Jumia Technologies AG (JMIA) Q2 2019 Earnings Report, Transcript and Summary

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to Jumia's Results Conference Call for the Second Quarter of 2019. [Operator Instructions] I would now like to turn the call over to Safae Damir, Head of Investor Relations for Jumia. Please go ahead.

Thank you, Alisa. Good morning, everyone. Good morning everyone. Thank you for joining us today for our second quarter 2019 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 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 final prospectus filed in connection with our initial public offering on April 15th 2019. In addition, on this call, we would refer to certain financial measures not reported in accordance with IFRS. You can find a 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, Safae. And hello, everyone. It's a pleasure to speak with you today. This is our second quarterly release as a public company, and we are happy to report another strong quarter of delivery on our mission and strategy. Going public in April, we've been pleased to see lots of interest in our company and had the opportunity to interact with a broad base of investors and market participants. We recognize some of you might still be new to Jumia. So I wanted to take this opportunity to briefly remind you of our mission, who we are today, and how we plan to build on the success of Jumia. If you'd like to please turn your attention to Page 5, I'll start with our mission. We are passionate about Africa and deeply convinced that technology can improve everyday life on the continent. We feel, Jumia, with the mission to give consumers access to goods and services in a convenient way and to help sellers distribute their goods and services more effectively, while making positive and sustainable impact across the continent. Moving on to Page 6. Our platform consists of our marketplace, where sellers and consumers can connect and transact. Jumia Logistics, which facilitates the delivery of the goods to consumers, and JumiaPay, which facilitates digital payments between the participants on our platform. Consumers use Jumia to save time and save money. They can buy products across many different categories like phones, fashion, groceries, as well as a number of services like food delivery for example. You can also use Jumia to pay for a number of services, such as data top-up, airtime recharge or utility payment, and all of this is happening under one brand with one single sign-on for the users. We have already achieved significant scale, almost 5 million consumers transacted on Jumia during the last 12 months, with over 80,000 sellers, 90% of the items sold were on Marketplace, generating more than a €billion of GMV over the same period. Jumia Logistics handled 13 million packages and 54% of our transactions were processed with JumiaPay in our two largest markets during Q4 of 2018. We are the leading Pan-African e-commerce platform and we see significant long-term opportunity to drive the adoption of e-commerce and the shift of retail spend from offline to online in Africa. Our sellers, on Page 7, are an important part of our ecosystem, and we strive to offer them the most compelling value proposition. We work with three types of sellers; brands and key accounts, local sellers, and cross-border sellers. We create a lot of value for them. We offer them a gateway to Africa, giving them access to a large and growing consumer base, and we provide a lot of services beyond that, including unique data, consumer insights, marketing support, logistics, and even access to financial services. On the other side of the Marketplace, I'm now on Page 8, we provide consumers with selection, price and convenience, in addition to unique local adaptations. We have really tailored the full shopping experience to many local specificities in order to adapt to our consumers' tastes and preferences. We offer our consumers an integrated ecosystem, on Page 9, which is very powerful to drive adoption and engagement. This brings a lot of strategic benefits to Jumia. First, it provides multiple points of entry into our platform for the different demographics. For example, middle class consumers can start with buying fashion phones and then move to other categories. Consumers on smaller budgets or consumers who are not necessarily ready to buy physical goods online can enter through micro transactions like airtime recharge. And more affluent consumers can enter through restaurant delivery or travel services. Secondly, this ecosystem drives engagement. We have something to offer for most consumer needs everyday. One day you buy a pair of shoes, one day grocery, one day a small appliance. And in Africa, consumers recharge their airtime almost every day. This integrated ecosystem of goods and services drives the relevance, engagement and ultimately consumer lifetime value. And last but not least, the ecosystem provides diversification, as you can see on the right-hand side, we are very well diversified across product categories and we are relevant to consumers across many aspects of their retail spend. This is very attractive for us as we do not depend on one single category. Our Marketplace is complemented by Jumia Logistics and JumiaPay, both of which are key enablers, of course, of our of services like food delivery for example. You can also use Jumia to pay for a number of services, such as data top-up, airtime recharge or utility payment, and all of this is happening under one brand with one single sign-on for the users. We have already achieved significant scale, almost 5 million consumers transacted on Jumia during the last 12 months, with over 80,000 sellers, 90% of the items sold were on Marketplace, generating more than a EUR1 billion of GMV over the same period. Jumia Logistics handled 13 million packages and 54% of our transactions were processed with JumiaPay in our two largest markets during Q4 of 2018. We are the leading Pan-African e-commerce platform and we see significant long-term opportunity to drive the adoption of e-commerce and the shift of retail spend from offline to online in Africa. Our sellers, on Page 7, are an important part of our ecosystem, and we strive to offer them the most compelling value proposition. We work with three types of sellers; brands and key accounts, local sellers, and cross-border sellers. We create a lot of value for them. We offer them a gateway to Africa, giving them access to a large and growing consumer base, and we provide a lot of services beyond that, including unique data, consumer insights, marketing support, logistics, and even access to financial services. On the other side of the Marketplace, I'm now on Page 8, we provide consumers with selection, price and convenience, in addition to unique local adaptations. We have really tailored the full shopping experience to many local specificities in order to adapt to our consumers' tastes and preferences. We offer our consumers an integrated ecosystem, on Page 9, which is very powerful to drive adoption and engagement. This brings a lot of strategic benefits to Jumia. First, it provides multiple points of entry into our platform for the different demographics. For