Dangdang Announces First Quarter 2013 Results Gross Margin in Q1 2013 Strengthened to 17.2%

Net Loss in Q1 2013 Narrowed by RMB 26.8 Million Year-Over-Year

GMV of Marketplace in Q1 2013 Increased by 193% Year-Over-Year

 

BEIJING, May 16, 2013 /PRNewswire/ -- E-Commerce China Dangdang Inc. ("Dangdang" or the "Company") (NYSE: DANG), a leading business-to-consumer e-commerce company in China, today announced its unaudited financial results for the first quarter ended March 31, 2013.

First Quarter 2013 Highlights

  • Gross Margin in the first quarter of 2013 was 17.2%, the highest level since the second quarter of 2011, compared to 14.2% in the first quarter of 2012 and 13.4% in the fourth quarter of 2012.
  • Net Loss for the first quarter of 2013 was RMB72.7 million ($11.7 million), representing 5.5% of total revenues, as compared with a net loss of RMB99.5 million in the first quarter of 2012 representing 9.2% of total revenues and a net loss of RMB122.1 million representing 7.6% of revenues in the fourth quarter of 2012.
  • Gross Merchants Value ("GMV") of the marketplace in the first quarter of 2013 were RMB584.1million ($94.0 million), a 193% increase from the corresponding period in 2012.

"We are pleased to report another quarter of solid financial and operational results with better than expected sales, highest gross margin since the second quarter of 2011, and better operating efficiency," said Ms. Peggy Yu Yu, Dangdang's Executive Chairwoman. "Books and media sales grew by 24% in this quarter, which allows us to maintain dominant market share in online media sector. Dangdang's marketplace program once again demonstrated outstanding growth momentum, as marketplace GMV grew at 193% year-over-year in the first quarter. Sales from general merchandise, which include both self-procurement and marketplace, exceeded sales from books and media for the second consecutive quarter."

"We are confident that Dangdang's transition from online bookstore to an integrated online shopping mall is well under way. Our strategy of placing more emphasis on third party marketplace continues in 2013. Going forward, we will undertake more business initiatives to drive marketplace growth, bringing in more merchants and providing more fulfilment  support to them, and to ensure that Dangdang customers enjoy rich selections, competitive pricing and seamless shopping experience," Ms. Yu continued.

"We are pleased with the strengthening financial results in the first quarter, making it a robust start of the fiscal year. As we continued to grow sales and drive operational efficiencies, our gross margin increased to 17.2%, an improvement of 300 basispoints over the same period last year. Our net loss narrowed to RMB72.7 million, or negative 5.5% of total net revenues, representing improving margin for the third quarter in row," said Mr. Jun Zou, Dangdang's Chief Financial Officer. "Likewise, cash flow from operations increased by 51% year-over-year, mainly due to better working capital management."

First Quarter 2013 Results

Dangdang's total net revenues in the first quarter of 2013 were RMB1,333.8 million ($214.7 million), a 23% increase from the corresponding period in 2012.

Media product revenue for the first quarter of 2013 was RMB863.9 million ($139.1 million), representing a 24% increase from the corresponding period in 2012. General merchandise revenue for the first quarter of 2013 was RMB411.7 million ($66.3 million), a 12% increase from the corresponding period in 2012, representing 31% of total net revenues, as compared to 34% in the corresponding period in 2012. Other revenue including revenue from third-party merchants for the first quarter of 2013 was RMB58.1 million ($9.4 million), representing a 194% increase from the corresponding period in 2012.

Dangdang had approximately 7.4 million active customers including approximately 2.4 million new customers in the first quarter of 2013, representing a 21% and 24% increase from the corresponding period in 2012. Total orders for the first quarter 2013 were approximately 14.8 million, a 21% increase from the corresponding period in 2012.

