Jumia Logistics platform for their delivery needs. I would like to provide additional context on this initiative. Logistics in Africa is notoriously challenging with various hurdles like a lack of addresses, organized capacity, storage space issues, and a predominance of cash on delivery. With Jumia Logistics, we have created a tech-rich platform capable of addressing these challenges. We leverage a network of over 300 third-party logistics partners managed through a proprietary back-end, providing full visibility on package journeys, and optimizing delivery times through volume allocation and smart routing. Additionally, we maintain an extensive network of physical locations, including warehouses in all operating countries and over 1,300 consumer pickup stations. Third-party businesses can use this platform for last-mile and end-to-end fulfillment services, including warehousing, picking, packing, and delivery. We're excited to offer logistics platform services to alleviate major distribution pain points in Africa, driving trade in our operational regions while generating more volumes for the logistics SMEs within our network. Moving to costs on Page 24. We’ve been optimizing our full cost structure. I’m pleased to report another quarter of record gross profit after fulfillment expense, reaching €6.6 million compared to a loss of €1.7 million in Q3 2019, with fulfillment expenses decreasing by 20% year-over-year due to operational enhancements across logistics operations. This included optimizing cross-border shipping metrics, staff cost savings in our fulfillment centers, and shifting our delivery pricing model from cost per package to cost per stock. Furthermore, we have been able to pass on a growing proportion of fulfillment expense to consumers and sellers through our fulfillment and value-added services revenue streams. The pass-through ratio of fulfillment expenses plus value-added services revenue over fulfillment expenses improved from 58% in Q3 2019 to 79% in Q3 2020. Sales & Advertising expenses decreased by 55% from €13.8 million in Q3 2019 to €6.2 million in Q3 2020, marking its lowest level in over three years, with all marketing efficiency metrics showing strong improvements. Sales & Advertising expense per order decreased by 53% from €2 in Q3 2019 to €0.9 per order in Q3 2020. Annual Sales & Advertising expense per active consumer declined by 43%, from €9.9 to €5.6. Sales & Advertising as a percentage of GMV decreased by almost 200 basis points, from 5.3% to 3.3%. These efficiencies stem from our strong brand and improved performance marketing across search and social media channels, including refined target market segmentation with tailored campaigns for each segment. The third major cost area, technology and G&A, is seeing meaningful improvements due to our rationalization efforts initiated late last year. G&A expenses, excluding SBC, dropped below €20 million for the first time in nine quarters, reaching €19.3 million—a 24% year-over-year decline. This decline results from staff cost reductions and professional fee savings largely due to portfolio optimization and cost rationalization initiatives. Next, regarding our balance sheet and cash flow items, our path to profitability is enhanced by our asset-light business model. Q3 2020 CapEx was less than €0.5 million as Jumia Logistics operates with minimal CapEx requirements. Net change in working capital resulted in a €4 million inflow, supported by reduced inventory and shorter receivable cycles. Cash utilization stood at €27.2 million, corresponding to a €22.1 million decrease in cash and cash equivalents—down 62% year-over-year—alongside a €5.1 million foreign exchange loss on cash held in USD. The €3.5 million net settlement expense for the class actions may be disbursed in Q4 2020. You may have noticed that we made a shelf filing earlier this summer, allowing us to issue up to 18 million ADS over the course of the next three years. We are making significant progress toward breakeven, which provides flexibility regarding liquidity. We intend to seize market opportunities to raise capital in the future, enhancing our balance sheet and increasing our flexibility. With that, I’ll hand the call back to Sacha.