example, middle class consumers can start with buying fashion phones and then move to other categories. Consumers on smaller budgets or consumers who are not necessarily ready to buy physical goods online can enter through micro transactions like airtime recharge. And more affluent consumers can enter through restaurant delivery or travel services. Secondly, this ecosystem drives engagement. We have something to offer for most consumer needs everyday. One day you buy a pair of shoes, one day grocery, one day a small appliance. And in Africa, consumers recharge their airtime almost every day. This integrated ecosystem of goods and services drives the relevance, engagement and ultimately consumer lifetime value. And last but not least, the ecosystem provides diversification, as you can see on the right-hand side, we are very well diversified across product categories and we are relevant to consumers across many aspects of their retail spend. This is very attractive for us as we do not depend on one single category. Our Marketplace is complemented by Jumia Logistics and JumiaPay, both of which are key enablers, of course, of our business as well as monetization and growth avenues in their own right. If I start with Logistics on Page 10, we chose to build an asset-light platform powered by data and technology. We identified relevant local partners in each region, city and neighborhood, and equipped them with the tools and processes to operate their own assets but powered with our systems. We complemented this partners' network with physical locations, seller drop-off stations, consumer pick-up stations and warehouses, and maybe here, I would like to mention the recent partnership we entered with Vivo Energy, who is operating over 2,000 service stations in Africa, and in particular, they operate under the Shell brand and among the initiatives we are developing together, we are offering consumers the possibility to use the retail service stations to pick up and drop off their online orders, and also to place and pay for Jumia orders in certain service stations. This creates more convenience for the users who prefer to use stations instead of home or office delivery and it brings economic benefits for both Jumia and Vivo. So it's a very good win-win partnership that we have here. The strategic benefits of Jumia Logistics are that it is asset light, it is scalable, and it has strong capillarity allowing us to reach consumers in major cities, but also secondary cities and rural areas. In the same way, we built Jumia Logistics to overcome the challenges of distribution in our countries, we have built JumiaPay to facilitate our own digital payment. Moving on to the Page 11, to make Jumia Pay attractive to both consumers and sellers, we integrated all relevant payment methods and created a seamless online shopping and payment experience. Consumers can choose to link their JumiaPay wallet to the payment method of their choice, such as a debit or credit card, a bank account, a mobile money account, or even a cash agency account. And JumiaPay is not only a great solution to the digital payment challenges we face, but it also has the potential to become a leading payment system in our market. On Page 12. For the near to mid term, we are focusing on two main avenues of growth and value creation with JumiaPay. The first one is a financial services marketplace, where we use JumiaPay to connect financial institutions with our sellers and consumers. This is a very natural extension of our existing marketplace and we can leverage the data we collect, our existing distribution platform, and the multiple use cases in our ecosystem. Here, let me give you an example. We have launched a seller lending service, where we provide data to third-party financial institutions in order to improve their ability to score sellers' credit. This helps our sellers to access short-term loans provided by this financial institution and we make a commission on the sale of the financial products. The second main avenue is payment processing. Here, we intend to use JumiaPay to process payments on behalf of third-party merchants, starting with online merchants with the goal to also cover offline merchants, some of whom are already active on the Jumia platform. The €50 million investment we received from MasterCard as part of the private placement, which took place concurrently with the IPO, is a great validation of the payment solution that we have built, and also a catalyst for further product development and innovation. And these payment processing services on the right are not yet live, but we are working on them in order to meet the regulatory and technical requirements to make it happen in the near future. On Page 13, when we look ahead, we see significant long-term opportunity to drive the adoption of e-commerce. In Africa, the penetration of e-commerce is less than 1%. In Latin America, it's 2.4%. In America, about 10%. And in China, 20%. So this massive opportunity is really ahead of us and we believe that we have build a platform to successfully capture this opportunity, as well as an engine to create something much bigger. Amazon, Alibaba, and MercadoLibre started with e-commerce and they leveraged it to create value in payments and other businesses. For us, we already have e-commerce and logistics. We already added food delivery. We are now building payments and financial services, and in the future, there are multiple other segments we can expand to, because we build Jumia as a platform that is capable of doing so much more. Now, right now, as we have said multiple times in the past, we are very focused on our core operations with the objective of scaling up, generating strong growth while driving monetization, cost efficiency and increasing the penetration of JumiaPay. This is exactly what we have continued to deliver in Q2, and let's now go to Page 15 to review the progress we have made on our financial strategy. Our financial strategy is centered around four key pillars; top line growth, monetization, cost efficiencies and JumiaPay. In the second quarter, we continued to deliver on each of those four pillars. GMV growth accelerated to 69% when compared with Q2 last year. Gross profit increased by 94%, faster than GMV growth, and our adjusted EBITDA loss as a percentage of GMV decreased by 562 basis points. And this has been achieved while we continue to make progress on JumiaPay. JumiaPay is now available in six of our countries, Nigeria, Egypt, Ivory Coast, Ghana, Morocco, and Kenya, which collectively represent a combined population of almost 440 million people. We have also expanded the scope of JumiaPay beyond our physical goods marketplace, and in selected countries, it's now available in our food delivery portal as well as our hotel booking portal. And last but not least, we continue to expand the range of services available from third parties powered by JumiaPay. In Nigeria, for example, we allow consumers to access micro loans, we also added event tickets; in Egypt, we added vouchers on local deals; and all of these services are offered by third-party providers on the JumiaPay app. I will now hand over to Antoine to review the financial performance in more detail. Executive

