Xpeng, an electric vehicle startup run by former Alibaba executive He Xiaopeng, said Monday it has raised around $500 million in a Series C+ round to further develop models tailored to China’s tech-savvy middle-class consumers.
The announcement followed its Series C round of $400 million closed last November. A source told TechCrunch that the company’s valuation at the time had exceeded the 25 billion yuan ($3.57 billion) round raised in August 2018.
The new proceeds bring the five-year-old Chinese startup’s to-date fundings announced to $1.7 billion.
Investors in the latest round include Hong Kong-based private equity firm Aspex Management; the storied American tech hedge fund Coatue Management; China’s top private equity fund Hillhouse Capital; and Sequoia Capital China. The other existing big-name backers are Foxconn, Xiaomi, GGV Capital, Morningside Venture Capital, IDG Capital, and Primavera Capital.
Despite the sizable round, Xpeng is headed for a slew of challenges. Electric vehicle sales in China have shrunk in the wake of reduced government subsidies set in motion last year, and the COVID-19 pandemic is expected to further dampen demand as the economy weakens.
Xpeng’s Chinese rival Byton, which counts heavyweights backers like Tencent, FAW Group, and Foxconn, is already showing signs of strain as it furloughed about half of its 450 North America-based staff citing coronavirus impact. In June, the company put the brakes on production for internal reorganization.
Xpeng’s other competitors seem to have proven more resilient. In April, Nasdaq-listed Nio secured a $1 billion investment for its Chinese entity, while Li Auto ventured to file for a U.S. public listing in July.
Xpeng claims it has so far been able to withstand coronavirus challenges. In May, the company obtained a production license for its fully-owned car plant in a city near its Guangzhou headquarters, signaling its reduced dependence on manufacturing partner Haima Automobile.
The speculation that Alibaba’s fintech affiliate Ant Group will go public has been swirling around for years. New details came to light recently. Reuters reported last week that the fintech giant could float as soon as this year in an initial public offering that values it at $200 billion. As a private firm, details of the payments and financial services firm remain sparse, but a new filing by Alibaba, which holds a 33% stake in Ant, provides a rare glimpse into its performance.
Alipay, the brand of Ant’s consumer finance app, claims to earmark 1.3 billion annual active users as of March. The majority of its users came from China, while the rest were brought by its nine e-wallet partners in India, Thailand, South Korea, the Philippines, Bangladesh, Hong Kong, Malaysia, Indonesia, and Pakistan.
In recent years Ant has been striving to scale back its reliance on in-house financial products in response to Beijing’s tightening grip on China’s fledgling fintech industry. Tencent, Alibaba’s nemesis, is considered a lot more reserved in the financial space but its WeChat Pay app has been slowly eating away at Alipay’s share of the payments market.
In a symbolic move in May, the Alibaba affiliate changed its name from Ant Financial to Ant Group. Even prior to that, Ant had been actively publicizing itself as a “technology” company that offers payments gateways and sells digital infrastructure to banks, insurance groups, and other traditional financial institutions — rather than being a direct competitor to them. On the Alipay app, users can browse and access a raft of third-party financial services including wealth management, microloans, and insurance.
As of March, Ant’s wealth management unit facilitated 4 trillion yuan ($570 billion) of assets under management for its partners offering money market funds, fixed income products, and equity investment services. During the same period, total insurance premiums facilitated by Ant more than doubled from the year before.
In June, Ant’s new boss Hu Xiaoming set the goal for the firm to generate 80% of total revenues from technology service fees, up from about 50% in 2019. He anticipated the monetary contribution of Ant’s own proprietary financial services to shrink as a result.
Ant grew out of Alipay, the payments service launched by Alibaba as an escrow service to ensure trust between e-commerce buyers and sellers. In 2011, Alibaba spun off Ant, allegedly to comply with local regulations governing third-party payments services. Ant has since taken on several rounds of equity financing. Today, Alibaba founder Jack Ma still controls a majority of Ant’s voting interests.
SoftBank and Alibaba seem to be pulling apart, Amazon launches a no-code app builder and a new congressional bill takes a different approach to online protections.
SoftBank Group founder Masayoshi Son said he’s leaving the board of Jack Ma’s Chinese e-commerce giant Alibaba Group, a month after Ma left the board of SoftBank.
