Pan-African e-commerce company Jumia released its third-quarter financial performance today, detailing a mix of expected and surprising results.
When TechCrunch discussed the company’s Q2 2020 financials, Jumia had a market cap of a little over $2.1 billion, based on a per-share price of $22. Since then, Jumia has lost value, trading at just $17.52 per share before the opening bell today. Let’s talk about what the company disclosed and how its new results are impacting its value.
Jumia’s third quarter
Before we dive into Jumia’s third-quarter results, recall that Jumia changed the default currency in its report from euros to the American dollar in Q2 2021; it will remain this way in the foreseeable future, according to the company.
Jumia Q3 financials highlight “accelerating usage growth” as its core theme, disclosing impressive percentage bumps in usage KPIs -- orders, annual active customers and gross merchandise volume (GMV).
Orders made on Jumia reached an all-time quarterly high of 8.5 million, representing a 28% year-over-year growth. Co-CEOs Jeremy Hodara and Sacha Poignonnec say that’s the fastest growth witnessed by Jumia in the past seven quarters. In Q2 2021, for reference, the number of orders made on the platform totaled 7.6 million.
The pan-African e-commerce company saw most orders from fast-moving consumer goods (FMCGs) and food delivery. According to Jumia, the former category saw its “highest ever volume number,” while the latter posted its highest-ever quarterly volume with more than 2 million orders made.
Annual active customers grew by 8.1% year-over-year to 7.3 million from Q3 2020, the report said. Gross Merchandise Value (GMV) — the total amount of goods sold over in the quarter — gained 8.1% from Q2 2021 to $238 million. These numbers stood at 7 million and $223.5 million in Q2 2021.
The co-CEOs say their company’s growth acceleration strategy, embraced at the end of Q2 2021, is behind the improving results across its three usage KPIs. Jumia also stated that it made bets in sales and advertising and technology arms to “support consumer acquisition and retention.”
Another key factor in its quarterly performance, the company said, was the expansion of its grocery category within "everyday products" to cover an estimated 15,000-20,000 SKUs. To execute this, Jumia had to change from a marketplace model to a retail one for the FMCG brands that largely contributed to the platform’s growth. Jumia also rolled out more dark stores to meet increasing demand.
Jumia — with online goods and service verticals in 11 African countries — posted third-quarter revenue growth of 8.5%, from $39.3 million to $42.7 million, beating the consensus of $40.2 million.
In Q2 2021, Jumia’s falling GMV led to decreasing total payment volume (TPV) at payment arm JumiaPay. In the third quarter, rising GMV drove increased usage, pushing up the platform’s TPV 15% year-over-year to $64.5 million.
JumiaPay transactions reached 3 million, up 34% year-over-year. Jumia says that is its fastest transactions growth rate in the last five quarters, adding that increase in volume, especially in areas such as food delivery, provided fuel to the digital payment’s growth.
The digital payment arm also contributed to 35.7% of the orders placed on Jumia this quarter compared to 34.1% in Q3 2020.
From the report, we noticed that Jumia is extending JumiaPay services to new sets of customers outside its core e-commerce market. For one, Nigerian users can book bus tickets via the app, while users in Egypt (students in particular) can pay tuition fees online.
Signs of profitability still elude the e-commerce company. Maybe JumiaPay’s diversification — which will surely bring more growth to its numbers — is a means to an end to achieve that.
But that road remains long for Jumia as losses compound even more in this quarter. Jumia’s adjusted EBITDA and operating losses in Q3 2021 went up by 94% and 93% year-over-year, respectively, to $52.5 million and $64 million.
Major factors behind this wild growth in losses are due to the company’s ramp-up in sales and advertising, and technology departments. Sales and advertising expenses reached $24.0 million, up 228% year-over-year, while technology and content expenses increased by 27% to $9.4 million, the company noted in the report.
Just as last quarter, the huge gain in sales and advertising spending indicates that “the company is back to its old method of executing aggressive advertising, which initially slowed during the pandemic,” as we wrote before.
The e-tailer finished Q3 2021 (ending September 30) with $583.6 million — $185 million in cash and cash equivalents; (it was $637.7 million in Q2 2021) and $399 million of financial assets. At the opening bell, Jumia shares fell 7.13%, trading at $17.20 and further down at $15.73 per share when this report went live.