Thank you, and hello, everyone. Let's now get into the details of Q2 financial performance. Let's start with two of our top line drivers, GMV and active consumers. We generated very strong GMV growth this quarter of 69% on a yearly basis, so beating our target of 56% -- 60%. This is the strongest level of growth in the last five quarters. This was driven by strong growth of active consumers and spend per active consumer. The last 12 months active consumers as of June 30th was 4.8 million versus 3.2 million a year ago, representing 51% yearly growth. Compared to the first quarter of '19, we added 589,000 consumers versus a quarterly net add of 211,000 consumers over the same period last year. This increase represents the strongest level of quarterly net adds in the last five quarters. The acceleration in consumer growth speaks to the increasing relevance of our platform, which drives consumer adoption and engagement. In parallel, with the strong growth of those top line drivers, we are able to increase the monetization of our platform. On Page 17, I would like to remind you that the most relevant monetization metrics for us are marketplace revenue and gross profit. We don't see revenue as a meaningful metric to assess the monetization of our business, as it is impacted by shifts in the mix between the first-party and marketplace. In the second quarter of '19, we continued to see a reduction in the proportion of first-party with national GMV. Our marketplace revenue increased by 90% on the back of strong growth across all components of marketplace revenue. Our gross profit margin increased by 78 bps taking our gross profit margin as a percentage of GMV to 6.2% as a result of an increased rate of monetization. As we grow our user base and our GMV, we are demonstrating our ability to further monetize our platform. Moving on to Page 18, you can see that we generate our marketplace revenue from diversified streams, which all grew strongly this quarter. Commissions, which are charged to our sellers, grew by 92%. Fulfillment, which are delivery fees charged to consumers, grew by 103%. Value-added services, which include services like logistics, packaging, content creation, grew by 47%. And last but not least, marketing and advertising revenue, which includes, for instance, performance marketing campaigns, placement of banners on our platform, experienced very strong growth of 490%. This stream represented 8% of marketplace revenue in Q2 '19 versus 2 % in Q2 '18. We drive monetization intensity on our marketplace in a very subtle manner. Some quarters, there maybe more intensity on the certain type of services based on how we see the adoption from sellers and consumers and their willingness to pay for such service. Over time, revenue diversification is very important for us, and we continue to build additional revenue streams to drive monetization, both from participants of our platform, consumers and sellers, as well as third party. Moving onto expenses, Page 19, our strong gross profit growth helps us cover an increasing proportion of our fulfillment expense, and in Q2 '19, our gross profit covered almost all our fulfillment expense. In Q2 '18, we lost EUR1.4 million post-fulfillment costs versus EUR0.3 million in Q2 '19. Our fulfillment expense includes large valuable portion, that is influenced by a number of factors, including the origin of the package, its destination as well as its volume. Compared with last year, we have seen this quarter an increase of cross-border business in the mix, an increase in medium and large packages as well as an increase in the volume of everyday FMCG goods. While there is a level of quarterly variation, we see a general trend within our business towards an increase in gross profit post-fulfillment expense. In the first half of '19 as a whole, we reached break-even at gross profit post-fulfillment expense. Turning to sales and advertising expense and G&A, Page 20, we continue to see clear, efficient improvements and operating leverage benefits. Our sales and advertising expense as a percentage of GMV decreased by 67 bps to 5.4% of GMV in Q2 '19. In the first half of '19, our GMV grew approximately twice faster than our sales and advertising. We continue to benefit from strong run awareness and consumer adoption, and we focus on directing our advertising expense towards more cost effective marketing channels. Our G&A and Tech expense as a percentage of GMV decrease by 344 bps to 11.1% of GMV as we realized economies of scale. As a result of accelerating monetization and cost efficiencies, we are making further progress towards profitability. Our adjusted EBITDA loss as a percentage of GMV improved by 562 bps from 21.4% in Q2 '18 to 15.8% in Q2 '19 taking this forward in our path to profitability. Our operating loss decreased from 25.2% of GMV to 23.7% of GMV. Our operating loss includes share-based compensation expense, which is a non-cash expense. We've seen an elevated level of this expense in Q2 '19 reaching €0.5 million as the IPO completed in April this year triggered divesting of some of the stock options granted as part of the 2016 plan. You can find more details on the share-based compensation expense going forward in Appendix. Adjusted for these non-cash expense, our operating loss as a percentage of GMV reduced by 529 bps from 21.7% to 16.4% of GMV. So, in summary, we have great momentum in our business allowing us to deliver strong results on our all four pillars of our strategy. With that, I'll hand over to Sacha.