Son said he sees the move as “graduating” from the board of his most successful investment to date. He then swiftly moved to defend the Japanese group’s investment strategy, which has become the subject of scrutiny and public mockery.
The PACT Act is a new bipartisan effort to reform Section 230, the crucial liability shield that enables internet platforms to exist, approaching the law’s shortcomings “with a scalpel rather than a jackhammer,” said Senator Brian Schatz (D-HI). It’s being proposed as an alternative to the EARN IT Act and President Trump’s executive order attacking Section 230.
SevenRooms serves restaurants, hotels and other venues, although food service establishments account for about 95% of its business. Another new opportunity has emerged as shops and other in-person venues are looking at reservations to help with social distancing.
We last surveyed VCs about their advertising and marketing investment strategies back in January in a completely different world, before the coronavirus pandemic began to wreak havoc on the global economy. To find out how the landscape looks now, we’ve compiled updated answers from two investors who participated in the previous survey and brought in three new perspectives. (Extra Crunch membership required.)
The New York City Council is expected to vote on a bill that will require the New York Department of Transportation to create a pilot program for the operation of shared electric scooters in the city.
The competition seeks “innovative designs for fully capable, low-mass toilets that can be used both in space and on the Moon.” It’s not the first time that NASA has enlisted the power of the crowd, and HeroX’s crowdsourcing platform, to come up with innovative technology around human waste management.
The Daily Crunch is TechCrunch’s roundup of our biggest and most important stories. If you’d like to get this delivered to your inbox every day at around 9am Pacific, you can subscribe here.
Hello and welcome back to TechCrunch’s China Roundup, a digest of recent events shaping the Chinese tech landscape and what they mean to people in the rest of the world. This week, we have updates from Alibaba’s rapidly growing cloud computing unit, Apple’s controversial decision to remove two podcast apps from its Chinese App Store, and more.
Zynn, a TikTok rival that had rocketed to the top of the download charts a few weeks since its launch in May, was removed from Google Play this week over plagiarism. Developed by Kuaishou, the nemesis of TikTok’s Chinese sister Douyin, Zynn is another made-in-China app that has recently taken the international market by storm.
In a statement (in Chinese) this week, Kuaishou said the removal was triggered by one complaint about a user-generated video that had stolen content from another platform. As venture capitalist Turner Novak observed, much of Zynn’s early content seemed to be ripped from TikTok.
The main driver of the app’s rise, however, is its reward system; it essentially pays users to use and promote its app, a strategy that has proven popular among China’s rural and small-town populations. Nasdaq-listed content aggregator Qutoutiao has used the same tactic to grow.
Whether this pay-to-use strategy is sustainable is yet to be seen. Zynn is apparently making efforts to retain users through other means, claiming it’s in talks with “celebrity-level” creators to enrich its content.
Influencers are in high demand these days. After proving the strategy of driving e-commerce sales through influencer live promotion, Alibaba decided it wanted to bring the model to overseas markets. As such, it put out a notice to recruit as many as 100,000 content creators who would help the Chinese giant promote products sold on its international marketplace, AliExpress.
Many may know that China has turned one of its poorest provinces Guizhou into a pivotal tech hub that’s home to many cloud services, including that of Apple China. Now China is morphing Tibet into another cloud computing center. One main project is a 645,000-square-meter data facility that will facilitate data exchange between China and South Asia.
The slogan suggests the strategic role Alibaba wants Dingtalk to play: an operating system built on Alibaba Cloud, the world’s third-largest infrastructure as a service behind Amazon and Microsoft. It’s a relationship that echoes the one between Microsoft 365 and Azure, as president of Alibaba Cloud Zhang Jianfeng previously suggested in an interview (in Chinese).
Dingtalk, built initially for enterprise communication, has blossomed into an all-in-one platform with a myriad of third-party applications tailored to work, education and government services. For instance, the Ministry of Education can easily survey students and parents through Dingtalk. The app is now serving 15 million organizations and 300 million individual users.
On top of Dingtalk integration, Alibaba Cloud said it will hire up to 5,000 engineers this financial year to fuel growth in areas including network, databases and artificial intelligence. The recruitment came after Alibaba committed in April to spend 200 billion yuan ($28 billion) over the next three years to build more data infrastructure amid increased demand for services like video conferencing and live streaming as businesses adapt to the COVID-19 pandemic.
