Jumia Technologies AG Q2 FY2022 Earnings Call

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to Jumia's Results Conference Call for the Second Quarter of 2022. At this time all participants are in 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 second quarter 2022 earnings call. With us today are Sacha Poignonnec and Jeremy Hodara, Co-Founders and Co-CEOs 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 annual reports on Form 20-F as published on April 29, 2022, as well as our other submissions with the SEC. In addition on this call, we would 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, Sacha. Welcome everyone and thanks for joining us today. I would like to share a few highlights of our Q2 performance and give you an update on our strategy and guidance. We are committed to taking the business to breakeven, and in that regard have delivered a strong quarter with very good progress on each building block of our path to profitability. Number one, usage growth. As you know, scale is a driver of profitability. Orders and quarterly active consumers were up 35% and 25%. GMV grew by 21% in Q2, 34% on a constant currency basis. This happened in a volatile macro context with increasing pressure on consumer spend and access to supply for our sellers. It also happened with very strong discipline on marketing investments from our side. For us, it's a clear sign that our focus on relevant everyday products, competitive prices and consumer experience is paying off. Number two, monetization acceleration. Revenue was up 42% and 56% on a constant currency basis. We posted the fastest marketplace revenue and gross profit growth rates of the past five quarters at 17% and 14% respectively. We want larger scale to be a catalyst for revenue growth and the diversified monetization engine we have built allows us to drive revenue from both consumer usage and the assets of our platform. Number three, cost efficiency. Cost discipline is a top priority for us even more so in the current context. We drove usage growth and monetization acceleration with lower than expected marketing investments. Sales and advertising expense reached $41 million in H1 compared to our guidance of $50 million to $55 million. G&A was another area of increased efficiency for us with G&A excluding share-based compensation expense being flat year-over-year and declining sequentially by 12%. So overall, some very good progress in Q2, the macro picture is challenging, however the fundamentals of our business have never been stronger. If we now look ahead, I'm turning to Page 4. Our strategic focus is to make strong progress on profitability. We have outlined here our near-term guidance, which reflects this continued focus. On usage, despite the macro, we aim to maintain robust usage growth and we reiterate our guidance of GMV growth in excess of 15% for the full year in USD terms. On monetization, we plan to accelerate. We expect gross profit in H2 of $75 million to $85 million. This implies year-on-year growth of 27% up to 44%, which is at least double the growth rate of Q2. So a significant acceleration. On the cost efficiency front, we are doubling down on cost discipline. In particular, we expect to drive further marketing efficiencies, leveraging the long-term investments we made over the past year in brand awareness and consideration. For H2, we expect sales and advertising of $35 million to $45 million, implying year-over-year savings of 18% up to 37%. So in summary, we're going to keep growing usage. We're going to accelerate gross profit growth and do this with even more cost efficiency. As a result, and I'm now turning to Page 5, we believe that we have turned the corner and have passed the peak of adjusted EBITDA losses that were reached in Q4 of last year in 2021. For H2, we expect losses of $87 million to $107 million, which implies a reduction versus H1 of 5% to 22% and versus last year, a reduction of 12% up to 29%. Finally, we reiterate our yearly guidance for 2022 of $200 million to $220 million. And we expect adjusted EBITDA losses to start decreasing on a yearly basis starting next year. The results of our clear strategy and consistent execution are coming nicely together, allowing us to reduce adjusted EBITDA losses going forward. And now Jeremy and Antoine will give more color on the results.

