Dangdang Announces Third Quarter 2013 Results Gross Margin Expanded to 17.6% in Q3 2013

Net Loss Margin in Q3 2013 Further Narrowed to 1.8%

GMV of Marketplace in Q3 2013 Increased by 184% Year-Over-Year

BEIJING, Nov. 14, 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 third quarter ended September 30, 2013.

Third Quarter 2013 Highlights

  • Gross Margin in the third quarter of 2013 was 17.6%, compared to 15.2% in the third quarter of 2012 and 17.1% in the second quarter of 2013.
  • Net Loss for the third quarter of 2013 was RMB27.9 million ($4.6 million), representing negative 1.8% of total net revenues, as compared with a net loss of RMB100.1 million in the third quarter of 2012 representing negative 7.8% of total net revenues and a net loss of RMB63.9 million representing negative 4.3% of total net revenues in the second quarter of 2013.
  • Gross Merchants Value ("GMV") of the marketplace in the third quarter of 2013 was RMB969.6 million ($158.4 million), a 184% increase from the corresponding period in 2012. The combined general merchandise sales from both the marketplace and self-procurement business increased 88% year-over-year.
  • Dangdang had approximately 8.4 million active customers including approximately 2.9 million new customers in the third quarter of 2013, representing 21% and 19% increases, respectively, from the corresponding period in 2012. Total orders for the third quarter of 2013 were approximately 15.7 million, a 13% increase from the corresponding period in 2012.

Ms. Peggy Yu Yu, Dangdang's Executive Chairwoman commented, "This quarter, we made a meaningful improvement to our bottom line by moving certain lower-margin general merchandise from self-procurement to  the marketplace and achieving better operating efficiency.  While this impacted our topline growth, the end result was an increase in gross margin and the best bottom line performance since the second quarter of 2011."

"We continued to enjoy our leadership position in the online books and media sector. At the same time, we adjusted our self-procurement categories to further improve gross profit.  Dangdang's marketplace program exceeded our expectations this quarter, with marketplace GMV growing 184% year-over-year. We are closer to achieving our goal of transforming Dangdang from an online bookstore into an integrated online shopping mall targeting mid-to-high end customers. Going forward, we plan to better utilize our customer base by developing strategies to tap into their purchasing power through cross-category sales and enhancements to the overall customer experience. In the near term, we will seek to balance revenue growth and bottom line performance."

"We achieved solid revenue growth and year-over-year gross margin expansion of 240 basis points.  Further improvement to fulfillment and operating leverage helped reduce our net loss to RMB27.9 million, or a negative 1.8% of total net revenues, which is the best performance since the second quarter of 2011," said Mr. Jun Zou, Dangdang's Chief Financial Officer. "We generated positive operating cash flow of RMB158 million compared with negative RMB106 million in the same period of last year. We remain focused on improving our financial performance by increasing our top line, expanding gross margin and identifying operational efficiencies with the goal of achieving profitability in the near future."

Third Quarter 2013 Results

Dangdang's total net revenues in the third quarter of 2013 were RMB1,525.9 million ($249.3 million), a 19% increase from the corresponding period in 2012. 

Media product revenue for the third quarter of 2013 was RMB1,046.0 million ($170.9 million), representing a 23% increase from the corresponding period in 2012. General merchandise revenue for the third quarter of 2013 was RMB421.8 million ($68.9 million), a 6% increase from the corresponding period in 2012. Other revenue including revenue from marketplace for the third quarter of 2013 was RMB58.1 million ($9.5 million), representing a 44% increase from the corresponding period in 2012. 

Dangdang had approximately 8.4 million active customers including approximately 2.9 million new customers in the third quarter of 2013, representing 21% and 19% increases, respectively, from the corresponding period in 2012. Total orders for the third quarter of 2013 were approximately 15.7 million, a 13% increase from the corresponding period in 2012. 

