African e-commerce giant Jumia today has its second-quarter financial performance, showing continued losses.
The company recorded a decline in operating losses and adjusted EBITDA in the first quarter of 2021, but they increased in the second quarter.
Per the report, operating losses were US$51.6 million in Q2 2021, up 24.7%, while adjusted EBITDA came in at -$41.6 million, worsening by 15.1% compared to Q2 2020.
The sharp losses were driven in part by how Jumia spent heavily on sales and advertising, which rose by 115% to $17.1 million in the second quarter alone. In Q2 2020, the sales and advertising bill was only $7.9 million, which is less than half what it is same period this year.
The huge jump in sales and advertising spending may indicate that the company is back to its old method of executing aggressive advertising, which initially slowed during the pandemic.
Experts say the company’s rising costs and declining profitability are not encouraging regarding its chances for near-term profitability.
However, the company stressed long-term investments in its business in its earnings report that it expects to leverage in the coming quarters and years.
Given that Jumia’s shares rose following its earnings report, it appears that investors are at least amenable to the argument. Still, the company’s metrics paint a mixed picture of its efforts.
For instance, Jumia’s active customers only grew by 3.3%, to 7 million, in the second quarter, while orders grew by a stronger 12.8%, to 7.6 million. In contrast, gross merchandise volume (GMV) fell 11%, to US$223.5 million, in the second quarter.
Jumia’s falling GMV impacted the total payment volume (TPV) of its payment arm, JumiaPay, in the quarter. That figure fell 4%, to $56.6 million, compared to the year-ago quarter.
That said, on other fronts, JumiaPay’s recent results are impressive. The payment service’s “on-platform penetration” as a portion of GMV grew to 23.5% in the second quarter. And transactions made on the platform grew 12.1%, to 2.7 million — the fastest transaction growth rate Jumia has witnessed in the past four quarters, mostly supported by the company’s food delivery category.
In the space of five months, from October 2020 to February 2021, Jumia’s share price spiked over 700%, to $65, mostly due to the pandemic increasing appetite for e-commerce stocks globally. But the company’s share price has dropped by more than 60% from those highs, to a close at $21.27 last Friday.
Revenue
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Meanwhile, Jumia closed its most recent quarter with $637.7 million in cash, which means that it has a good amount of runway ahead of itself to sort out growth and profitability.
In the wake of its earnings reports, Jumia’s shares climbed 3.38% to $21.99 per share with a market cap of $2.168 billion.
In the second quarter of 2021, Jumia reported revenues of $40.2 million, up 4.6% on a year-over-year basis.
Wall Street was optimistic that Jumia would report revenue of $43.34 million, up from the $38.5 million recorded in Q2 2020. Although the company did not meet revenue expectations, it did surpass investor expectations of a loss worth $0.43 a share by reporting a more modest $0.41 per-share loss in the second quarter. For reference, Jumia lost $0.61 per share in the year-ago period.
While the African e-commerce company has shifted from first-party sales to a marketplace for third parties, its first-party revenue increased 7% year-over-year in the second quarter. Jumia’s marketplace revenue, on the other hand, grew a smaller 0.6% to $26.2 million.
The revenue mix-shift helped Jumia’s gross profit grow 4%, to $26.8 million in the most recent quarter, compared to its year-ago comparable. Gross profit after fulfillment expense also expanded 16.3%, to $7.7 million.