Thanks, Antoine. Looking ahead, if you please move to Page 22, and building on this momentum, you can see that we have multiple additional opportunities to drive long-term growth and value creation. Today, and this is something that we have repeatedly said, we are very disciplined. We are only focusing on our existing business and the path to profitability through scale. This means that we stick to our existing regions and categories, we drive the growth of Jumia with a clear focus on cost efficiency and path to profitability. Once this is achieved, there are lots of other opportunities to go after, in order to create even more value. New business lines like, for example, digital content, new geographies, and maximize value creation from our logistics, payment and marketing assets. There's so much more we can go after. But for now, we are fully focused on our core business. Now, before I wrap up, I would like to give you a bit of context and color to the sales practice review, including in our release, when we became aware of allegations concerning improper sales practices, we started a review. This was disclosed in our prospectus and we are now proactively giving you an update. This is part of our continued effort to be very transparent with the market. As you can read, so far, we're talking about isolated instances that had only a modest GMV impact and virtually no impact on our financial statements. We are constantly reviewing and improving our systems and controls to help us avoid such instances in the future. It's been a very solid quarter. At Jumia, we've all our teams executing on our strategy. We grew our top line drivers GMV, active consumers very strongly. Our gross profit grew even faster at 94%. So far in 2019, we are positive after fulfillment and we have also made a lot of good progress on cost efficiency. We just celebrated our seventh anniversary this summer and we took the time to reflect on the tremendous journey we've had so far and remind ourselves of why we have embarked on it. This celebration is also a moment of gratitude towards our consumers, sellers, partners and shareholders that are making this possible, our mission to improve everyday life in Africa through technology is what keeps us going. We are very excited by the opportunity that lies ahead of us. In our 14 markets, there are about 700 million people and almost 350 million Internet users. Nigeria itself is set to become the third most populous country on the planet by 2050, according to the United Nations. And we believe that this digitally born new generation will provide huge momentum for Jumia in the decades to come. Thank you very much for your attention, and we are now ready to take your questions.

Thank you. We will now begin the question-and-answer session. [Operator Instructions] The first question today comes from Scott Devitt with Stifel. Please go ahead.

Hi. Thank you. Sacha, I apologize if this isn't in deck. I don't have it in front of me. But I just wonder if you could speak to the business in terms of strengths and weaknesses by market, you know, our big contributors to the business are Nigeria and Egypt, and if you could just speak to where you think you're doing better or worse? And then second, in terms of some of the initiatives that you've noted on the call intended to reduce longer term friction and drive growth in the business. Could you just highlight some of the areas where you think that could be more influential in the business in the near term if there's two, three, four things that you would highlight? Thank you.