Cost of revenues was RMB1,257.5 million ($205.5 million), representing 82.4% of total net revenues, as compared to 84.8% in the corresponding period in 2012. The decreased cost of revenues as a percentage of total net revenues was primarily due to reducing some lower margin self-procurement general merchandise. Gross margin in the third quarter of 2013 was 17.6%, as compared to 15.2% in the corresponding period in 2012 and 17.1% in the second quarter of 2013. The year-over-year increase resulted from strong gross margin contribution from books and media, and the increase in other revenue, representing the sustained scaling of the marketplace.

Fulfillment expenses which include warehousing and shipping expenses, were RMB179.3 million ($29.3 million), representing 11.7% of total net revenues, compared to 14.4% in the corresponding period in 2012 and 12.0% in the second quarter of 2013. The year-over-year and quarter-over-quarter decreases in fulfillment expenses as a percentage of total net revenues were primarily due to economies of scale, more efficient warehouse operation and lower shipping costs.    

Marketing expenses were RMB58.1 million ($9.5 million), representing 3.8% of total net revenues, compared to 3.6% in the corresponding period in 2012 and 5.1% in the second quarter of 2013. The year-over-year increase in marketing expenses as a percentage of total net revenues was primarily due to increased investment in online marketing programs to build awareness of Dangdang's fashion and apparel destination category.  The quarter-over-quarter decrease in marketing expenses as a percentage of net revenues was due to the reduction of offline advertising including television advertising.

Technology and content expenses were RMB44.6 million ($7.3 million), representing 2.9% of total net revenues, compared to 3.2% in the corresponding period in 2012 and 3.1% in the second quarter of 2013. The year-over-year and quarter-over-quarter decreases in technology and content expenses as a percentage of total net revenues were primarily due to operating leverage.

General and administrative expenses were RMB36.0 million ($5.9 million), representing 2.4% of total net revenues, compared to 2.6% in the corresponding period in 2012. The decrease in general and administrative expenses as a percentage of total net revenues was primarily due to larger scale and improved management efficiency.

Share-based compensation expenses, which were allocated to related expense line items, were RMB2.7 million ($0.4 million) in the third quarter of 2013, compared to RMB2.8 million in the corresponding period in 2012, representing a 1.9% decrease.

Dangdang recorded an operating loss of RMB43.3 million ($7.1 million) in the third quarter of 2013, as compared with an operating loss of RMB104.6 million in the corresponding period in 2012, primarily due to strong execution on margin expansion and operating leverage. 

Operating loss excluding share-based compensation expenses (non-GAAP) was RMB40.6 million ($6.6 million), as compared with an operating loss excluding share-based compensation expenses (non-GAAP) of RMB101.8 million in the corresponding period in 2012.

Net loss was RMB27.9 million ($4.6 million), as compared with losses of RMB100.1  million and RMB 63.9 million in the third quarter of 2012 and second quarter of 2013, respectively, primarily due to the Company's efforts to increase gross profit and operating leverage.

Net margin was negative 1.8%, as compared with a negative net margin of 7.8% in the corresponding period in 2012.

Net loss excluding share-based compensation expenses (non-GAAP) was RMB25.2 million ($4.1 million), as compared with a net loss excluding share-based compensation expenses (non-GAAP) of RMB97.3 million in the corresponding period in 2012.

As of September 30, 2013, Dangdang had cash and cash equivalents, short-term time deposits and held-to-maturity investments of RMB1,432.9 million ($234.1  million), as compared to RMB1,634.6 million, including RMB709.4 million of restricted cash as of December 31, 2012. As of September 30, 2013, Dangdang had no restricted cash and no short-term bank loans.

Capital expenditures for the third quarter of 2013 were RMB16.9 million ($2.8 million), including RMB9.0 million spending on the construction of Tianjin warehouse.

Adjusted EBITDA loss (non-GAAP) in the third quarter of 2013 was RMB28.9 million   ($4.7 million), as compared with an adjusted EBITDA loss of RMB90.6 million in the corresponding period in 2012.