Thanks very much. To conclude, let’s provide perspective on our achievements to date and our direction going forward. We began the call emphasizing our strategy revolves around four key pillars, which we manage dynamically. Over the past 12 months, we have driven the business with a sharp focus on profitability, delivering strongly against that objective. Comparing our business for the first nine months of 2019 versus 2020, it’s evident that it’s working. We’ve significantly improved across the board, with only GMV down, largely by choice. Notably, there are many growth opportunities across our business, both in volume and value. We now possess a business mix, cost structure, and fundamental drivers supporting Jumia’s long-term profitable growth. This progress has been achieved without any volume surge or external tailwinds, showcasing the underlying business quality and instilling confidence in our path to profitability. You may wonder why we’re prioritizing profitability at this stage. Allow me to clarify. Firstly, our business model has been validated by successful companies like Mercado Libre, Alibaba, and Amazon. Secondly, Africa holds immense potential, providing us with decades of growth opportunities to foster e-commerce and payments adoption amidst challenging distribution conditions for sellers in the offline world. Throughout the years, we have proven our capability to address and conquer challenges in payments, logistics, and developing scalable marketplaces featuring consumers and sellers. Thus, our primary focus is ensuring profitability as the business scales. Once this concern is properly addressed, we can be more comfortable accelerating usage growth, knowing that the business is fundamentally profitable. We are committed to delivering milestones as they materialize, continuing our strategy of balancing selective growth with efficiencies, driving increased monetization and cost efficiencies, all the while enhancing JumiaPay penetration. Upon achieving profitability, we can allocate more resources to amplify user base growth, further accelerate JumiaPay, prioritize Jumia Logistics as a potential standalone entity, and explore new avenues for growth, including gaming, digital content, geographical expansion, and more. We are confident in our relevance within the e-commerce, food delivery, payment, and logistics landscape; we have built a scalable platform able to expand. We operate an asset-light company with significant regional and category diversification, and we are optimistic about the future, encouraged by our recent results. Thank you for attending today’s call, and we are now ready for questions.

First question is from Ralph Schackart from William Blair. Please go ahead.

Good morning. You made some really good strides in logistics and marketing fulfillment expense decreased during Q3, I think down by around 20% and 55% or so year-over-year respectively, which is really great progress. Sacha, you talked about doing this in an environment without a surge in volume. Well, maybe just kind of taking a step back, assuming there’s not – I guess near term or outlook for a surge in volume. Where do you think further progress could go on this front? Do you really need that surge in volume to continue to get these really strong decreases in expenses year-over-year? Just maybe some more color on this, that’d be great. Thank you.

Yes, thanks, Ralph for the question. It’s a very good question. We’ve kept repeating over the last two years as we approached the process of going public that we were betting not on any surge, but rather the gradual adoption of e-commerce in Africa, and that, considering all factors, we don’t need a significant change to take the company to profitability. We simply need to continue doing what we’re doing. Looking ahead, I believe we can still improve unit economics quite significantly. Firstly, there are numerous monetization avenues we’ve just begun to explore, many of which we haven’t even tapped into. This includes enhancing the advertising services we provide to sellers and third parties, as well as opening up Jumia Logistics for third-party use, which we expect to gradually boost contributions over the coming months. Additionally, we have yet to monetize JumiaPay properly; we're currently not generating revenue from payment service provider activities. Thus, I believe there are many opportunities to grow revenues while maintaining the current size of the business. On the cost side, although some improvements necessitate increased volume, we can still find ways to enhance cost-efficiency. Consequently, as unit economics improve, they will continue to do so regardless of any surge in demand. Without a surge, I believe we will still see growth. We have also shared some details with you to indicate where that growth will materialize, and we are confident there’s ample growth potential in the business, particularly in the areas we strategically choose. There may be some volatility, but we will persist in bringing you updates. If a surge does materialize, that would be an added bonus; however, we are focusing on the steady growth trajectory we envision.

Thanks for the extra color, Sacha.

The next question comes from Mark Mahaney from RBC. Please go ahead.