Of course. And thanks for those questions. And I think in terms of markets, and here, I appreciate it's not in the deck. We have not included the geographical disclosure here in this quarterly release. Nigeria and Egypt and we have explained that are the two regions which represent roughly 50% of our business and then we have North Africa, West Africa, East Africa and South Africa. And when we look at those markets, we also sometimes look at the maturity of those markets, right So some of the countries we launched them six, seven years ago, and some of them were launched more recently. So generally what we see is a quite very strong dynamism across the region and across the continent. We see good macro in Nigeria, good macro in Egypt. And overall -- and our diversification here is a big strength, because we have 14 markets and two of those make about 50% of the business and the rest make the other 50%. So we are very protected from a diversification perspective. What we tend to see in terms of profitability is that the countries which are a bit more advanced have better economics and better unit economics, of course, because they're --- they have reached more scale and they're more advanced in terms of marketplace developments in terms of monetization and cost efficiency as well. And in the other ones, which are -- a little bit less major, we still see more growth or faster growth. And we see them a little bit behind, of course, in terms of profitability because they are more new. So I think this is --- here what we can say. And then, you know, that the business really is a combination of bringing a very good and very strong consumer experience. For us, it always starts with that. And I think here we are doing very well. We have a lot of initiatives to accelerate the delivery of the products and make the consumer experience always better. And then you combine that with increasing the number of the sellers and the assortments, which is the second part of our focus. And the more sellers you bring, the more choice you can bring to the consumers. The more sellers you bring, the more they can compete with each other and the better the prices for the consumers. And, you know, the third component is to drive very efficient and very strong local marketing. So we have a lot of different ways to engage with the consumers through very localized channels. And for us, there is no magic formula. So these three things that when you put it together, it should bring the best consumer experience, the best sellers and assortment and price and the best way to engage with consumers. That's how you drive these very good top line drivers, and you can see it in the growth of the GMV and in the growth of the active users. It's really driven by those I would say fundamentals. Then, of course, adding to that is JumiaPay, which for us is an extremely important focus. And JumiaPay is something that we drive on the back of the development of the marketplace. And here, you know, this is following, I would say, the adoption of the marketplace. So in terms of highlights and -- it's really driven by the fundamentals.

Thanks, Sasha.

Thank you.

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

Hi, guys. Thanks for the questions. First maybe just on the monetization, you saw, I think about 5% growth quarter-over-quarter in kind of the commission growth versus much stronger growth on a GMV basis, maybe you can talk about that gap and then maybe the opportunity to also increase take rates? And then if you can also maybe just talk about kind of repeat purchase behavior and how that's been trending as well? Thank you.

Of course. So when we look at the monetization, we have today commissions, fulfillment, value-added services and marketing and advertising. You can see that we have grown the gross profit by I think 94% and the marketplace revenue by 90% over the -- from Q2 2019 to Q2 -- versus Q2 2018, we've the growth of the GMV, which is 69%. So we are able to extract more monetization from the GMV. Now, for us, it's always a focus to make sure that we extract this monetization from diversified streams and from I would say services which create value for the sellers. So as you can see, the commissions have been growing generally if you look at our development over the last quarters, they have been growing less fast than the other streams and usually we like to generate this monetization rather from value-added services or from fulfillment or marketing and advertising rather than just commissions and there is -- to some extent the sellers pay commissions and then they pay marketing and advertising and then they pay value-added services, and for them, they look at those as the cost of doing business with Jumia. And so we need to be very subtle in the way we are pushing the various services when we think about the sellers. And sometimes, we would increase the monetization pressure on certain services. And as we do that, we may decide to reduce the commission. So there is a, I would say, we are driving the intensity on the various services based on how the sellers are reacting to the pressure that we put. Now, when we think about this monetization and how we can drive the take rate, they are really four, you know, -- there are four initiatives that we are working on. One is Jumia Express, which, as you know, is our fulfilled by Jumia program, and we have been communicating in the past that we have roughly about a third of our GMV, which is processed under Jumia Express. And as we are doing this, the sellers' willingness to pay for the service is increasing with time, and we very much see Jumia Express as a good avenue to increase the take rate. The second one is marketing and advertising. I think on this one, this is the main, you know -- this is one of the main the revenue drivers of many marketplaces. And we are barely stopping on this one. As you can see, it used to be a very modest part of our revenues. Now it starts to be about 10%. I think the exact number is 8% of our revenue now is coming from marketing and advertising. And this is something where we have a lot of leverage. And this marketing and advertising is both with our existing sellers, but also with third-party merchants. The good thing with Jumia Express and the marketing and advertising is here we are talking about pure incremental margin almost, because we have no additional costs. The cost of Jumia Express, we already have it in the P&L, right? Because we already have the warehouses, we already have the people and we are already fulfilling about a third of the GMV with the cost. But the revenue is coming, and the marketing and advertising is the same. We already have the traffic, we have the users. So there are very few -- very small incremental costs associated with those revenues. They are almost pure incremental margin. Then number three and four, are JumiaPay and Jumia Logistics, which of course we intend to open to third-party. And both of those are very exciting monetization opportunity for us, because we already have the assets and typically the payment processing margins are very, very attractive. And logistics, of course, there would be some variable costs associated with it, but we would definitely leverage a lot of our fixed costs. So we see those four as strong upsides for the future of monetization. And then in terms of repeat purchase, we are definitely seeing good trends here, so far in 2019, and this is something that we always look at. At some point, we'll think about how we can communicate that to you. But so far, so good, we are a seeing a continuous improvement of the various trends in terms of the cohorts and the repeat purchase. So we are satisfied here.

Great, thank you.