Apple bans podcast apps
Just as podcasts are gaining ground in China, two foreign podcast apps that appeal to independent content creators were banned from the Apple App Store. The move echoed Apple’s crackdown on Chinese-language podcasts on its own podcast platform last year this time.
Investor’s favorite app is back
Speaking of app removal, this week, many venture capitalists and product managers in China are celebrating the return of Jike (即刻). The social media app, which has a loyal following within the Chinese tech circle, was removed nearly a year ago from app stores for unspecified reasons, but many speculated it was due to censorship.
The app is a kind of a hybrid of Reddit and Twitter, allowing users to discover content and connect based on interests and topics. Many VCs and internet firm employees use it to trade gossip and share hot takes. Its death and life are a reminder of the immense regulatory uncertainty facing tech companies operating in China.
Sought-after Hong Kong listings
Two of the largest U.S.-traded Chinese companies are floating their shares in Hong Kong for secondary listings amid fraying ties between Beijing and Washington. NetEase, the second-biggest gaming company in the world after Tencent, jumped 6% from its offer price to HK$130 on the first day of trading this week. JD.com, the Alibaba archrival, has reportedly priced its offering at HK$226 a share.
Eswin, a semiconductor company founded by the boss of Chinese display technology giant BOE Technology, has completed a sizable funding round as the Chinese government encourages domestic chip production.
Hello and welcome back to TechCrunch’s China Roundup, a digest of recent events shaping the Chinese tech landscape and what they mean to people in the rest of the world. Last week, we had a barrage of news ranging from SoftBank’s latest bet on China’s autonomous driving sector to Chinese apps making waves in the U.S. (not TikTok).
TikTok isn’t the only app with a Chinese background that’s making waves in the U.S. A brand new short-video app called Zynn has been topping the iOS chart in America since May 26, just weeks after its debut. Zynn’s maker is no stranger to Chinese users: it was developed by short-video platform Kuaishou, the nemesis of Douyin, TikTok’s Chinese sister.
The killer feature behind Zynn’s rise is an incentive system that pays people small amounts of cash to sign up, watch videos or invite others to join, a common user acquisition tactic in the Chinese internet industry.
Paying people to use & recommend your app to others i.e. the classic Qutoutiao (趣头条 Fun Headlines) model popularized in China from around 2017 has now made it over to the States
Given how many unemployed people there are due to Covid-19. Never been a better time to test this https://t.co/nXXoCrlTvW
The other app that’s been trending in the U.S. for a while is News Break, a hyper-local news app founded by China’s media veteran Jeff Zheng, with teams in China and the U.S. It announced a heavy-hitting move last week as it onboards Harry Shum, former boss of Microsoft AI and Research Group, as its board chairman.
Alibaba looks for overseas influencers
The Chinese e-commerce giant is searching for live-streaming hosts in Europe and other overseas countries to market its products on AliExpress, its marketplace for consumers outside China. Live-streaming dancing and singing is nothing new, but the model of selling through live videos, during which consumers can interact with a salesperson or session host, has gained major ground in China as shops remained shut for weeks during the coronavirus outbreak.
In Q1 2020, China recorded more than 4 million e-commerce live-streaming sessions across various platforms, including Alibaba. Now the Chinese giant wants to replicate its success abroad, pledging that the new business model can create up to 100,000 new jobs for content creators around the world.
Oppo in Germany
Oppo announced last week its new European headquarters in Düsseldorf, Germany, a sign that the Chinese smartphone maker has gotten more serious on the continent. The move came weeks after it signed a distribution deal with Vodafone to sell its phones in seven European countries. Oppo was also one of the first manufacturers to launch a 5G commercial phone in Europe.
Chinese tech stocks return
We speculated last week that Hong Kong might become an increasingly appealing destination for U.S.-listed Chinese tech companies, many of which will be feeling the heat of tightening accounting rules targeting foreign companies. Two firms have already taken action. JD.com and NetEase, two of China’s biggest internet firms, have won approvals to list in Hong Kong, Bloomberg reported, citing sources.
Massive losses in SoftBank’s first Vision Fund didn’t seem to deter the Japanese startup benefactor from placing bold bets. China’s ride-hailing giant Didi has completed an outsized investment of over $500 million in its new autonomous driving subsidiary. The financing led by SoftBank marked the single-largest fundraising round in China’s autonomous driving sector.