Thanks. Let me ask two questions, please. First, for the first time, you had a decline in active customers sequentially; I know it’s a trailing 12-month metric. Could you talk about that? Can you do something to stabilize that? Should we expect the customer count to decrease? Is that part of the rationalization, shedding unprofitable customers, or can this trend be reversed? I assume the goal would be to grow active customers over time. So could you elaborate on that? Secondly, regarding 1P revenue, given the focus on the marketplace business, do you think it would be reasonable to assume that you’ll exit the 1P e-commerce market entirely and just focus on the marketplace business? Thank you very much.

Thanks, Mark. These are great questions. First, regarding the sequential decline in active consumers, just to clarify, as you mentioned, these figures represent the last 12 months of active customers, comparing Q2 2020 to Q3 2020 based on the metrics over the previous four quarters. There are many dynamics that can influence this metric. During this period, we continued to make considerable strides on efficiency, as evidenced by the 14% reduction in sales and advertising expenses between Q2 2020 and Q3 2020. We also improved efficiency regarding active consumers by 16% during that time. In some sense, this result is reflective of the choices we’re making. Regarding customer lifetime value (CLV), we’ve observed that some customers only responded to promotions, particularly those tied to airtime and similar products. Thus, some of those consumers may have been lost as we pivoted towards customers that promote positive CLV. We don't foresee this trend continuing; in fact, we anticipate the metric will trend upward over time. We are confident about this outlook as well. On the topic of 1P, I wouldn’t say we will stop entirely, but I don't foresee that happening anytime soon. 1P remains an attractive option for us in markets with supply volatility, enabling us to buy and sell when necessary to drive relevance in the marketplace or address supply shortages. For example, as we prepare for Black Friday, we still engage in some retail activities, which enhances our margins and relevance for consumers. While our primary focus is the marketplace, we will continue to engage in 1P selectively to support our broader strategy.

Okay. Thank you, Sacha.

The next question comes from Aaron Kessler from Raymond James. Please go ahead.

Great. Thanks, guys. A couple of questions, maybe just a follow-up on the last question. I also noticed that the average order value is down about €5 sequentially. I think it was at a similar level for electronics. Could you provide insights on the average order value? Also, how do you perceive the optimal level of advertising? Are you currently at the right level? Which channels are you focused on going forward? Lastly, could you provide any Q4 trends or updates? Thanks a lot.

Thanks, Aaron. Regarding average order value (AOV), we consider it an output of consumer usage on our platform, rather than a target we aim to manipulate. We're focused on driving attractiveness for customers, so we anticipated the AOV drop, which reflects the rise of everyday categories with lower prices. The AOV is impacted by various factors, including the quantity of items in users’ baskets and their pricing. Our strategy revolves around maintaining positive consumer lifetime value (CLV) and ensuring orders remain profitable. We closely monitor AOV but don’t pursue a specific number. Our marketing primarily highlights online and performance channels, which comprise most of our expenditures. These spending methods are diverse and granular, involving performance channels like app installations, retargeting, and affiliate marketing. Our second-largest advertising spend is offline commissions through the JForce program, which compensates individuals for recruiting new Jumia users. Looking at our advertising expense mix, we’re committed to continual optimization and exploring new advertising channels to attract new users. Regarding Q4 trends, it’s slightly early to comment. However, we recently started our Black Friday event—a month-long shopping festival, initiating last Friday in most regions, which progresses with heightened offers each week.

Got it. That’s helpful. Thank you.

The next question comes from Sarah Simon from Berenberg. Please go ahead.

Yes. I’ve got three questions, please. Firstly, regarding SG&A, what do you consider to be an appropriate or stable quarterly SG&A cost? The numbers have decreased significantly—should we expect that to continue, or do you think we’ve reached a stable level? Secondly, GMV figures indicate that aside from mobile phones, growth categories appear flat to slightly down overall. Are there specific categories that are weaker than others or particularly strong? You've previously mentioned strong growth in food delivery and FMCG—has that continued? Lastly, while you cannot provide Q4 guidance, it seems fair to say we started to see a shift towards selling profitable goods in Q4 last year. Is it reasonable to expect that the rate of decline in raw GMV should moderate in Q4? Or should we anticipate further shifts away from higher-priced goods? Thank you.

