Jumia Technologies AG — FY2019 Form 20-F Summary
Business context and reporting period
Jumia operates a pan-African e-commerce platform comprising a third-party marketplace, logistics services and JumiaPay. The filing covers the fiscal year ended December 31, 2019, with unaudited quarterly information including the fourth quarter of 2019. Financial statements are prepared under IFRS in euros. Jumia’s ADSs, each representing two ordinary shares, began trading on the NYSE in April 2019 under JMIA.
During late 2019, Jumia exited Cameroon, Rwanda and Tanzania and entered into a distribution and commercial agreement for its Jumia Travel flight and hotel portals. The exited geographies and travel assets represented less than 10% of 2019 GMV, gross profit and operating loss.
Key financial and operating metrics
| Metric | FY2019 | FY2018 | Change |
|---|---|---|---|
| Revenue | €160.4 million | €129.1 million | +24.3% |
| Gross profit | €75.9 million | €44.2 million | +71.7% |
| Gross margin | 47.3% | 34.2% | +13.1 percentage points |
| Operating loss | €227.9 million | €169.7 million | Loss increased 34.3% |
| Net loss | €227.1 million | €170.4 million | Loss increased 33.3% |
| Adjusted EBITDA loss | €182.7 million | €150.2 million | Loss increased 21.7% |
| Operating cash flow | (€182.6 million) | (€139.0 million) | Outflow increased 31.3% |
| Cash and cash equivalents | €170.0 million | €100.6 million | +€69.4 million |
| Term deposits | €62.4 million | None reported | New in 2019 |
| Lease liabilities | €9.2 million | None reported | IFRS 16 adoption |
Annual loss margins remained substantial: operating loss was approximately 142.1% of revenue, net loss was approximately 141.6% of revenue and Adjusted EBITDA loss was approximately 113.9% of revenue. The company had accumulated losses of approximately €1.1 billion at year-end.
- Annual Active Consumers increased to 6.1 million from 4.0 million.
- Orders increased to 26.5 million from 14.4 million.
- GMV increased to €1.10 billion from €828.2 million.
- JumiaPay transactions increased to 7.6 million from 2.0 million, while TPV increased to €124.3 million from €54.8 million.
- JumiaPay penetration reached 28.7% of orders, compared with 14.0% in 2018.
- Sales and advertising expense per Annual Active Consumer declined to €9.2 from €11.6.
Fourth-quarter 2019 results
| Metric | Q4 2019 | Q4 2018 |
|---|---|---|
| Revenue | €49.3 million | €43.3 million |
| Gross profit | €24.8 million | €15.2 million |
| Gross margin | 50.3% | 35.1% |
| Operating loss | €61.1 million | €52.9 million |
| Net loss | €63.6 million | €53.1 million |
| Adjusted EBITDA loss | €53.4 million | €48.6 million |
| GMV | €301.2 million | €311.0 million |
| Adjusted GMV | €292.9 million | €275.2 million |
| Orders | 8.3 million | 5.5 million |
Gross profit less fulfillment expense was positive in Q4 2019, which management cited as evidence of improving core unit economics and scale. However, Q4 remained materially loss-making, and general and administrative expense included €2.2 million of restructuring costs related to portfolio optimization and headcount rationalization.
Material changes versus the prior comparable period
- Marketplace revenue grew 69.9% to €78.5 million, led by higher commissions and fulfillment revenue. Marketing and advertising revenue increased 169.2% to €6.1 million.
- First-party revenue was essentially flat at €81.2 million, while cost of revenue declined slightly to €84.5 million. The improved gross margin therefore came primarily from greater marketplace monetization, reduced consumer incentives and promotional discipline.
- Fulfillment expense rose 53.4% to €77.4 million, mainly because of higher shipment volumes and cross-border sales.
- General and administrative expense rose 52.3% to €144.5 million, including higher staffing, public-company, legal, advisory and share-based compensation costs. Share-based compensation increased to €37.3 million from €17.4 million.
- Cash used in operating activities increased to €182.6 million. Financing inflows of €316.8 million, primarily from the IPO and Mastercard private placement, more than offset operating and investing cash uses.
- Investing cash outflows increased to €67.7 million, primarily because €62.7 million was placed into term deposits.
- Comparative 2017 and 2018 revenue and sales and advertising expense were restated for the reclassification of certain vouchers and consumer and partner incentives. The restatement did not affect previously reported profit or equity.
Guidance, outlook, commentary and risks
Management did not provide formal numerical revenue, EBITDA or profitability guidance. The company expects to continue investing in its marketplace, logistics, technology and JumiaPay capabilities and expects losses to continue in the coming years. Management stated that existing cash, cash equivalents and expected operating resources were sufficient for anticipated needs for at least the next twelve months, but also acknowledged that additional financing may be required in the future.
- Management expects to pursue cost efficiencies, increase fulfillment scale, expand JumiaPay adoption and improve margins and unit economics.
- Phones and consumer electronics GMV declined approximately 20% year over year, and management expected the resulting business-mix rebalancing to weigh on GMV in the first half of 2020.
- The COVID-19 pandemic created risks to international sellers, imported inventory, consumer demand, operating costs and fulfillment capacity. Jumia temporarily shut its South African fulfillment center.
- Jumia identified two material weaknesses in internal control over financial reporting: IT access and segregation-of-duties controls, and the ability of corporate finance and accounting functions to implement new accounting standards and interpretations timely and appropriately. Disclosure controls were therefore deemed ineffective as of December 31, 2019.
- Several shareholder class action lawsuits related to alleged IPO disclosures were pending in the United States. The company could not estimate any potential loss.
- The company had €25.8 million of accrued tax-risk provisions and disclosed an additional €8.2 million of possible, but not probable, tax exposure. It also disclosed a potential upper-single-digit to low-double-digit euro million corporate tax exposure in Germany if tax authorities’ positions prevailed.
- Jumia had transferred approximately €121 million into Nigeria but held valid capital importation certificates for approximately €90.5 million, creating uncertainty regarding repatriation of the remaining funds.
- The company does not hedge its foreign-currency exposure and remains exposed to currency volatility, inflation, political and regulatory instability, fraud, failed deliveries, cash-on-delivery collections, cybersecurity, competition and evolving payment regulations.
Most important facts for investors to verify
- Whether improving gross profit and Q4 contribution economics can translate into materially lower Adjusted EBITDA and operating cash losses.
- The cash-burn rate, availability and transferability of the €170.0 million cash balance and €62.4 million of term deposits, particularly under COVID-19 conditions.
- Progress in remediating the two material weaknesses and whether additional restatements or control deficiencies arise.
- The status and potential cost of the shareholder litigation, tax audits, Nigerian capital-importation certificates and other contingencies.
- Whether portfolio exits, lower promotional intensity and weaker electronics demand improve profitability without materially damaging GMV, consumer growth or seller engagement.
- Future financing requirements and the potential dilution or contractual effects of additional equity or debt funding.