The capital will give Didi a huge boost in the race to win the autonomous driving race, where it is a relative latecomer. It’s competing with deep-pocketed players that are aggressively testing across the world, including the likes of Alibaba, Tencent and Baidu, and startups such as Momenta, NIO and Pony.ai.
Speaking of live-streaming e-commerce, two of China’s biggest internet companies have teamed up to exploit the new business model. JD, the online retailer that is Alibaba’s long-time archrival, has signed a strategic partnership with Kuaishou — yes, the maker of Zynn and TikTok’s rival in China.
The collaboration is part of a rising trend in the Chinese internet, where short video apps and e-commerce platforms pally up to explore new monetization avenues. The thinking goes that video platforms can leverage the trust that influencers instill in their audience to tout products.
Despite reporting an unprofitable first quarter, Meituan, a leader in China’s food delivery sector, saw its shares reach a record high last week to bring its valuation to over $100 billion.
Notion, the fast-growing work collaboration tool that recently hit a $2 billion valuation and has attracted a loyal following in China, was briefly banned in China last week. It’s still investigating the cause of the ban, but the timing noticeably coincided with China’s annual parliament meeting, which began last week after a two-month delay due to COVID-19. Internet regulation and censorship normally toughen around key political meetings in the country.
Hello and welcome back to TechCrunch’s China Roundup, a digest of recent events shaping the Chinese tech landscape and what they mean to people in the rest of the world. It’s been a tumultuous week for Chinese tech firms abroad: Huawei’s mounting pressure from the U.S., a big blow to U.S.-listed Chinese firms, and TikTok’s high-profile new boss.
China tech abroad
Further decoupling
Over the years, American investors have been pumping billions of dollars into Chinese firms listed in the U.S., from giants like Alibaba and Baidu to emerging players like Pinduoduo and Bilibili. That could change soon with the Holding Foreign Companies Accountable Act, a new bill passed this week with bipartisan support to tighten accounting standards on foreign companies, with the obvious target being China.
“For too long, Chinese companies have disregarded U.S. reporting standards, misleading our investors. Publicly listed companies should all be held to the same standards, and this bill makes commonsense changes to level the playing field and give investors the transparency they need to make informed decisions,” said Senator Chris Van Hollen who introduced the legislation.
Here’s what the legislation is about:
1) Foreign companies that are out of compliance with the Public Company Accounting Oversight Board for three years in a row will be delisted from U.S. stock exchanges.
PCAOB, which was set up in 2002 as a private-sector nonprofit corporation overseen by the SEC, is meant to inspect audits of foreign firms listed in the U.S. to prevent fraud and wrongdoing.
The rule has not sat well with foreign accounting firms and their local regulators, so over time PCAOB has negotiated multiple agreements with foreign counterparts that allowed it to perform audit inspections. China is one of the few countries that has not been cooperating with the PCAOB.
2) The bill will also require public companies in the U.S. to disclose whether they are owned or controlled by a foreign government, including China’s communist government.
The question now is whether we will see Chinese companies give in to the new rules or relocate to bourses outside the U.S.
The Chinese firms still have a three-year window to figure things out, but they are getting more scrutiny already. Most recently, Nasdaq announced to delist Luckin, the Chinese coffee challenger that admitted to fabricating $310 million in sales.
Those that do choose to leave the U.S. will probably find a warmer welcome in Hong Kong, attracting investors closer to home who are more acquainted with their businesses. Alibaba, for instance, already completed a secondary listing in Hong Kong last year as the city began letting investors buy dual-class shares, a condition that initially prompted many Chinese internet firms to go public in the U.S.
The long-awaited announcement is here: TikTok has pickedits new chief executive, and taking the helm is Disney’s former head of video streaming, Kevin Mayer.
It’s understandable that TikTok would want a global face for its fast-growing global app, which has come under scrutiny from foreign governments over concerns of its data practices and Beijing’s possible influence.
Curiously, Mayer will also take on the role of the chief operating officer of parent company ByteDance . A closer look at the company announcement reveals nuances in the appointment: Kelly Zhang and Lidong Zhang will continue to lead ByteDance China as its chief executive officer and chairman respectively, reporting directly to ByteDance’s founder and global CEO Yiming Zhang, as industry analyst Matthew Brennan acutely pointed out. That means ByteDance’s China businesses Douyin and Today’s Headlines, the cash cows of the firm, will remain within the purview of the two Chinese executives, not Mayer.