The next question today comes from Mark Mahaney with RBC Capital Markets. Please go ahead.

Great. Thank you. This is Shweta for Mark. Two questions, please. So first, on payment, on JumiaPay, could you, Sacha, talk a little bit about how much adoption there has been in your two primary countries of 54% of transactions as of Q4 of '18, any update there? And then also across the other four countries now, what the adoption has been like? And then how that has impacted returns and cancellations on the platform. Any quantifiable improvements on that driven by JumiaPay? That's first. And then the second one, any update on the value-added services decelerated compared to Q1 of '19. Any thought on what -- decelerated a little bit more than expected. What was that from? And how much the Jumia Express drives the monetization growth? Thank you.

Yeah, of course, Shweta. For payment, we are very much seeing a continuous progress. So this 54% was for Q4 of 2018 and this is something that we -- number that we had published as part of the offering and we are considering various KPIs that we can disclose on payments so that we can give you good progress. What I can tell you is that this 54% is higher now, right? So it's continued, right? And so this is continuing in Nigeria and Egypt. And we are seeing very good progress there. In the other markets, it's a bit early to tell, right? Because there's some -- it's still the early days. So I think it's too early to comment. But again, we are looking for ways to give you the disclosure. What I can tell you is the 54% is now higher, and this is really, really, really good. In terms of quantifiable impact, we're definitely seeing higher success rates for the transactions which are processed under JumiaPay in terms of delivery and we see less or we see just a higher success rate, which is good from the fulfillment expense. At the same time, we have certain fees associated with payments. So, I think overall this has for now, I would say, quite a neutral impact so far this year, right? So in a way, it is positive. We have more --- we have more success, but there are also costs associated with payments. So there's some of that. But I think I would not say that there is a big quantity there. And then the value-added services, yes, I think we have to look at them and take the perspective on them. So, of course, those value-added services, they were introduced last year, right? So in '17, if you remember when we were starting the same chart, we have been producing this chart on and on. I think in '17, we had almost none of those and we introduced them in '18. So of course, when we introduced them, the growth rate were very, very high and a little bit like you are seeing now on the marketing and advertising, right? So you see some very fast growth rate, but because you start from a lower base. And at the same time you can -- we always look at those in the Jumia Express and the value-added services in general, as -- and we drive them in a subtle way. And typically, the willingness to pay of the sellers here is always you provide the service and then they use the service and then you start monetizing it, and then as you start monetizing it, you increase the basis of the sellers who are paying and then you maybe increase the fees per the service that those sellers are paying. So I think here in Q2, we wanted to put a bit less pressure on that. And we put a bit more pressures -- more pressure on other things. But it's certainly not something that we are worried about and Jumia Express is developing very well. So, you know, I think we have to see that over the -- over couple of quarters rather than just one.

Thank you, Sacha.

The next question today comes from Mark Mahaney with RBC Capital Markets. Please go ahead.

I've got two questions as well, please. Sacha, just back on marketing and advertising. Sacha, can you just tell us what marketing and advertising products is implemented and in which markets? Just so we can get a feel for how developed that is. And then the second one was on the proposed VAT system leveling the playing field in Nigeria. I mean, that seems to me to be very positive for anyone domestic like yourselves. But would you say that you suffer from that not being a level playing field now, as indeed, do you see this as a meaningful upside to you, versus alternative platforms? Or how should we think about that? Thanks.

Thank you, Sarah. So the marketing and advertising is a mix of different products, right? And those products are tailored to both the small sellers who are mostly looking for performance marketing tools to increase visibility and increase sales, and products which are more appealing for big sellers or brands which are looking more for to build awareness and more visibility and different types of campaigns. So, we have performance tools such as sponsored products or newsletters and push notification and display ad banners and things like that. And we have also specific visibility campaigns that we can tailor for some of the bigger sellers. And this is something that we have been developing in the past and is working very much in I would say more of our advanced markets, of course, because we are dealing there with more advanced version of the marketplace. So we have very good success, for example, in Morocco, but also in Nigeria, Egypt, Kenya, and Ivory Coast, those are the markets where we're seeing good trends. But certainly, we have and I think you're seeing the across the various marketplaces, right? We have such a unique platform to tailor the advertising campaigns and we have data about the interest of the users et cetera, et cetera. So we haven't even started to sell our search results, right? So we are we are just barely scratching the surface here with banners and sponsored products. But yet, we are seeing a lot of the appetite from all the sellers, both the small and the big ones. So we're certainly very excited about this. And our ecosystem of goods and services is also something which is very attractive because we have different platforms and different portals where we can really target the users and we also have our seller center, right, we have a lot of advertisers who are trying to go after the SMEs and because we work with all those SMEs, we can provide them with amazing opportunities to target those sellers and those restaurants and those hotels et cetera. So we are really pulling all the assets of the ecosystem together to create something very attractive here. And it's a very good question on VAT and thanks for asking it. I think, as always, with those, it's always hard to predict and how things can play out because there's always something delay between when those schemes are announced and how they are being completely in real life implemented. So we'll have to see how this is playing out and generally we are very much a reflection, we are an extension of the marketplace and the retail dynamic. So, I think we will have to see how this plays out. It's too early to tell to be honest. 1q

But do you think that consumers use foreign platforms because they're cheaper, because obviously with the VAT differential say in theory there is a price advantage for somebody to buy from a different platform, even if they have to wait longer. Do you ever feel like you leaves out in terms of revenue because of that VAT being imposed on you and not the others?