Thanks a lot, Sacha. Hello everyone. I will start with the progress on the first building block of our path to profitability: usage growth, and we're on Page 7. Usage growth is the result of coordinated efforts across all areas of the business. And we've been working relentlessly across the platform to earn and to keep the trust and the loyalty of our customers. We have outlined on the page recent examples of what we are doing on the marketing, commercial logistics, and tech fronts to support the usage growth. On the marketing front, we're investing in both consumer adoption and retention, and we're seeing a very strong level of engagement on our platform. During the Jumia Anniversary campaign, our video content views reached a record of 116 million, at 55% year-over-year. This demonstrates our thorough understanding of what resonates with customers and our ability to produce engaging content for them. On the commercial front, we offer consumers a wide range of relevant products and services with a particular focus on everyday categories. This is even more important in a challenging macro context where consumers can rotate away from higher value discretionary items towards staples and everyday products. While we are seeing sustained volume growth across categories, FMCG was the fastest growing category in terms of items sold in Q2, up 95%. On the logistic side, we remain focused on improving the speed and the cost of our deliveries, offering our consumers even more convenience. In Q2, 60% of shipped packages reached consumers within 24 hours of placing the order. This is a great achievement considering the volume step up we experienced as part of the Jumia Anniversary Campaign. Last but not least, we are reaping the benefits of our sustained technology investments over the past year to enhance user interface and experience. This reported a 17% uplift in conversion rate year-over-year in the second quarter. Our consistent and disciplined execution on these initiatives is driving the robust usage growth momentum you are seeing. On Page 8, there is broad-based growth momentum across all reported usage metrics. Quarterly active consumers reached 3.4 million, up 25% as we continue to acquire new consumers and improve the retention rate of existing ones. Orders reached 10.3 million, up 35% driven by both new consumer adds and the increased purchase frequency of returning consumers. These developments drove robust GMV growth. Despite material FX headwinds, GMV reached $271 million, up 21% year-over-year and 34% on a constant currency basis. And you will note that the FX headwinds to GMV are much larger in Q2 than in Q1 last quarter, with 13 points of percentage adverse impact to GMV growth, compared to eight percentage points last quarter. We had 10 of our 11 local currencies depreciating against the dollar in the first half of 2022, compared to the first half of 2021. In particular, the Egyptian Pound and the West African CFA Franc both depreciated by 10% against the dollar, while the Naira in Nigeria depreciated by 7%. Notwithstanding the FX headwinds, the growth momentum in the business remains robust; we're driving not only robust but also high-quality growth with significant improvement in cohort and repurchase dynamics, as you can see on Page 9. You heard us talk in the past about the discipline with which we deploy consumer incentives and marketing investments with a focus on cohort quality. You've also heard us talk about the importance of everyday products to support repurchase dynamics. This is now clearly demonstrated by the retention and purchase frequency data that you see on the page. The average 90-day repurchase rate of the new consumers acquired in Q1 2022 reached 44%, over five points versus Q1 last year. It’s driving an uplift in purchase frequency with the number of quarterly orders per quarterly active consumer increasing by 8% year-over-year, reaching over three orders in Q2. The strategic focus we placed on everyday product categories was an important driver of these improvements. On Page 10, you can see the continued shift of our GMV towards everyday categories, which went from accounting for 57% of our GMV in Q2 2020 to 66% in Q2 2022. Within the brackets of everyday categories, the lifestyle services, which include food delivery and the JumiaPay app services, saw their current GMV double from 9% in Q2 2020 to 18% in Q2 2022. Within the everyday physical goods categories, the home and fashion categories remain consistently the largest two product categories, each commanding a mid to high teen share of GMV. Average order values stood at $26.3 in Q2, as we further penetrate more affordable, smaller ticket size categories. Let's now move on to JumiaPay, starting with the TPV on Page 12. JumiaPay TPV increased by 31% year-over-year and 45% on a constant currency basis, supported by the robust GMV growth. On-platform penetration of JumiaPay as a percentage of GMV reached 27% in Q2, up from 25% in Q2 last year, as we focused on increasing the penetration of JumiaPay in a disciplined and gradual manner. Turning to transactions on Page 13, JumiaPay transactions reached $3.4 million in Q2 this year, up 25% year-over-year, supported by accelerating volume growth across the business and in the food delivery category in particular. Overall, 33% of orders placed on the Jumia platform in Q2 2022 were completed using JumiaPay, compared to 35% last year. The growth in JumiaPay transactions in our e-commerce and food delivery platform outpaced the growth of JumiaPay app transactions. As JumiaPay penetration is almost 100% on the JumiaPay app, the reduced share of JumiaPay app in the transaction mix led to a decline in the overall JumiaPay transaction penetration as a percentage of orders. Overall, the growth momentum of JumiaPay on platform remains very robust. JumiaPay has been a tremendous driver of convenience and security for consumers while opening up a broad range of relevant digital services. Starting from 2023, we expect JumiaPay to turn into a monetization driver as we offer this solution to third-party merchants off platform. And now I'll hand over to Antoine, who will walk you through our financial performance in more detail.