Outlook for Fourth Quarter 2013

Dangdang expects total net revenue in the fourth quarter of 2013 to be around RMB1,937.8 million, representing year-over-year growth of around 20%. The Company also expects GMV from its marketplace to grow at a rate of 150% year-over-year in the fourth quarter of 2013. This forecast reflects Dangdang's current and preliminary view, which is subject to change.

Conference Call Information

Dangdang's management will host a conference call at 7:00 A.M. Eastern Time (or 8:00 P.M. Beijing/Hong Kong time) on Nov 14, 2013.

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

US:

China, Domestic:

+1-845-675-0437

+400-620-8038


China Domestic

+400-620-8038


Hong Kong:

+852-2475-0994


International:

+65 67239381


Please dial in 10 minutes ahead of the schedule 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 through November 21, 2013:

International:

+61 2 8199 0299


Conference ID:

89229468


A live and archived webcast of this conference call will be available at http://ir.dangdang.com through November 14, 2014.

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 930,000 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 fourth 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 its 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:

Sophia Zhou
Investor Relations Director
E-commerce China Dangdang Inc.
Phone: +86-10-5799-2306
E-mail: ir@dangdang.com

Elaine Ketchmere, CFA
Compass Investor Relations
+1 310-528-3031
Email: eketchmere@compass-ir.com     

-  Financial tables Follow -

E-Commerce China Dangdang Inc.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share related data)












As of December 31,
2012


As of September 30,
2013


RMB


RMB

US$


(Audited)


(Unaudited)

(Unaudited)

ASSETS





Current assets:





Cash and cash equivalents

432,703


298,237

48,732

Restricted cash

709,417


-

-

Time deposits with original maturities exceeding
 three months

492,445


854,615

139,643

Held-to-maturity investments

-


280,000

45,752

Inventories

1,485,579


1,404,523

229,497

Accounts receivable, net

56,610


75,791

12,384

Prepaid expenses and other current assets

203,294


256,555

41,920

Amounts due from a related party

320


466

76

Total current assets

3,380,368


3,170,187

518,004






Fixed assets, net

116,391


102,230

16,704

Construction in progress

4,883


139,523

22,798

Prepaid land lease payment

44,209


43,539

7,114

Prepaid expenses and deposits

37,275


10,610

1,734

Total assets

3,583,126


3,466,089

566,354






LIABILITIES AND SHAREHOLDERS' EQUITY




Current liabilities:





Short-term bank loans

600,000


-

-

Accounts payable

1,563,787


2,099,776

343,101

Deferred revenue

228,765


205,991

33,659

Accrued expenses and other current liabilities

414,776


573,812

93,759

Amounts due to related parties

2,333


-

-

Total current liabilities

2,809,661


2,879,579

470,519

Non-current liablities

33,966


29,730

4,858

Total liabilities

2,843,627


2,909,309

475,377






Shareholders' equity:





Class A common shares (par value of
 US$0.0001 per share; 686,505,790 shares authorized; 
 268,919,350 and 270,294,095 shares issued and 
 outstanding as of December 31, 2012 and 
 September 30, 2013, respectively)

200


200

33

Class B common shares (par value of US$0.0001
 per share; 313,494,210 shares authorized;
 131,916,660 and 131,876,660 shares issued and 
 outstanding as of December 31, 2012 and
 September 30, 2013, respectively)

103


103

17

Additional paid-in capital

1,855,164


1,867,903

305,212

Accumulated other comprehensive loss

(92,066)


(122,999)

(20,098)

Accumulated deficit

(1,023,902)


(1,188,427)

(194,187)

Total shareholders' equity

739,499


556,780

90,977

Total liabilities and shareholders' equity

3,583,126


3,466,089

566,354

 

 

E-Commerce China Dangdang Inc.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(In thousands, except share related data)




Three Months Ended


September 30,
2012


September 30,
2013


RMB


RMB

US$


(Unaudited)


(Unaudited)

(Unaudited)

Net revenues





  Product revenue

1,247,281


1,467,748

239,828

    Media

849,856


1,045,953

170,907

    General merchandise

397,425


421,795

68,921

  Other revenue

40,282


58,118

9,496






Total net revenues

1,287,563


1,525,866

249,324






Cost of revenues

(1,091,413)