Cost of revenues was RMB1,104.9 million ($177.9 million), representing 82.8% of total revenues, as compared to 85.8% in the corresponding period in 2012. The decreased cost of revenues as a percentage of total revenues was primarily due to the execution on the strategic category mapping to move certain categories to the marketplace and economies-of-scale in some of Dangdang's self-procurement categories. Gross margin in the first quarter of 2013 was 17.2%, as compared to 14.2% in the corresponding period in 2012 and 13.4% in the fourth quarter of 2012. The year-over-year increase was primarily due to the increase of other revenue, representing the sustained scaling of the marketplace, as well as improved self-procurement margin due to economies of scale. The quarter-over-quarter margin improvement was primarily due to increased margin of self-procurement business as a result of better category selection and commercial terms with suppliers.

Fulfillment expenses which include warehousing and shipping expenses, were RMB184.6 million ($29.7 million), representing 13.8% of total revenues, compared to 16.2% in the corresponding period in 2012 and 12.0% in the fourth quarter of 2012. The year-over-year decrease was primarily due to consistent operating leverage and improved warehousing management systems.

Marketing expenses were RMB43.2 million ($7.0million), representing 3.2% of total revenues, compared to 2.7% in the corresponding period in 2012. The increase was primarily due to increased spending in navigation website and other targeted marketing campaigns related to our membership program.

Technology and content expenses were RMB49.3 million ($7.9 million), representing 3.7% of total revenues, compared to 3.0% in thecorresponding period in 2012. The increase was primarily due to increased engineering headcount and investment in IT facilities.

General and administrative expenses were RMB32.4 million ($5.2 million), representing 2.4% of total revenues, compared to 2.5% in the corresponding period in 2012. General and administrative expenses remained in line with the expansion of the business year-over-year.

Share-based compensation expenses, which were allocated to related expense line items, were RMB2.6 million ($0.4 million) in the first quarter of 2013, compared to RMB2.8 million in the corresponding period in 2012,representing a 7% decrease.

Dangdang recorded an operating loss of RMB80.4 million ($12.9 million) in the first quarter of 2013, as compared with an operating loss of RMB107.2 million in the corresponding period in 2012, primarily due to increase of gross margin and consistent operating leverage.

Operating loss excluding share-based compensation expenses (non-GAAP) was RMB77.8 million ($12.5 million), as compared with an operating loss excluding share-based compensation expenses (non-GAAP) of RMB104.4 million in the corresponding period in 2012.

Net loss was RMB72.7 million ($11.7 million), as compared with a loss of RMB99.5 million and RMB 122.1 million in the first and fourth quarters of 2012 respectively, primarily due to our efforts to increase gross profit and operating leverage.

Net margin was negative 5.5%, as compared with a negative net margin of 9.2% in the corresponding period in 2012.

Net loss excluding share-based compensation expenses (non-GAAP) was RMB70.1 million ($11.3 million), as compared with a net loss excluding share-based compensation expenses (non-GAAP) of RMB96.7 million in the corresponding period in 2012.

As of March 31, 2013, Dangdang had cash and cash equivalents, restricted cash, and short-term time deposits of RMB1,584.7 million ($255.1 million), as compared to RMB1,634.6 million as of December 31, 2012.

Capital expenditures for the first quarter of 2013 were RMB24.3 million ($3.9 million), including RMB11.8 million spending on the construction of Tianjin warehouse.

Adjusted EBITDA loss (non-GAAP) in the first quarter of 2013 was RMB65.1 million ($10.5 million), as compared with an adjusted EBITDA loss of RMB94.8 million in the corresponding period in 2012.

Outlook for Second Quarter 2013

Dangdang expects total net revenue in the second quarter of 2013 to be around RMB1.6 billion representing year-over-year growth of around 23%. We also expect GMV from our marketplace to grow at a rate of 175% year-over-year in the second quarter of 2013. This forecast reflects Dangdang's current and preliminary view, which is subject to change.

Filing of Annual Report on Form 20-F

On April 10, 2013, the Company filed its annual report on Form 20-F for the fiscal year ended December 31, 2012 that includes its audited financial statements with the Securities and Exchange Commission. The annual report is available on the Company's investor relations website at http://ir.dangdang.com. Holders of the Company's securities may request a hard copy of the Company's annual report free of charge.  