Thank you, Jeremy. Hello everyone. I will start with the monetization performance, which speaks to our progress on the second building block of our path to profitability, monetization acceleration. Let's first unpack revenue growth dynamics on Page 15. Revenue reached $57.3 million in Q2 2022, up 42% year-over-year and 56% on a constant currency basis. The largest contributor to revenue growth was first-party revenue, which increased by over 90% year-on-year, supported by the strong momentum in the FMCG and grocery sub-category in particular. The second observation I’d like to make here is that the newer revenue streams such as value-added services and marketing and advertising are starting to have a material contribution to revenue growth. The combined contributions of value-added services and marketing and advertising to revenue growth surpassed the combined contributions of commissions and fulfillment revenue. The growth across a broad range of revenue streams is allowing us to continue making growth investments in the form of consumer incentives, which were up by $3.6 million year-on-year in the second quarter. Let’s now dive deeper into the marketplace revenue trajectory on Page 16. Marketplace revenue posted its fastest growth rate of the past seven quarters, up 17% year-over-year and 28% on a constant currency basis, with a number of revenue streams reaching record levels. I’d like to reiterate the point I made on the prior slide, which is the diversification of revenue streams. Here, you see clearly the growing contribution to marketplace revenue from marketing and advertising and value-added services, which reached an all-time high in Q2 at 41% of marketplace revenue compared to 33% a year ago. And this is the result of the very strong growth rate we’ve been driving across these two activities. Marketing and advertising revenue hit an all-time high of $4.6 million, surpassing the previous record reached in Q4 2021, up 76% year-over-year, the fastest growth rate in over two years. This was supported by an acceleration in the number of campaigns run, which was up by over 140% in Q2 2022 versus Q2 2021. Value-added services accelerated by 32%, partly as a result of increased logistics revenue from local and international sellers. On the flip side, fulfillment revenue reached $7.7 million, down 7% year-over-year due to a broader deployment of next day free delivery. This is a trend we're comfortable with, as one free next day delivery in relevant areas is an important driver of convenience, supporting consumer adoption and repurchase. And we have built a strong and diversified monetization engine that makes us less reliant on consumer shipping fees. Last but not least, commission revenue reached a six-quarter high at $10.6 million, surpassing the prior peak of Q4 2021. This corresponds to a 13% year-on-year increase supported by the robust GMV growth. This is net of consumer incentives. If we exclude the impact of consumer incentives, commission revenue was up 21% year-on-year. I’d like to point out that the increase in commission revenue is yet to fully reflect the impact of commission increases, which were undertaken in May and June 2022, and we expect the impact of these increases to materialize in the second half of 2022. The strong marketplace revenue growth is driving an acceleration in gross profit growth. Gross profit grew at a five-quarter high of 14% year-on-year, supported by the robust growth in marketplace revenue. On a constant currency basis, gross profit growth reached 24% year-on-year. We continue to invest into price competitiveness and free shipping, with an increase in consumer incentives from $4.5 million in Q2 2021 to $8.2 million in Q2 2022. Excluding the impact of consumer incentives, gross profit accelerated by 23% year-on-year and 36% in constant currency, while the margin as a percentage of GMV increased to 14.2%. While we have meaningfully accelerated monetization growth in Q2, we are working on a number of initiatives that will allow us to drive even faster growth in the second half of 2022. We have outlined some of these initiatives on Page 18. We are working across all revenue streams to drive either faster growth and margins or a combination of both with respect to first-party activity, which grew at an average north of 100% year-on-year over the past three quarters. Thanks to strong volume growth in the FMCG and grocery categories, this is allowing us to negotiate volume rebates with our suppliers, helping us expand our first-party gross profit margin. Within marketplace revenue, we are working on a number of levels to further accelerate growth and expand margins. On the commission front, as mentioned earlier, we implemented commission increases in May and June 2022, leveraging the robust volume growth experienced over the past year. We expect the full impact of these increases to be reflected in gross profit in the second half of 2022. Value-added services revenue also has meaningful growth potential; the deployment of next day free delivery and Jumia Express items is allowing us to better monetize the Jumia Express service that we provide to sellers. The revenue associated with Jumia Express is booked under value-added services. Last but not least, we remain in the very early days of marketing and advertising monetization on all platforms. For advertisers looking to reach African consumers online with purchase intent and drive measurable results, Jumia is the advertising platform of choice. We are leveraging this unique positioning to drive increased uptake of our ad solutions by our sellers and third-party advertisers. In addition, we are currently in the process of monetizing the assets of our platform, selectively allowing third-party participants to make use of them, starting with our logistics platform. Eighteen months into the launch of our logistics as a service offering, we are now generating over $1 million in quarterly revenue from this activity. Our offering solves a material pain point for