Huawei is in limbo after the U.S. slapped more curbs on the Chinese telecoms equipment giant, restricting its ability to procure chips from foreign foundries that use American technologies. The company called the rule “arbitrary and pernicious,” while it admitted that the attack would impact its business.
As Huawei faces pressure abroad due to the Android ban, other Chinese phone makers have been steadily making headway across the world. One of them is Oppo, which just announced a partnership with Vodafone to bring its smartphones to the mobile carrier’s European markets.
The U.S. has extended sanctions to more Chinese tech firms to include CloudWalk, which focuses on developing facial recognition technology. This means all of the “four dragons of computer vision” in China, as the local tech circle collectively calls CloudWalk, SenseTime, Megvii and Yitu, have landed on the U.S. entity list.
The smartwatch maker is eyeing a transparent, self-disinfecting mask, becoming the latest Chinese tech firm to jump on the bandwagon to develop virus-fighting tech.
The TikTok parent bankrolled financial AI startup Lingxi with $6.2 million, marking one of its first investments for purely monetary returns rather than for an immediate strategic purpose.
Bilibili, a Chinese video streaming website that was once regarded as a haven for youth subculture, has been steadily making its way into the mainstream as users age up and content diversifies. The NASDAQ-traded company recorded a 70% year-over-year growth to reach 172 million monthly active users by the first quarter, placing it in the same rank as video services operated by Tencent and Baidu’s iQiyi.
Daily time spent per user soared to a record of 87 minutes, which is likely linked to the extended stay-at-home order imposed on students during COVID-19.
In the same period, Tencent Video reported 112 million subscribers, while iQiyi commanded 118.9 million, almost all of whom are paying. Bilibili, by contrast, saw only about 8% of its MAU paying.
Bilibili’s growth engine is fundamentally different from the two giants though. While Tencent Video and iQiyi bet on Netflix -style, professionally produced programs, Bilibili relies on a wide array of user-generated content in the style of Youtube. The number of monthly creators grew 146% to 1.8 million, who collectively submitted 4.9 million pieces per month. Among its top creators is, lo and behold, the Communist Youth League of China.
The Youth League is among Bilibili’s top 7 creators, and it gets the most likes of any contributor. It and other state-sanctioned influencers have been flooding the site with virus-related conspiracy theories and fanning anti-American sentiment. https://t.co/u5k0FTQwm2pic.twitter.com/EbXaK7P7kY
The site also has an unconventional way of monetizing its audience. It doubles as a mobile gaming platform — to be expected given its young user base — and earned half of its revenue from video games in Q1. Other avenues of revenue generation come from virtual item sales during live broadcasting, advertising, and sales from content creators who operate online shops via Bilibili.
Despite healthy user growth, Bilibili widened net loss to 538.6 million yuan or US$76.1 million in the first quarter, a steep increase from 195.6 million yuan from the year before. It cites COVID-19 in causing delays in merchandise deliveries through its platform.
Nonetheless, the company bolstered its cash reserve to 10 billion yuan or $1.14 billion after Sony’s outsized $400 million strategic investment, which would explore synergies in animation and games between the partners. The online entertainment upstart is among a small crop of companies that have attracted financing from both Alibaba and Tencent, which are long-time archrivals.
“In Q1, we still generate positive operating cash flow, and our actual cash burn in Q1 was 200 million yuan, which is much less than loss in our P&L,” Bilibili chief financial officer Fan Xin asserted during the company earnings call.
The article was updated on May 19, 2020 to reflect a corrected statement from Bilibili on the company’s cash reserve.
Masayoshi Son is making his biggest play yet to silence doubters. On Monday, the Japanese billionaire unveiled an unprecedented $41 billion plan to sell off assets and shore up SoftBank Group Corp.’s crumbling market value in the face of the coronavirus pandemic.SoftBank aims to sell assets to raise as …
Pan-African e-commerce company Jumia got into the black (by a small amount) on its gross profit vs. fulfillment expenses, expanded financial services and still posted losses.
The online sales company, with an operations center in China, also anticipates some negative impact on 2020 growth from the coronavirus outbreak, CEO Sacha Poigonnec said.
