Dangdang Announces Second Quarter 2012 Results

BEIJING, Aug. 16, 2012 /PRNewswire-Asia/ -- 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 second quarter ended June 30, 2012.

Second Quarter Highlights

• Total net revenues in the second quarter of 2012 were RMB1,207.8 million ($190.1 million), a 53% increase from the corresponding period in 2011.
• Media revenue for the second quarter of 2012 was RMB771.9 million ($121.5 million), an increase of 32% from the corresponding period in 2011.
• General merchandise revenue for the second quarter of 2012 was RMB402.5 million ($63.4 million), an increase of 110% from the corresponding period in 2011, representing 33% of total net revenues, compared to 24% in the corresponding period in 2011.

"We are pleased to report the solid result of the second quarter. In a fiercely competitive environment, we achieved 53% year-over-year growth in net revenues and reached a gross margin at 13%. General merchandise contributed 33% of total revenues in the second quarter compared with 24% in the same period in 2011. Other revenue, composed mainly of revenue from third-party merchants, increased 122% year-over-year and 69% quarter-over-quarter, reflecting the strong growth momentum of our marketplace program," said Ms. Peggy Yu Yu, Dangdang's Executive Chairwoman. "We have a disciplined way of dealing with this competitive environment. We planned and timed our recent product promotions to take place in different periods of the quarter and benefit our customers, and we maintained our pricing in the leading position of the China e-commerce market," Ms. Yu added.

"We increased investment in fulfilment in the second quarter, and implemented next-day-delivery services in 150 cities, delivery-in-evening services in 10 cities and same-day-delivery in 20 cities as part of our ongoing efforts to improve customer services," commented Mr. Guoqing Li, Chief Executive Officer. "Dangdang launched the e-reader named "Dangdang Doucon" in early July, which was also welcomed by our customers. China's e-book market is still at an early stage, and we are still in the phase of forming new customer reading habits."

Second Quarter 2012 Results

Dangdang's total net revenues in the second quarter of 2012 were RMB1,207.8 million ($190.1 million), a 53% increase from the corresponding period in 2011.

Media product revenue for the second quarter of 2012 was RMB771.9 million ($121.5 million), representing a 32% increase from the corresponding period in 2011. General merchandise revenue for the second quarter of 2012 was RMB402.5 million ($63.4 million), representing a 110% increase from the corresponding period in 2011. Other revenue including revenue from third-party merchants for the second quarter of 2012 was RMB33.4 million ($5.3 million), representing a 122% increase from the corresponding period in 2011.

Dangdang had about 5.7 million active customers in the second quarter of 2012, representing a 23% increase from the corresponding period in 2011. Total orders for the second quarter of 2012 were approximately 11.1 million, a 20% increase from the corresponding period in 2011.

Cost of revenues was RMB1,050.0 million ($165.3 million), representing 86.9% of total revenues, as compared to 85.7% in the corresponding period in 2011. The increased cost of revenues as a percentage of total revenues was primarily due to the increased percentage of the general merchandise products sold at Dangdang's website, which have lower gross margin than media products. General merchandise revenue for the second quarter of 2012 was RMB402.5 million ($63.4 million), representing 33% of total net revenues, as compared to 24% in the corresponding period in 2011. Gross margin in the second quarter of 2012 was 13.1%, as compared to 14.3% in the corresponding period in 2011. The year-over-year decrease was primarily due to competitive pricing, changes in product mix with a higher percentage of general merchandise.

Fulfillment expenses, which include warehousing and shipping expenses, were RMB180.7 million ($28.4 million), representing 15.0% of total revenues, compared to 13.3% in the corresponding period in 2011. The increase was primarily attributable to the expansion of the procurement team and the increased rental costs for the new fulfillment centers, as well as investments in improving customers' shopping experience through faster delivery services.

Marketing expenses were RMB36.3 million ($5.7 million), representing 3.0% of total revenues, compared to 2.3% in the corresponding period in 2011. The increase was primarily due to the different marketing tactics in the two corresponding periods and the increasingly competitive environment in the second quarter 2012.

Technology and content expenses were RMB38.8 million ($6.1 million), representing 3.2% of total revenues, compared to 2.6% in the corresponding period in 2011. The increase was primarily due to the increased headcount of mid to high level engineers who are working to improve Dangdang customers' shopping experience and promote mobile e-commerce.

General and administrative expenses were RMB30.8 million ($4.9 million), representing 2.6% of total revenues, which percentage remained unchanged from the corresponding period in 2011.

Share-based compensation expenses, which were allocated to related expense line items, were RMB2.8 million ($0.4 million) in the second quarter of 2012, compared to RMB2.6 million in the corresponding period in 2011,representing a 7.8% increase.

Dangdang recorded an operating loss of RMB126.2 million ($19.9 million) in the second quarter of 2012, as compared with an operating loss of RMB52.2 million in the corresponding period in 2011, primarily due to the increase in cost of revenues and the increase in fulfillment and marketing expenses.

Operating loss excluding share-based compensation expenses (non-GAAP) was RMB123.4 million ($19.4 million), as compared with an operating loss excluding share-based compensation expenses (non-GAAP) of RMB49.6 million in the corresponding period in 2011.

Net loss was RMB122.2 million ($19.2 million), as compared with a net loss of RMB28.4 million in the corresponding period in 2011, primarily due to the increase in cost of revenues and the increase in fulfillment and marketing expenses. Net loss excluding share-based compensation expenses (non-GAAP) was RMB119.4 million ($18.8 million), as compared with a net loss excluding share-based compensation expenses (non-GAAP) of RMB25.8 million in the corresponding period in 2011.

As of June 30, 2012, Dangdang had cash and cash equivalents, time deposits with original maturities exceeding three months and held-to-maturity investments of RMB1,439.4 million ($226.6 million), as compared to RMB1,391.8 million as of December 31, 2011.

Capital expenditures for the second quarter of 2012 were RMB47.0 million ($7.4 million).

Adjusted EBITDA loss (non-GAAP) in the second quarter of 2012 was RMB113.5 million ($17.9 million), as compared with an adjusted EBITDA loss of RMB43.5 million in the corresponding period in 2011,primarily due to the increase in cost of revenues and the increase in fulfillment and marketing expenses.

Outlook for Third Quarter 2012

Dangdang expects its total net revenues in the third quarter of 2012 to be around RMB1,272 million, representing year-over-year growth of around 40%. This forecast reflects Dangdang's current and preliminary view, which is subject to change.

Conference Call Information

Dangdang's management will host an earnings conference call at 8:00 AM on August 16, 2012, U.S. Eastern Time (or 8:00 PM on August 16, 2012, Beijing/Hong Kong time).

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

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 August 22, 2012:

Additionally, a live and archived webcast of this conference call will be available at http://ir.dangdang.com/ until March 31, 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 840,000 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 third quarter 2012 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 income/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:

Maria Xin
Investor Relations Director
E-commerce China Dangdang Inc.
+86-10-5799-2306
[email protected]

Caroline Straathof
IR Inside
+31-6-54624301
[email protected]

SOURCE E-commerce China Dangdang Inc.