companies across a broad range of industries. We intend to leverage our position to further optimize our pricing and expand both revenue and margin from this activity. While we expect these initiatives to drive sustained growth over many years to come, they will positively impact gross profit as early as the second half of 2022. We expect gross profit of $75 million to $85 million in the second half of 2022, implying year-on-year growth of 27% to 44% and a sequential increase of 29% to 46%. I would like to point out that our near-term guidance does not reflect any material contribution from off-platform payment processing activities of JumiaPay, which are in the very early days of their development. We intend to drive off-platform rollout in a very disciplined and gradual manner, and hence we do not expect any relevant revenue contribution before 2023. Let’s now move on to cost, starting with fulfillment expense on Page 20. Fulfillment expense reached $27.8 million, up 46% year-over-year and up 62% on a constant currency basis. This trajectory is driven by robust volume growth and high inflationary pressures. With respect to volume growth drivers, fulfillment expense includes both the cost associated with our e-commerce orders and logistics of the service packages. The former reached $10.3 million, up 35% year-over-year, while the latter more than doubled year-over-year to $2.6 million. With respect to input cost inflation, as you know, fuel costs increased significantly over the past few months, the cost of packaging also went up and there is obviously wage inflation. In this context, we are working on a number of initiatives to mitigate the impact of inflation ranging from scale efficiencies to drive straight and shipping cost savings to productivity initiatives in our warehouses to reduce handling and packaging costs. Moving on to sales and advertising expense on Page 21. After a period of marketing investment ramp-up that started in June 2021, we are now stabilizing the level of investment. Sales and advertising reached $22.2 million in Q2 2022. The year-on-year growth rates decreased from 115% in Q2 2021 to 30% in Q2 2022. You will note here that the FX impact is more moderate on sales and advertising expense compared to other lines of the P&L with only 6 percentage points. This is because a large part of our sales and advertising expenses are denominated in USD corresponding to online marketing costs, including search and social media costs. Our H1 2022 sales and advertising expense came in lower than expected at $41 million, compared to our guidance of $50 million to $55 million. Resilient usage growth allowed us to remain very disciplined and spend less than expected in marketing. Building on that, we intend to drive more marketing efficiencies in the second half of 2022. We expect sales and advertising of $35 million to $45 million in H2 2022, implying a year-on-year decline of 18% to 37%. Moving on to technology and G&A cost on Page 22. Technology continues to be an important area of investment for us to support the long-term growth of our business, both on the e-commerce and payment fronts. Technology expense reached $14.3 million in Q2 2022, up 70% year-on-year and 83% on a constant currency basis. This is largely a result of headcount increases completed in the second half of 2021. On a sequential basis, the technology expense increase was much more moderate at 10% quarter-on-quarter. G&A excluding share-based compensation reached $26.6 million in Q2 2022, flat year-over-year and up 11% on a constant currency basis. On a sequential basis, G&A excluding share-based compensation was down 12%, mostly as a result of local tax efficiencies. We remain very disciplined when it comes to G&A and overhead costs in particular. We are currently on a hiring freeze, which is driving headcount decreases since we are not replacing leaders. This will allow us to keep G&A cost base relatively stable going forward. I want to make an important distinction here. The height of the pandemic, i.e., 2020 and 2021, was not a period of capacity expansion and G&A costs ran for us, quite the opposite. G&A excluding share-based compensation was $120 million in 2019, and we brought it down by 11% to $107 million in 2020 and kept it stable in 2021 at $108 million. We have already done a fair amount of work to right-size our G&A cost base, but we will continue to further optimize our organizational structure and cost base. Turning to adjusted EBITDA loss on Page 23. Adjusted EBITDA loss reached $57.2 million in Q2 2022, demonstrating that we are past the peak of adjusted EBITDA losses that were reached in Q4 2021. Adjusted EBITDA loss in Q2 2022 was down 37% year-on-year and 49% on a constant currency basis. This is a clear deceleration compared to Q1 2022, where adjusted EBITDA loss was up 70% year-on-year. For the second half of 2022, we intend to start reducing adjusted EBITDA loss on a year-on-year basis. We expect H2 2022 adjusted EBITDA loss of $87.4 million to $107.4 million. This implies a year-on-year reduction of 12% to 29%. Let’s now move on to balance sheet and cash flow items on Page 24. CapEx in Q1 2022 was $3.7 million, mostly relating to technology equipment purchases. We are reducing our full year 2022 CapEx guidance from $15 million to $25 million to $10 million to $15 million as we are slowing down the phasing of logistics capacity expansion. Net change in working capital had a neutral impact during the quarter as an increase in trade payables related to the Jumia anniversary campaign was offset by increases in trade receivables and inventory. Cash utilization for the quarter was $63.7 million with the main difference versus adjusted EBITDA losses relating to CapEx and cash adjustments from provisions. At the end of March 2022, we had a liquidity position of $351 million comprised of $54 million of cash and cash equivalents and $297 million of short-term deposits and other financial assets. With that, I’ll hand over to Sacha for concluding remarks.