These were highlights today for Jumia’s fourth-quarter and full-year results — 10 months after the company became the first vc-backed startup in Africa to go public on a major exchange.
The results
Jumia — with online goods and service verticals in 11 countries — posted 2019 revenue growth of 24% (€160 million) over 2018. The company increased its annual active customer base in the fourth-quarter by 54% (to 6.1 million) from 4.0 million for the same period last year.
Jumia’s 2019 Gross Merchandise Value (GMV) — the total amount of goods sold over the period — contracted by 3% to €301 million in the fourth-quarter.
Poignonnec attributed the decline to “business mix re-balancing”, which entailed reducing expenditures on promotions. The company also saw a contraction in sales of phones and electronics, which impacted GMV.
The online retailer had a 49% increase in orders from 5.5 million in Q4 2018 to 8.3 million in Q4 2019.
Perhaps the brightest spot in Jumia’s 2019 performance was the company’s ability to reach a gross profit of €1.0 million after fulfillment expenses in Q4.
That obviously doesn’t get them to profitability over all the company’s other expenses, but fulfillment costs have been historically high for Jumia as an online-retailer in Africa.
The overall pattern of growing revenues and customers YoY has been consistent for Jumia.
But so too have the company’s losses, which widened 34% in 2019 to €227.9 million, compared to €169.7 million. Negative EBITDA for Q4 increased 5% to €51.2 million from €48.6 over the same period in 2018.
CEO Sacha Poignonnec pointed to Jumia’s ability in Q4 to reach positive gross-profit over fulfillment expenses — one of the company’s largest costs — as a sign it could eventually get into the black overall.
“As we reach these milestones we’ll bring new milestones. This year we were profitable after fulfillment expenses and one day we’ll be profitable after marketing [expenses] and so on and so forth,” he said.
What’s new
Jumia exited several countries in 2019 — suspending e-commerce operations in Tanzania, Cameroon, and Rwanda. “We believe those countries have…potential in the long-term but decided to allocate our resources to the countries that best support our long-term growth and path to profitability,” said Poignonnec.
Jumia also saw lift in its JumiaPay digital finance product — and notably — is developing new financial services (including for SMEs) aided by its big financial investors, Mastercard and Axa.
Jumia launched an Axa money market fund product in Nigeria in 2019 and some promotional programs on Mastercard’s network, as noted in page 10 of its investor presentation.
Total payment volume on JumiaPay increased 57% year-over-year to €45.6 million in 2019 and JumiaPay was used for 29% of Jumia e-commerce orders.
This is significant, as the company has committed to generate more revenues from higher margin digital payment products and offer JumiaPay as a standalone service across Africa.
Since its founding in 2012, Jumia has been forced to adapt to slower digital payments integration in its core market Nigeria and allow cash-on-delivery payments, which are costly and more problematic than digital processing.
Poignonnec also acknowledged the company’s 2020 revenues could be negatively impacted by the coronavirus. “The recent…outbreak in China is likely to affect growth over the coming quarters, and here we are starting to face some challenges to fulfill our cross-border sales,” he said.
Share price
Surprisingly absent from Jumia’s earnings call (and the subsequent Q&A) was discussion of the company’s share price, which spiked then plummeted after its April 2019 NYSE listing.
That lasted until May, when Jumia’s stock came under attack from short-seller Andrew Left, whose firm Citron Research issued a report accusing the company of fraud — which sent the company’s share price plummeting — from $49 to $26
Then on its second-quarter earnings call in August, Jumia offered greater detail on the fraud perpetrated by some employees and agents of its JForce sales program.
The company declared the matter closed, but Jumia’s stock price plummeted more after the August earnings call (and sales-fraud disclosure), and has lingered in single-digit value for several months.
That’s 50% below the company’s IPO opening in April and 80% below its high.
For the remainder of 2020, bringing back growth in GMV and more positive metrics, such as attining gross profitafter fulfillment expenses, could revive investor confidence in Jumia and its share price.
It could also put the company in a better position to match competition — such as the Marketplace Africa e-commerce platform of MallforAfrica and DHL — and the possible entry in Africa of China’s Alibaba.
Pan-African e-commerce company Jumia got into the black (by a small amount) on its gross profit vs. fulfillment expenses, expanded financial services and still posted losses.
