Jumia is having a good party. I have written why the future of this business looks promising. JumiaPay has come to become a very powerful double play which can help the ecommerce business. Simply, even if the ecommerce operation does not perform well, JumiaPay has the volume to normalize the financials. As a separate company, JumiaPay is one of the largest fintech companies in Africa today, with operations in more than half a dozen nations. In the Q2 earnings report, Jumia offers a mixed signal: something for bears and more for bulls.
Jumia has reduced its operating loss over the last 6 quarters; €37.6 million, from €47.4 million recorded in Q1. As it pivots to a marketplace, GMV dropped by 13% year-on-year when compared with the Q2 2019 number. JumiaPay TPV (total portfolio value) reached an all-time high of €53.6 million, a year-over-year increase of 106%. Also, JumiaPay Transactions reached 2.4 million, a year-over-year increase of 36%, representing 35.6% on-platform penetration in terms of Orders.
However, Jumia will pay $5 million as a court settlement brought against it for alleged misstatements and omissions in connection with, and following, the initial public offering. But largely, Jumia had a good party in Q2.
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I have written so much about Jumia when it was a pure ecommerce company. I never liked the business model then. But when Jumia changed and added payment, I became a fan. My change of heart was supported by data: the world has not seen any successful ecommerce company without double play. In other words, you cannot make money just by doing ecommerce, especially in emerging economies. Rather, you add something on that ecommerce, and use the transaction volume which comes from ecommerce to make money from something else. Alibaba became better with Alipay, its paytech unit. India’s Flipkart depended on PhonePe to become a better company. Even Amazon relied on AWS to find favour before Wall Street.
Jumia has gone paytech and today is one of the largest fintech companies in Africa with more than 6 million users. Wall Street has noticed and its stock is rebounding. In the last 3 months, it has doubled its market cap, and the trajectory looks positive
As always, alleged crimes committed in Nigeria are settled outside the nation; America pockets $5M, Nigeria gets nothing. We have no justice department. Look at the Malabu Oil scandal, Europe has made tons of money from oil firms on fines; yet, the victim has not even defined its sufferings!
Jumia stock chart
Results highlights
- Usage growth
- Annual Active Consumers reached 6.8 million, a year-over-year increase of 40%.
- Orders reached 6.8 million, a year-over-year increase of 8%.
- GMV was €228 million, a year-over-year decrease of 13% compared to GMV1 in the second quarter of 2019.
- Monetization development
- Gross profit reached €23.3 million, a year-over-year increase of 38%.
- Cost efficiency
- Gross profit after Fulfillment expense reached a record €6.0 million, compared to a loss of €0.7 million in the second quarter of 2019.
- Sales & Advertising expense was €7.2 million, the lowest absolute amount since 2017, and a year-over-year decrease of 51%. 12-month Sales & Advertising expense per Annual Active Consumer decreased by 38% from c. €10.8 in the second quarter of 2019 to €6.7 in the second quarter of 2020.
- Adjusted EBITDA loss reached €32.9 million, decreasing by 26% on a year-over-year basis. Excluding a net expense of €3.6 million related to the class action settlement described below, Adjusted EBITDA loss would have been €29.3 million, decreasing by 34% on a year-over-year basis.
- Operating loss was €37.6 million, a 44% decrease year-over-year.
- JumiaPay development
- TPV reached an all-time high of €53.6 million, a year-over-year increase of 106%, more than doubling on-platform TPV penetration from 9.9% of GMV in the second quarter of 2019 to 23.5% of GMV in the second quarter of 2020.
- JumiaPay Transactions reached 2.4 million, a year-over-year increase of 36%, representing 35.6% on-platform penetration in terms of Orders.
“We have made significant progress on our path to profitability in the second quarter of 2020, with Operating loss decreasing 44% year-over-year to €37.6 million. This was achieved thanks to an all-time high Gross Profit after Fulfillment expense of €6.0 million and record levels of marketing efficiency with Sales & Advertising expense decreasing by 51% year-over-year,” commented Jeremy Hodara and Sacha Poignonnec, Co-Chief Executive Officers of Jumia.
“We are navigating these uncertain times of COVID-19 pandemic with strong financial discipline and operational agility which positions us to emerge from this crisis stronger and even more relevant to our consumers, sellers and communities.”
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Jumia’s breakeven point is still couple of years from now, other things being equal. It tells you the enormity of what is required to pioneer a sector here. All these losses being mentioned are investors money, but they are keeping faith. What happens when Jumia becomes very profitable with ten of millions of shoppers? That is when you see greedy and ignorant people start telling you about ripoff, and why its operations must be banned in Nigeria…
We need to educate people here, during planting and toiling period, nobody seems to be aware, but once there is bountiful harvest, everyone comes to the village squares and stadiums, asking for their own cut. We are never fair to entrepreneurs and early stage investors in this part of the world.
As for Nigeria and its justice system, well, Nigeria is just like a warehouse, which you can hire to store both legal and contraband items, and you can always move your goods whenever you wish.
You cannot be worried on behalf of someone who doesn’t know what he wants, and still not ready to learn what he doesn’t know.