Thank you, Jeremy. Thank you, Antoine. I think we have clearly made very good progress over the first half of this year delivering very strongly on each building block of our path to profitability. We have very strong momentum to double down on those profitability efforts. GMV growth in H1 was the highest in the past two years. Last year in the same Q2 earnings call, we promised the market that we would accelerate usage growth. And that’s exactly what we did. Looking ahead, we intend to maintain growth, and we have reiterated our guidance. In Q2, marketplace revenue growth was the highest of the past seven quarters. Gross profit growth was the highest of the past five quarters. And in H2 of this year, we intend to double if not triple the growth rate of gross profit to reach 27% to 44%. Importantly, we expect to drive the growth in usage and accelerate the monetization with strong cost discipline. In particular, for H2, we anticipate higher marketing efficiency. We’ve already seen the pace of our Sales & Advertising investments slow down sequentially in the first half of this year. For the second half, we intend to reduce Sales & Advertising by 18% to 37%. We’re also working, of course, on initiatives to drive efficiencies across the full cost structure. On fulfillment, we are focused on generating scale efficiencies and productivity enhancements to mitigate the impact of inflation. We also remain very disciplined on the G&A front; you have seen our G&A expense, excluding share-based compensation, come down over the past two quarters, and we intend to maintain the discipline. As a result, we expect adjusted EBITDA losses to start reducing in the second half of this year. And beyond that, we expect the loss to decline on a yearly basis starting next year. We are very much aware of the increased market focus on profitability; our strategy and business execution are very much aligned with that. I think our performance and the guidance we have provided speak clearly to that. Importantly, there is no disconnect here between the near-term profitability objectives and the long-term attractiveness and strengths of our platform. As we pursue our scale and profitability objectives, we are building an even more attractive and relevant platform for our consumers, as well as win-win partnerships with our sellers and broader ecosystem participants. Thank you for your attention. And we are now ready to take your questions.