The online sales company, with an operations center in China, also anticipates some negative impact on 2020 growth from the coronavirus outbreak, CEO Sacha Poigonnec said.
These were highlights today for Jumia’s fourth-quarter and full-year results — 10 months after the company became the first vc-backed startup in Africa to go public on a major exchange.
The results
Jumia — with online goods and service verticals in 11 countries — posted 2019 revenue growth of 24% (€160 million) over 2018. The company increased its annual active customer base in the fourth-quarter by 54% (to 6.1 million) from 4.0 million for the same period last year.
Jumia’s 2019 Gross Merchandise Value (GMV) — the total amount of goods sold over the period — contracted by 3% to €301 million in the fourth-quarter.
Poignonnec attributed the decline to “business mix re-balancing”, which entailed reducing expenditures on promotions. The company also saw a contraction in sales of phones and electronics, which impacted GMV.
The online retailer had a 49% increase in orders from 5.5 million in Q4 2018 to 8.3 million in Q4 2019.
Perhaps the brightest spot in Jumia’s 2019 performance was the company’s ability to reach a gross profit of €1.0 million after fulfillment expenses in Q4.
That obviously doesn’t get them to profitability over all the company’s other expenses, but fulfillment costs have been historically high for Jumia as an online-retailer in Africa.
The overall pattern of growing revenues and customers YoY has been consistent for Jumia.
But so too have the company’s losses, which widened 34% in 2019 to €227.9 million, compared to €169.7 million. Negative EBITDA for Q4 increased 5% to €51.2 million from €48.6 over the same period in 2018.
CEO Sacha Poignonnec pointed to Jumia’s ability in Q4 to reach positive gross-profit over fulfillment expenses — one of the company’s largest costs — as a sign it could eventually get into the black overall.
“As we reach these milestones we’ll bring new milestones. This year we were profitable after fulfillment expenses and one day we’ll be profitable after marketing [expenses] and so on and so forth,” he said.
What’s new
Jumia exited several countries in 2019 — suspending e-commerce operations in Tanzania, Cameroon, and Rwanda. “We believe those countries have…potential in the long-term but decided to allocate our resources to the countries that best support our long-term growth and path to profitability,” said Poignonnec.
Jumia also saw lift in its JumiaPay digital finance product — and notably — is developing new financial services (including for SMEs) aided by its big financial investors, Mastercard and Axa.
Jumia launched an Axa money market fund product in Nigeria in 2019 and some promotional programs on Mastercard’s network, as noted in page 10 of its investor presentation.
Total payment volume on JumiaPay increased 57% year-over-year to €45.6 million in 2019 and JumiaPay was used for 29% of Jumia e-commerce orders.
This is significant, as the company has committed to generate more revenues from higher margin digital payment products and offer JumiaPay as a standalone service across Africa.
Since its founding in 2012, Jumia has been forced to adapt to slower digital payments integration in its core market Nigeria and allow cash-on-delivery payments, which are costly and more problematic than digital processing.
Poignonnec also acknowledged the company’s 2020 revenues could be negatively impacted by the coronavirus. “The recent…outbreak in China is likely to affect growth over the coming quarters, and here we are starting to face some challenges to fulfill our cross-border sales,” he said.
Share price
Surprisingly absent from Jumia’s earnings call (and the subsequent Q&A) was discussion of the company’s share price, which spiked then plummeted after its April 2019 NYSE listing.
That lasted until May, when Jumia’s stock came under attack from short-seller Andrew Left, whose firm Citron Research issued a report accusing the company of fraud — which sent the company’s share price plummeting — from $49 to $26
Then on its second-quarter earnings call in August, Jumia offered greater detail on the fraud perpetrated by some employees and agents of its JForce sales program.
The company declared the matter closed, but Jumia’s stock price plummeted more after the August earnings call (and sales-fraud disclosure), and has lingered in single-digit value for several months.
That’s 50% below the company’s IPO opening in April and 80% below its high.
For the remainder of 2020, bringing back growth in GMV and more positive metrics, such as attining gross profitafter fulfillment expenses, could revive investor confidence in Jumia and its share price.
It could also put the company in a better position to match competition — such as the Marketplace Africa e-commerce platform of MallforAfrica and DHL — and the possible entry in Africa of China’s Alibaba.