Thanks, Sarah. I wish we had definitive answers. Regarding SG&A, our outlook is that, while we've effectively managed costs in this area, we plan on focusing on growth in usage and monetization rather than further cutting G&A. While there may be slight fluctuations and potential modest reductions, we expect fairly flat development moving forward. Regarding GMV, a nuanced analysis is needed. Underneath the average figures lie diverse categories with varying dynamics; some are growing more than others, while some have indeed begun to shrink. That said, many growth opportunities exist, reflected in certain categories we are prioritizing. Lastly, while it's challenging to predict GMV trends, the situation should improve over time with more favorable comparisons as we advance. The business mix rebalancing we initiated a year ago has not been an overnight change, so it is essential to recognize that volatility may persist for some time as we gauge the full ramifications of our efforts. I assure you that we will continue to provide you with detailed breakdowns and insights on how each segment is performing.

Okay. Perfect. Thanks.

The next question comes from Brian Nowak from Morgan Stanley. Please go ahead.

Hi. This is Matt on for Brian. Thanks for taking the question. Is there any material divergence in your largest countries where you’re performing better than others, and if so, what differentiates those countries? Thanks.

Yes, the answer is no. While we witness some differences when comparing metrics across various nations, I would say the overall performance remains quite consistent, and that’s something we appreciate. Good results are not restricted to any single country; they arise across all of them. Thus, performance is broad-based rather than being driven by individual markets.

The next question comes from Catherine O'Neill from Citi. Please go ahead.

Hi. I just had a question on the logistics-as-a-service plan. I want to understand how you’re managing capacity for that without affecting your core business. How actively are you marketing this service? How should we think about the size of the opportunity?

Yes, the size of the opportunity is enormous. We built our logistics capabilities out of necessity over the past eight years, making a significant investment in resources, technology, and time. Now that we have created this asset, we view it as a substantial opportunity because we possess a robust system providing visibility, reliability, and cost-effectiveness for businesses needing to transport goods in Africa. We do not possess an exact growth figure yet, but we are ready to scale the service after having successfully piloted it in multiple countries. We are happy to market it to sellers and SMEs as we observe demand, and while we will not compromise our core Jumia business in this process, we feel confident that we won’t encounter capacity issues anytime soon. Without a surge in demand, our current model supports gradual growth.

Okay, thanks. Can I ask about your warehouse capacity? You've indicated it's about 110,000 square meters. How do you foresee this evolving over the next couple of years, and what type of investment will that require?

Yes, we expect the warehouse capacity to increase gradually. Storage and logistics require minimal CapEx since we utilize rented spaces dedicated just for consolidation and fulfillment. Therefore, I anticipate steady growth, but it doesn’t require significant investment or long-term capital outlay.

The next question comes from Lamont Williams from Stifel. Please go ahead.

Hi. As you reduce advertising costs, what trends are you observing in customer acquisition costs? Are they decreasing as you leverage your brand better? Additionally, can you provide any indications regarding the timeline for JumiaPay monetization?

Yes, we are indeed witnessing similar trends in our customer acquisition costs as well as other marketing efficiency metrics. This leaves us feeling optimistic. Regarding JumiaPay monetization, we are nearly ready to start pilot testing it as a payment service provider. We plan to initiate this in the near future, likely within the next few quarters, but don't foresee it significantly affecting our revenues immediately.

Okay, great. Thank you.

There are no more questions in the queue. This concludes our question-and-answer session. I’d like to turn the conference back over to Sacha for any closing remarks.

Great. Thank you so much, everyone. I think we’re over the hour, so really appreciate you joining. Thanks for your support. As always, we are available if you have any questions. We wish you the very best. Take care, everyone. Bye-bye.

The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.