Yeah, look, it's -- there's always with this cross-border e-commerce, there's always some questions, right? So those platforms do not contribute to the local economy. They do not pay taxes. They do not create jobs. They just ship goods, basically, essentially. And I think we want to develop the marketplace in a sustainable way for the local economy. So we're working hands in hands with all the stakeholders to make sure that we contribute and we bring our share of the development of the economy. So, here we have to see how the government decides to apply this VAT and how they apply also other types of rules for all the different players, right? So and -- I think it's something that honestly, we have to see how they how they play it. It depends. But to some extent, I think e-commerce is still very new in those markets. And I don't see those as having a very, very big impact. Whatever is done in reality at the end of the day, I don't see them as having a huge impact. I think it's just -- it will -- those rules will keep coming and moving as e-commerce is developing and what we certainly see is a lot of engagement, I would say, from all the governments we are -- in all the countries where we operate because they really see that e-commerce is something very positive for job creation, for creating also access for the consumers who live in the rural areas, so inclusion and the development of small sellers and creating jobs et cetera. So I think it will go into the right direction.

Okay, thanks.

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

Hey, guys, this is Alex Chavdaroff on for Brian. Thanks for taking the question. Can you talk a little bit about what controls you're putting in place to avoid issues with JForce sales? And then how confident are you that this is an isolated incident? And then second, can you talk a little bit about how much your Ramadan event boosted GMV or active customers in the quarter? And you know, more broadly, like what worked and what didn't? Thank you.

Sure. So, can you repeat your first question, Alex, please. Just to make sure I get it? I know it's about JForce. But --

Yeah. Yeah, sure. So I was just asking around, you know, what controls you're putting in place to make sure you avoid issues with the JForce sales.

Of course. Yeah, I mean, over time, JForce is an excellent channel, because it's -- it really provides us with the opportunity to interact physically with a lot of consumers. And it's a great educational channel. Of course, it's a decentralized salesforce with dozens of thousands of agents et cetera. So there's a lot of controls that we have and we have built over time, right? So we've been working on that channel for a long time and we've been constantly improving it, right? So this is part of what we do all the time. We identify something or there's an incident and then we take corrective actions, we take any sanctions and then we improve it. So it's always about creating better data-driven systems, where the system can flag any potential issue, and when this flag is created, that we are able to investigate or analyze, right? So we have the same for JForce, but we have also the same for the customer profiling system, and we are always improving those. And this is a tool that we use and which job is to detect or flag any potential issue and then we look into it. So every time we see something or we uncover any incident and we always improve that. So here we are tightening the controls to make sure that whenever we see certain patterns or whenever we see some concentration in orders or some patterns basically of transactions which are taking place in a certain way, then we are able to flag those and look into them, right? So I think it's a very efficient channel, but it requires this constant improvement whenever we see some deviations, and JForce always a channel which is always very much around optimization, right? So when we change the commissions of the agents in a certain way, for example, in a certain category, then right away you see that those agents are pushing more products this way or that way, right? So it's a very subtle channel, which is very reactive, and every time we twitch or we make a small change, then it changes the behaviors of dozens of thousands of agents who are trying to optimize or trying to optimize the system to increase their commissions which is good. It's how it should work/ So this is really what we are doing. It's a constant improvement of those patterns, so that any time we see something strange, we are able to look at it and then in terms of isolated, I mean, we can't speak for something which is ongoing, you see the release we've had, there are two matters, one is closed and the other one is so far completely isolated, and it has no impact on our active consumers. And so it's really something which so far is completely isolated. But of course, as we continue the work, we will look into that, right? So here, again, this is part of what we do. We identify something, a risk or we face an incident, we analyze. We take the corrective action. We take any sanctions if necessary. And this is what we do really all the time. And here, we decided to provide an update because we want to be very transparent. Now on Ramadan, in a way, we always mentioned those commercial events because it's interesting two of these that there was Ramadan and there was Mobile Week. But really -- it really comes down to the day-to-day and the fundamentals I was mentioning earlier, right? So, of course, we always have commercial campaigns in order to create some excitement and some communications. But the reality is it's very much a day-to-day and it's very much a day-to-day performance and it's about bringing a lot of new products and the relevant assortment at the best price with the best experience and consumers are online, we have a very big awareness and consumers are buying. And that's just the result of all those efforts. And I think we are seeing very good traction in

The FMCG category and Ramadan was certainly helping there because, of course, during Ramadan, there is a lot of food-related goods which are being transacted on the platform. And there was overall something which was positive for us, Ramadan. But again, I don't want to make it sound like it drove the quarter. The performance of this quarter, and similarly to all the other quarters, is really driven by just everyday bringing more products, good prices and good customer experience, and this we have combined with good marketing, creates just good engagement and usage of the platform, right?