Conference Call Information

Dangdang's management will host an earnings conference call at 8:00 AM on May 16, 2013 U.S. Eastern Time (or 8:00 PM on May 16, 2013 Beijing/Hong Kong time).

Dial-in details for the earnings conference call are as follows:

US:

+1-718-354-1231


Hong Kong:

+852-2475-0994


International:

+65-6723-9381


Please dial-in 10 minutes before the call is scheduled to begin and provide the passcode to join the call. The passcode is "Dangdang earnings call."

A replay of the conference call may be accessed by phone at the following number until May 23, 2013:

International:

+61 2 8199 0299


Passcode:

70532296


Additionally, a live and archived webcast of this conference call will be available at http://ir.dangdang.com/ until November 30, 2013.

About Dangdang

E-Commerce China Dangdang Inc. ("Dangdang" or the "Company") (NYSE: DANG) is a leading business-to-consumer e-commerce company in China. On its website dangdang.com, the Company offers more than 900,000 books and other media products as well as selected general merchandise products including beauty and personal care products, home and lifestyle products, baby, children and maternity products, apparel, digital and electronics products. It also operates the dangdang.com marketplace program, which allows third-party merchants to sell their products alongside products sourced by the Company. Dangdang's nationwide fulfillment and delivery capabilities, high-quality customer service support and scalable technology infrastructure enable it to provide a compelling online shopping experience to customers.

Safe Harbor Statement

This announcement contains forward-looking statements. These statements are made under the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as "will," "expects," "anticipates," "future," "intends," "plans," "believes," "estimates," "confident" and similar statements. Among other things, the outlook for the second quarter 2013 and quotations from management in this announcement, as well as Dangdang's strategic and operational plans, contain forward-looking statements. Dangdang may also make written or oral forward-looking statements in its periodic reports to the U.S. Securities and Exchange Commission, in its annual report to shareholders, in press releases and other written materials and in oral statements made by its officers, directors or employees to third parties. Statements that are not historical facts, including statements about Dangdang's beliefs and expectations, are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties. A number of factors could cause actual results to differ materially from those contained in any forward-looking statement, including but not limited to the following: Dangdang's growth strategies; its future business development, results of operations and financial condition; its ability to attract and retain new customers and to increase revenues generated from repeat customers; its expectations regarding demand for and market acceptance of our products and services; trends and competition in China's business-to-consumer e-commerce market; changes in its revenues and certain cost or expense items; the expected growth of the Chinese business-to-consumer e-commerce market; Chinese governmental policies relating to Dangdang's industry and general economic conditions in China. Further information regarding these and other risks is included in Dangdang's annual report on Form 20-F and other documents filed with the Securities and Exchange Commission. Dangdang does not undertake any obligation to update any forward-looking statement, except as required under applicable law. All information provided in this press release and in the attachments is as of the date of this press release, and Dangdang undertakes no duty to update such information, except as required under applicable law.

About Non-GAAP Financial Measures

To supplement Dangdang's consolidated financial results presented in accordance with United States Generally Accepted Accounting Principles ("GAAP"), we use the following measures as the non-GAAP financial measures defined by the SEC: non-GAAP operating loss, non-GAAP operating margin, non-GAAP net loss and adjusted EBITDA loss (collectively referred to as the "Non-GAAP Financial Measures" thereafter). We define non-GAAP operating loss, non-GAAP operating margin and non-GAAP net loss as operating loss, operating margin and net loss excluding the impact of share-based compensation expenses respectively; we define adjusted EBITDA loss as loss before interest, taxes, depreciation, amortization, other non-operating income, and share-based compensation expenses. We review the Non-GAAP Financial Measures together with net loss or income to obtain a better understanding of our operating performance. We believe that these Non-GAAP Financial Measures provide meaningful supplemental information regarding the Company's performance and liquidity. However, a limitation of using the Non-GAAP Financial Measures as an analytical tool is that they do not include all items that impact our net loss for the period. In addition, because they are not calculated in the same manner by all companies, they may not be comparable to other similar titled measures used by other companies. In light of the foregoing limitations, you should not consider the Non-GAAP Financial Measures in isolation from or as an alternative to net income/loss prepared in accordance with U.S. GAAP.