Thank you. Our first question is coming from Aaron Kessler with Raymond James. Please go ahead.

Great. Thank you. A couple of questions. First maybe just you can comment about the plan to further drive the kind of gross profits less incentive growth over the next, maybe several quarters and maybe specific to incentive, kind of how should think about payments going forward as well. Second, increase on the marketing revenues, I think as you highlight, if you have any more color around that, should we think about this increase is pretty sustainable going forward as well, and kind of change on the market revenues. And maybe third, just on commission increase, can you just quantify kind of how much that was as a percentage? Thank you.

Thanks, Aaron. I think maybe it was me that you were breaking a little bit, so I’ll try to answer, but if I’m off topic, please let me know. Right? The first question is on the gross profit and the incentive part, right?

Yes. It’s gross profit minus fulfillment kind of plans to expand that amount over time.

Yes. So look, I think on this one, I think we give a bit less guidance than on the gross profit because there are a lot of unknowns on the fulfillment efficiencies and the inflation that is underlying, right? So that’s why we give guidance on gross profit for H2. And it’s a bit harder for us to give guidance on the gross profit after fulfillment because the fulfillment right now is a lot impacted by inflation. Of course, as we said, we have a lot of initiatives to drive efficiencies and savings on fulfillment, but it’s harder. I would say to predict. Definitely in order to drive the EBITDA reduction or the loss reduction that we aim for H2, we want to expand the gross profit after fulfillment. Right. And that’s our objective. And we have not given precise guidance over that because of the nature of fulfillment efficiencies at the moment. But definitely we want to drive that forward. Now, advertising revenues, as we said in the call, and we are still, we believe in the early days to some extent of this revenue stream and we have very big ambitions for those in the long term. We think that we have a very unique value proposition for both the big brands and the big sellers. We have also a lot of smaller sellers who are using our solutions of sponsored ads and sponsored products. And then we have also a lot of third-party advertisers who will come to Jumia in order to reach consumers and this revenue stream being in the early days. And also being to some extent dependent on our campaigns. I think you see that over time there’s been some volatility. So there’s going to be some fluctuation of growth over time. But we believe that overall it’s one of the revenue streams, which is in the midterm going to grow very well and very fast. Right. So there will be fluctuation, as you know, you’ve seen the last, if you look at the few quarters in 2021, of course, Q4 was much bigger because of Black Friday, right? And so here, we’ll see in Q3, Q4, but generally speaking, this is one that we intend to grow fast. And we believe we’re still in the early days of this one. And then commission increases we are very careful about that. So we have passed some increases and we’re going to keep doing that. At the same time, we want to do that in a very thoughtful way because as a marketplace, of course, the commission level is very important for the sellers. And we want to do that in a thoughtful way. And I would say almost in partnership with sellers, right? So we’re going to – I think continue to see some commission growth driven by the volume growth and the commission increase that we are passing, but we want to do that in a thoughtful way.

Got it. Great. That’s helpful. Thank you.

Thanks, Aaron.

Hi. Thanks for taking my question. The first question I have is on what do you see in your consumer base as a result of the macro? Are you seeing trade downs for your orders? Anything you can point to there and what is your guidance contemplating from a macro standpoint going at least for the back half of the year and into 2023? Thanks.

Thanks, Lamont. Look, I think it’s a big question. I wish I would know what’s going to happen. Right. I think what we’re saying in terms of consumer, and I would say I’m going to speak also about the sellers because both are impacted by the macro, right? So of course, the consumers are impacted by the inflation, across the board and in particular commodity and food prices. The consumer sentiment is under pressure and the spending is under pressure. On the seller side, the sellers are also under pressure because of weaker local currencies, right? And a lot of the sellers depend on access to hard currencies in order to trade, import, and operate. And so we see also some sellers struggling with access to supply and ability to import products or to even just to go into production, right? So we see that. At the same time, I don’t want to make it sound like nothing is happening, but challenging macro for us is nothing new. It’s something that we have been exposed to pretty much from day one. And we are used to navigating periods of high volatility and hyperinflation. In the past, we have sometimes fared better than other channels in periods of hyperinflation or increased consumer price sensitivity. Because at the end of the day, we have a lot of competitive advantages to appeal to consumers. We have price transparency. We have a very healthy marketplace flywheel where the consumers can benefit from multiple sellers competing together. We have the ability to offer also the first-party products where we can decide to price ourselves and intervene on the market. And we have access also to cross-border channels. We have a very attractive base of sellers in China that we can work with when we see gaps in supply and gaps in certain categories. So I think what we are seeing now and what we've seen in Q2 and what we're saying for H2 is that we're going to keep growing, and we're going to keep growing while accelerating monetization and saving on marketing. So I think we are quite confident. We are quite confident that despite the macro, people can trade down, but as long as they need to buy products, they will come to Jumia and look for options, and we will be well positioned. So I think the guidance we give on keeping growth in the context of macro challenges, along with saving investments in marketing, combined with monetization, is a very strong sign of confidence.

