Jumia Q2 2023 Results: Growth, Spending & Losses

Jumia Reports Second Quarter 2021 Financial Results

Jumia, a leading e-commerce platform in Africa, has released its financial performance report for the second quarter of 2021. Following the release of these earnings, the company’s stock experienced a rise of 3.38%, closing at $21.99 per share.

This resulted in a market capitalization of $2.168 billion for the company. A notable change occurred in how Jumia reports its financials.

Currency Change to US Dollar

Historically, Jumia reported its financial data in euros. However, effective April 1st, the company transitioned to reporting in the American dollar.

This shift is attributed to increased cash balances resulting from equity fundraising activities. To ensure clarity, Jumia has adjusted comparative figures from prior quarters to align with the new presentation currency, facilitating accurate comparisons.

Q2 2021 Revenue Performance

Jumia announced revenues of $40.2 million for the second quarter of 2021, representing a 4.6% increase compared to the same period last year.

Analysts had predicted revenues of $43.34 million, exceeding the $38.5 million reported in Q2 2020. Despite not meeting revenue expectations, Jumia outperformed in terms of losses.

The company reported a loss of $0.41 per share, which was better than the anticipated loss of $0.43 per share. In Q2 2020, Jumia experienced a loss of $0.61 per share.

Shift in Revenue Streams

Jumia has been strategically moving away from direct first-party sales towards a marketplace model featuring third-party vendors. Interestingly, first-party revenue actually increased by 7% year-over-year during the quarter.

Conversely, revenue generated from the marketplace grew by a more modest 0.6%, reaching $26.2 million.

Gross Profit Growth

This change in revenue composition contributed to a 4% growth in Jumia’s gross profit, totaling $26.8 million for the most recent quarter when compared to the same period last year.

Furthermore, gross profit after accounting for fulfillment expenses expanded by 16.3%, reaching $7.7 million.

Increased Financial Losses

Despite a reduction in operating losses and adjusted EBITDA during the first quarter of 2021, Jumia experienced an increase in these figures in the subsequent quarter. Operating losses reached $51.6 million in Q2 2021, representing a 24.7% rise. Adjusted EBITDA also deteriorated, landing at -$41.6 million, a 15.1% worsening compared to Q2 2020.

A significant factor contributing to these losses was the company’s expenditure during the quarter. Sales and advertising expenses for Jumia surged by 115%, totaling $17.1 million. This contrasts sharply with the $7.9 million spent in the same quarter the previous year. This substantial increase suggests a return to more aggressive advertising strategies, which had been somewhat curtailed during the pandemic.

The escalating costs and diminishing profitability raise concerns about Jumia’s ability to achieve profitability in the short term. However, the company emphasized its ongoing investments in its business, anticipating benefits in the coming quarters and years. Investors appear receptive to this explanation, as evidenced by the rise in Jumia’s share price following the earnings report. Nevertheless, the company’s performance indicators present a complex picture.

Consider, for example, the growth in Jumia’s active customer base, which only increased by 3.3% to reach 7 million in the second quarter. While the number of orders grew at a more robust rate of 12.8%, totaling 7.6 million, gross merchandise volume (GMV) declined by 11% to $223.5 million during the same period.

This decrease in GMV directly impacted the total payment volume (TPV) processed through JumiaPay, the company’s payment platform. TPV fell by 4% to $56.6 million compared to the year-ago quarter.

However, JumiaPay demonstrated positive developments in other areas. Its “on-platform penetration” – the proportion of GMV handled by the service – grew to 23.5% in the second quarter. Furthermore, the number of transactions processed on the platform increased by 12.1% to 2.7 million, marking the fastest transaction growth rate Jumia has observed in the last four quarters, largely driven by its food delivery service.

Between October 2020 and February 2021, Jumia’s stock price experienced a dramatic increase, exceeding 700% to reach $65, fueled by heightened demand for e-commerce stocks globally during the pandemic. However, the company’s share price has since fallen by over 60% from these peaks, closing at $21.27 last Friday.

Jumia concluded the most recent quarter with a cash reserve of $637.7 million, providing the company with substantial financial flexibility to address growth and profitability challenges.