For information on the reconciliation between the Non-GAAP Financial Measures and the GAAP financial measures presented in accordance with U.S. GAAP for the periods presented, please see the table captioned "Reconciliations of non-GAAP results of operations measures to the nearest comparable GAAP financial measures" at the end of this release.

For investor and media inquiries, please contact:

Allie Du
Investor Relations Department
E-commerce China Dangdang Inc.
+86-10-5799-2257
duwenwen@dangdang.com

Caroline Straathof
IR Inside
+31-6-54624301
info@irinside.com

E-Commerce China Dangdang Inc.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share related data)







As of
December 31,
2012


As of
March 31,
2013


RMB


RMB

US$


(Audited)


(Unaudited)

(Unaudited)

ASSETS





Current assets:





Cash and cash equivalents

432,703


383,722

61,783

Restricted cash

709,417


708,521

114,079

Time deposits with original maturities exceeding three months

492,445


492,412

79,283

Inventories

1,485,579


1,449,911

233,450

Accounts receivable, net

56,610


70,720

11,387

Prepaid expenses and other current assets

203,294


189,266

30,474

Amounts due from related parties

320


320

51

Total current assets

3,380,368


3,294,872

530,507






Fixed assets, net

116,391


110,065

17,722

Construction in progress

4,883


55,613

8,954

Prepaid land lease payments

44,209


43,986

7,082

Prepaid expenses and deposits

37,275


9,633

1,551

Total assets

3,583,126


3,514,169

565,816






LIABILITIES AND SHAREHOLDERS' EQUITY




Current liabilities:





Short-term bank loans

600,000


300,000

48,303

Accounts payable

1,563,787


1,858,914

299,303

Deferred revenue

228,765


183,293

29,512

Accrued expenses and other current liabilities

414,776


471,780

75,961

Amounts due to related parties

2,333


2,333

376

Total current liabilities

2,809,661


2,816,320

453,455

Non-current liablities

33,966


32,155

5,178

Total liabilities

2,843,627


2,848,475

458,633






Shareholders' equity:





Class A common shares (par value of US$0.0001 per share,
686,505,790 shares authorized, 268,919,350 and 268,931,850
shares issued and outstanding as of December 31, 2012 and
March 31, 2013, respectively)

200


200

32

Class B common shares (par value of US$0.0001 per share,
313,494,210 shares authorized, 131,916,660 shares issued
and outstanding as of December 31, 2012 and March 31, 2013)

103


103

16

Additional paid-in capital

1,855,164


1,857,766

299,119

Accumulated other comprehensive loss

(92,066)


(95,763)

(15,419)

Accumulated deficit

(1,023,902)


(1,096,612)

(176,565)

Total shareholders' equity

739,499


665,694

107,183

Total liabilities and shareholders' equity

3,583,126


3,514,169

565,816

 


E-Commerce China Dangdang Inc.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(In thousands, except share related data)



Three Months Ended


March 31,
2012


March 31,
2013

March 31,
2013


RMB


RMB

US$


(Unaudited)


(Unaudited)

(Unaudited)

Net revenues





  Product revenue

1,063,855


1,275,610

205,386

    Media

695,976


863,898

139,096

    General merchandise

367,879


411,712

66,290

  Other revenue

19,769


58,144

9,362

Total net revenues

1,083,624


1,333,754

214,748






Cost of revenues

(929,287)


(1,104,891)

(177,898)






Gross profit 

154,337


228,863

36,850






Operating expenses:





  Fulfillment 

(175,530)


(184,590)

(29,721)

  Marketing 

(29,589)


(43,232)

(6,961)

  Technology and content 

(32,071)


(49,320)

(7,941)

  General and administrative 

(26,831)


(32,414)

(5,219)

  Government grants

2,445


329

53






Total operating expenses

(261,576)


(309,227)