Okay, great. Thank you.

Great. Thank you. My first question is on the JumiaPay monetization potential. Could you provide a bit more detail on how you're thinking about the monetization plan and the timing of launches of different products and services and how meaningful that could be for 2023? Secondly, on sort of advertising marketing spend and incentives. I guess you're fairly comfortable that when you cut sales and marketing spend, as you plan to year-on-year, that won't detrimentally impact the growth. And then on the other side, how should we think about the incentives going into the second half? And finally on CapEx, I know you've taken down your CapEx guidance for this year. Is that sort of permanent reduction or are you pushing some of that CapEx spend into 2023?

Thank you. Thank you very much for that. JumiaPay monetization for us is a very big strategic priority that we are, as you mentioned, undertaking at the moment, right? So in the past couple of quarters, we obtained our licenses to offer merchant payment processing services in Nigeria and Egypt, which is great because those are our two largest markets. Right? And we've been over the last few months preparing for the launch and starting to pilot it, right? So we are actually live in Egypt with a number of pilot merchants. And we are about to go live in Nigeria with some pilot merchants. And we were operating JumiaPay only for our platform and so we are undertaking a number of changes and adaptations in order to operate for third-party merchants and create features and products that work for that. And it's a bit too soon for us to give guidance in terms of how much revenues we expect, etc., in 2023. But it's already live; it's something that the first step for us was to obtain the license, which is a very big achievement. The second step was to adapt the product and start piloting it, which is ongoing. And the first step will be to scale it, right? So I think probably in the coming one or two quarters, we'll be able to give an update on the pilot and then probably more precise guidance. But again, we don't expect revenues yet this year; probably next year. How much is a bit too soon to tell. We are also, of course, looking at more countries to be in a position to offer those services in the other countries. And I think we are very uniquely positioned to offer payment processing services because, after all, JumiaPay has been processing the payments for Jumia. And we believe we're one of the biggest merchants online. And so we believe that JumiaPay is very, very attractive and provides a very good service for merchants. And we know it because it's providing the service to Jumia. So we look forward to updating you on this, as soon as we can. In terms of consumer incentives and sales and advertising, you are right that we want to drive that very meaningfully and very carefully, or very thoughtfully, I should say. And we certainly want to continue to invest and to continue to support consumer adoption and consumer loyalty. And we want to continue to see some growth in usage. And so I think here, those levels of sales, advertising, and consumer incentives are to some extent discretionary, right? So we decide what we think is the right amount to invest based on what we think is the best return that we can get and the best output we can expect in terms of consumer uptake and so on. And I think we feel good with this level for H2. We can change and adjust those on a dynamic basis. I think you see the strength of the brand and the strength of the cohorts that we have disclosed and brought you some numbers during this quarter. You see the strength of the value proposition in terms of assortment and pricing. So we believe that the amounts for H2 are appropriate and will lead to continued growth in a good and healthy way. We are able to accelerate or to decelerate if we see that we can or we need to. So now we believe that this is the right amount. And then in terms of CapEx, I think to some extent, those CapEx, I mean, all of those CapEx are in local currency, right? So I think here some of that guidance, some of the reduced guidance is due to the fact that in dollar terms, we can invest less and we get the same in local terms. I think it's not a permanent reduction. It's something that we assess all the time. And those CapEx are mainly about fulfillment centers, equipment and certain new locations that we decide to upgrade for our sellers to do drop-off and so on, so forth. And so we are generally very flexible with that and we can reassess CapEx almost as we need. And we believe that certainly, we want to stay asset-light in the future and keep that flexibility.

Great. Thank you.

Thank you. Our first question is coming from Aaron Kessler with Raymond James. Please go ahead.

Thank you very much for joining us as always. And we are available if there are any follow-ups, and we look forward to a great second half of the year. Thank you very much, everyone. Take care.

Thank you, ladies and gentlemen. This does conclude today's conference call. You may disconnect your lines at this time and have a wonderful day. Thank you for your participation.