Thank you.

The next question today comes from Andrew Howe with Citi. Please go ahead.

Hi, Sacha. So a couple of questions from me. On fulfillment expense, it looks like it's trending a bit higher in Q2 relative to GMV -- compared with Q1 or even to 2018 as a whole. I'm just wondering, you know, is there anything maybe some cost inflation in fulfilment or any friction that you're experiencing kind of as you achieve efficiencies, and how do you see the kind of the glide path to getting lower fulfillment expense relative to GMV going forward? Second question, just about the path to profitability. Any update on your latest thinking? I know you in the past you talked about late 2022 is kind of the time to reach break-even. Is that still scenario that you talk about? And related to that kind of the need to raise additional capital before that point, is that something you can update us on? Thank you.

Sure. Yeah. I mean, on the fulfillment, a couple of thoughts and I think in Q2, we had a few factors in the mix of the business, which drove the fulfillment cost slightly higher than before. We had a little bit more cross-border and we had a little bit more of the packages being shipped into secondary cities or in rural areas. And we had a slight higher proportion also of medium and large packages versus the small packages. So I think all of those, they tend to drive higher fulfillment and then some of those, we capture them into the revenues, right? Because we are charging more and we're charging more fulfillment to the consumers and to the sellers, but not necessarily all of that, right? I think this is not necessary a trend. But you know that we have to see that over the course of several quarters. We are still profitable after fulfillment year-to-date, right, which is the first time for us as a Group. We have multiple countries which are contributing to that and some countries which are less mature one which are still negative after fulfillment and are dragging here the performance. But we've -- we're not worried about that, if at all, and I would say that one of the things which is happening also is that we have higher volumes, right? So -- we -- our growth in terms of the items sold is faster than the growth of the GMV and so we have just more packages and more items, which is, in our opinion, very good because it brings more relevance and more usage from the consumers. So that's what we can say for that. I think we're still maintaining what we have said in the past for late 2022 and this is our objectives and on a quarterly basis at Group level towards the end of 2022, right, which is what we have said in the past. And we think we have what we need to achieve that. So that's what we are working on.

Thank you.

The next question today comes from Ralph Schackart with William Blair. Please go ahead.

Good morning. Last quarter, I think you talked about expectation for 2019 GMV to grow in line with historical rates and then in Q2 you saw acceleration built over Q1 of '19 and over 2018 growth rate in general. So just curious about how you're thinking about GMV growth for the balance of the year? Thank you.

Yeah, I mean, we're still maintaining the range of 50% to 60%. And here again, GMV is one of the top line drivers. We also look at active consumers, items sold, transactions, traffic, users who are visiting the platform and which ultimately will be a big driver of our marketing and advertising revenue. So we see all those things. We still maintain the GMV of 50% to 60%. And -- but we look, of course, at all those together, right? So I think we maintain that and -- if we end up being above that, then we are above that, but for now, this is what we maintain.

Okay, great. Thanks, Sacha.

The next question today is a follow-up from Sarah Simon from Berenberg. Please go ahead.

Yeah, just a quick one. I was interested, do you have any first thoughts on how Jumia Prime has been working for you, I know it's only in a couple of cities. But do you have any kind of first* thoughts on the success of that program?

Yeah. I think the question was about Jumia Prime, I don't know if -- the line was difficult to hear at least for me. Yeah. We are really piloting Jumia Prime and we started that in Nigeria at the end of the quarter and it's really, really too early to say, right? So it's been really just two months. And we've focused this offering in two of the cities mostly and we see a lot of good buzz, if you look at the ratings on Jumia -- on the Jumia platform about the Jumia Prime, you see a lot of good things. I think for us we are in the early days of that. It's something, of course, that is very interesting to look at. But it's a bit too early to comment.

Okay, thanks.

This concludes our question-and-answer session. I would like to turn the conference back over to Safae for any closing remarks.

Great. Thank you so much for your attention and as always we are very eager to have a very constructive dialogue so, you know, if there are any follow up questions from any none we are happy to do it anytime and thank you so much for attending and being so involved. Take care. Thank you. Bye.

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