(49,789)






Loss from operations

(107,239)


(80,364)

(12,939)






Interest income

6,437


8,859

1,426






Interest expense

(366)


(4,480)

(721)






Other income, net

1,645


3,275

527






Loss before income taxes

(99,523)


(72,710)

(11,707)






Income tax expenses

-


-

-






Net loss

(99,523)


(72,710)

(11,707)











Net loss attributable to common shareholders

(99,523)


(72,710)

(11,707)






Net loss per common share 





                                         - Basic

(0.25)


(0.18)

(0.03)

                                         - Diluted

(0.25)


(0.18)

(0.03)






Net loss per ADS





                                         - Basic

(1.25)


(0.91)

(0.15)

                                         - Diluted

(1.25)


(0.91)

(0.15)






Net loss allocated to common shareholders used in net loss per
share/ADS calculation





                                         - Basic

(99,523)


(72,710)

(11,707)

                                         - Diluted

(99,523)


(72,710)

(11,707)

Shares used in net loss per common share computation: 









Class A common shares:





                                         - Basic

265,306,426


268,924,378

268,924,378

                                         - Diluted

397,223,086


400,841,038

400,841,038

Class B common shares:





                                         - Basic

131,916,660


131,916,660

131,916,660

                                         - Diluted

131,916,660


131,916,660

131,916,660






ADSs used in net loss per ADS calculation 




                                         - Basic

79,444,617


80,168,208

80,168,208

                                         - Diluted

79,444,617


80,168,208

80,168,208






Other comprehensive loss





  Foreign currency translation adjustment, net of taxes

(1,416)


(3,697)

(595)






Comprehensive loss attributable to common shareholders

(100,939)


(76,407)

(12,302)

 

Share-based compensation

(In thousands, except share related data)



Three Months Ended


March 31,
2012


March 31,
2013

March 31,
2013


RMB


RMB

US$


(Unaudited)


(Unaudited)

(Unaudited)






Share-based compensation expenses included are as follows:


Operating expenses:





  Fulfillment                                                                                        

480


424

68

  Marketing

83


81

13

  Technology and content

248


262

42

  General and administrative

1,981


1,830

295

Total

2,792


2,597

418


(1) This announcement contains translations of certain RMB amounts into U.S. dollars at specified rates solely for the convenience of the reader. Unless otherwise noted, all translations from RMB to U.S. dollars are made at a rate of RMB6.2108 to US$1.00, the noon buying rate on Mar 29, 2013 in The City of New York for cable transfers of RMB as certified for customs purposes by the Federal Reserve Bank of New York.  


(2) Each ADS represents five common shares of the Company.

Non-GAAP operating loss, operating margin and net loss

(In thousands)



Three Months Ended


March 31,
2012


March 31,
2013

March 31,
2013


RMB


RMB

US$


(Unaudited)


(Unaudited)

(Unaudited)






Loss from operations

(107,239)


(80,364)

(12,939)

Share-based compensation expenses

2,792


2,597

418

Non-GAAP operating loss

(104,447)


(77,767)

(12,521)






Operating margin 

-9.9%


-6.0%

-6.0%

Impact due to share-based compensation expenses

0.3%


0.2%

0.2%

Non-GAAP operating margin

-9.6%


-5.8%

-5.8%






Net loss                                                                                              

(99,523)


(72,710)

(11,707)

Share-based compensation expenses

2,792


2,597

418

Non-GAAP net loss

(96,731)


(70,113)

(11,289)

Adjusted EBITDA 

(In thousands)



Three Months Ended


March 31,
2012


March 31,
2013

March 31,
2013


RMB


RMB

US$


(Unaudited)


(Unaudited)

(Unaudited)






Loss from operations

(107,239)


(80,364)

(12,939)






Add back:                                                                                          










 Depreciation and amortization  

9,626


12,626

2,033






 Share-based compensation expenses 

2,792


2,597

418






 Adjusted EBITDA 

(94,821)


(65,141)

(10,488)

SOURCE E-commerce China Dangdang Inc.



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