(1,257,460)

(205,467)






Gross profit 

196,150


268,406

43,857






Operating expenses:





  Fulfillment 

(185,747)


(179,255)

(29,290)

  Marketing 

(45,839)


(58,142)

(9,500)

  Technology and content 

(40,818)


(44,643)

(7,295)

  General and administrative 

(33,143)


(36,007)

(5,883)

  Government grants

4,794


6,348

1,037






Total operating expenses, net

(300,753)


(311,699)

(50,931)






Loss from operations

(104,603)


(43,293)

(7,074)






Interest income

8,122


10,203

1,667






Other (expenses) income, net

(3,578)


5,200

850






Loss before income taxes

(100,059)


(27,890)

(4,557)






Income tax expense

-


-

-






Net loss

(100,059)


(27,890)

(4,557)











Net loss attributable to common shareholders

(100,059)


(27,890)

(4,557)






Loss per common share:





                                         - Basic

(0.25)


(0.07)

(0.01)

                                         - Diluted

(0.25)


(0.07)

(0.01)






Loss per ADS:





                                         - Basic

(1.25)


(0.35)

(0.06)

                                         - Diluted

(1.25)


(0.35)

(0.06)






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





                                         - Basic

(100,059)


(27,890)

(4,557)

                                         - Diluted

(100,059)


(27,890)

(4,557)

Shares used in loss per common share computation: 










Class A common shares:





                                         - Basic

268,583,299


269,699,201

269,699,201

                                         - Diluted

400,499,959


401,576,296

401,576,296

Class B common shares:





                                         - Basic

131,916,660


131,877,095

131,877,095

                                         - Diluted

131,916,660


131,877,095

131,877,095






ADSs used in loss per ADS calculation: 





                                         - Basic

80,099,992


80,315,259

80,315,259

                                         - Diluted

80,099,992


80,315,259

80,315,259






Other comprehensive income (loss), net of tax of nil





  Foreign currency translation adjustment

4,485


(6,996)

(1,143)






Comprehensive loss attributable to common
  shareholders

(95,574)


(34,886)

(5,700)

 

 

Share-based compensation

Share-based compensation expenses included are as follows:

(In thousands, except share related data)



Three Months Ended


September 30,
2012


September 30,
2013


RMB


RMB

US$


(Unaudited)


(Unaudited)

(Unaudited)






Operating expenses:





   Fulfillment

478


450

74

   Marketing

83


122

20

   Technology and content

248


219

36

   General and administrative

1,966


1,930

315

Total

2,775


2,721

445
















(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 US$ are made at a
      rate of RMB6.1200 to US$1.00, the noon
buying rate on September 30, 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


September 30,
2012


September 30,
2013


RMB


RMB

US$


(Unaudited)


(Unaudited)

(Unaudited)






Loss from operations

(104,603)


(43,293)

(7,074)

Share-based compensation expenses

2,775


2,721

445

Non-GAAP operating loss

(101,828)


(40,572)

(6,629)






Operating margin 

-8.1%


-2.8%

-2.8%

Impact due to share-based compensation expenses

0.2%


0.2%

0.2%

Non-GAAP operating margin

-7.9%


-2.6%

-2.6%






Net loss

(100,059)


(27,890)

(4,557)

Share-based compensation expenses

2,775


2,721

445

Non-GAAP net loss

(97,284)


(25,169)

(4,112)

 

Adjusted EBITDA 


(In thousands)



Three Months Ended


September 30,
2012


September 30,
2013


RMB


RMB

US$


(Unaudited)


(Unaudited)

(Unaudited)






Loss from operations

(104,603)


(43,293)

(7,074)






Add back:










 Depreciation and amortization  

11,187


11,635

1,901






 Share-based compensation expenses 

2,775


2,721

445






 Adjusted EBITDA 

(90,641)


(28,937)

(4,728)

SOURCE E-commerce China Dangdang Inc.



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