JD.Com Inc (ADR) (NASDAQ:JD), China’s largest online direct sales company, today announced its unaudited financial results for the quarter ended March 31, 2016.

First Quarter 2016 Highlights

  • GMV for the first quarter of 2016 increased by 55% to RMB129.3 billion (US$120.1 billion) from the core GMV (excluding Paipai.com) of RMB83.6 billion in the first quarter of 2015.
  • Net revenues for the first quarter of 2016 were RMB54.0 billion (US$8.4 billion), an increase of 47.3% from the first quarter of 2015. Revenues from services and others, mainly from the Company’s e-commerce platform business, for the first quarter of 2016 were RMB4.0 billion (US$0.6 billion), an increase of 91% from the first quarter of 2015.
  • Loss from operations for the first quarter of 2016 was RMB864.9 million (US$134.1 million) compared to RMB822.6 millionfor the same period last year. Non-GAAP loss from operations2 for the first quarter of 2016 was RMB295.7 million (US$45.9 million), compared to RMB318.0 million for the first quarter of 2015. Non-GAAP operating margin of JD Mall3 for the first quarter of 2016 was 0.5%, compared to negative 0.1% for the first quarter of 2015.
  • Annual active customer accounts increased by 73% to 169.1 million in the 12 months ended March 31, 2016 from 97.8 million in the 12 months ended March 31, 2015, excluding unique customers from Paipai.com.
  • Fulfilled orders in the first quarter of 2016 were 342.1 million, an increase of 54% from 221.5 million orders fulfilled for the core business in the same period in 2015. Fulfilled orders placed through mobile accounted for approximately 72.4% of total orders fulfilled in the first quarter of 2016, an increase of more than 160% compared to the same period in 2015.

“We had a solid first quarter of the year with healthy growth in revenues, new users and mobile traffic,” said Richard Liu, Chief Executive Officer of JD.com. “JD.com’s commitment to authenticity and unwavering focus on the best user experience continue to win the trust of China’s growing middle class, helping us to once again outperform the industry. With our growing reputation as China’s leading online retailer and more top brands discovering the value of partnering with JD.com, we are very excited about the opportunities ahead.”

“Our core JD Mall business showed continued top-line growth momentum and solid improvement in profitability, even in a seasonally slow quarter,” said Sidney Huang, JD.com’s Chief Financial Officer. “We look forward to building on these encouraging results in the year ahead as we partner with more international brands, enhance our big data capabilities and further expand our logistics network. We are also very pleased by the progress of our new business initiatives, including JD Finance, O2O and technology, all of which are well positioned for long-term growth.”

 Recent Business Developments

  • JD.com established partnerships with a number of leading international brands during the quarter to meet the fast-growing demand from Chinese consumers for high-quality, authentic imported products, and help the brands expand their presence inChina. To strengthen its kitchenware offering, JD.com partnered with six top European brands in February, including WMF, WOLL, Zwilling, Fissler, Emsa and Luminarc. Germany’s TOM TAILOR GROUP launched its first Chinese online store on JD Worldwide in March, and Japan’s Kao Group also signed a strategic cooperation agreement with JD Worldwide.
  • In April, JD Mall launched a dedicated platform for home furnishings to connect leading international brands with Chinese consumers. The initiative kicked off at Milan Design Week 2016, with the Company hosting a special furniture and interiors exhibition that showcased the best of Chinese and Italian design.
  • As part of JD.com’s overall efforts to help partners develop brand recognition in China, the Company launched a series of “Super Brand Days.” Beginning this year, JD.com has built highly targeted and effective promotional campaigns with brands including Huggies, LeTV, Lenovo, Samsung, Supor and Wuliangye.
  • In March, JD.com became the first ecommerce company in China to provide paperless electronic signature solutions for deliveries. The adoption of the electronic signature technology is expected to improve operating efficiency and further enhance the delivery experience for users.
  • In March, JD Finance joined China Everbright Bank to launch a co-branded Visa credit card targeting young adults and Chinese travelers abroad. Leveraging its proprietary risk control system and big data capabilities, JD Finance provides back-end credit rating analysis along with seamless online registration to facilitate the issuance of the credit card.
  • In March, the Shenzhen Stock Exchange approved an RMB10 billion asset-based securities program for JD Finance’s consumer financing products over the next 12 months in recognition of JD Finance’s strong risk control capabilities. JD Finance successfully completed the issuance of four tranches of asset-based securities, raising over RMB5 billion in the first four months of 2016, and it has been self-funding its growth in 2016.
  • In April, JD.com completed the merger of its O2O business, JD Daojia, with Dada Nexus Limited, China’s largest crowdsourcing delivery platform, to form a new company. By leveraging the extensive combined crowdsourcing networks of Dada and JD Daojia, the new company will provide low-cost delivery services to China’s retailers, service providers and O2O enterprises, with increased efficiencies, under the Dada brand. The O2O supermarket platform will continue using the JD Daojia brand, focus on the location-based mobile commerce sector and cooperate with offline supermarkets and convenience stores to provide consumers with a speedy premium shopping experience.
  • During the first quarter, JD.com extended its leadership in fulfillment capabilities among China’s ecommerce companies. As ofMarch 31, 2016, JD.com operated 209 warehouses covering an aggregate gross floor area of approximately 4.3 million square meters and a total of 5,987 delivery stations and pickup stations across China.
  • JD.com had approximately 100,000 merchants on its online marketplace and a total of 108,985 full-time employees as ofMarch 31, 2016.

First Quarter 2016 Financial Results

GMV and Net Revenues. GMV for the first quarter of 2016 was RMB129.3 billion (US$20.1 billion), up 55% from the core GMV for the first quarter of 2015. GMV from the online direct sales and online marketplace businesses totaled RMB76.2 billion and RMB53.1 billion, respectively, in the first quarter of 2016, an increase of 50% and 63%, respectively, from the core GMV for the first quarter of 2015. GMV from electronics and home appliance products was RMB67.5 billion in the first quarter of 2016, an increase of 54% from the core GMV for the first quarter of 2015, while GMV from general merchandise and others was RMB61.8 billion in the first quarter of 2016, an increase of 56% from the core GMV for the first quarter of 2015. GMV from general merchandise and others increased to 48% of total GMV in the first quarter of 2016 from 47% in the first quarter of 2015.

For the first quarter of 2016, JD.com reported net revenues of RMB54.0 billion (US$8.4 billion), representing a 47% increase from the same period in 2015. The increases in GMV and net revenues were primarily due to the growth in active customer accounts and the number of fulfilled orders in the first quarter of 2016. Net revenues from online direct sales increased by 45%, while net revenues from services and others increased by 91% in the first quarter of 2016, as compared to the first quarter of 2015, primarily due to the increased revenues from the Company’s rapidly expanding online marketplace, advertising services and third-party logistics services.

Cost of Revenues.  Cost of revenues increased by 44% to RMB46.2 billion (US$7.2 billion) in the first quarter of 2016 from RMB32.2 billion in the first quarter of 2015. This increase was primarily due to the growth of the Company’s online direct sales business, the increased traffic acquisition costs directly related to the online marketing services provided to merchants and suppliers as well as interest expenses related to JD Finance.

Fulfillment Expenses.  Fulfillment expenses, which primarily include procurement, warehousing, delivery and customer service expenses, increased by 68% to RMB4.5 billion (US$0.7 billion) in the first quarter of 2016 from RMB2.7 billion in the first quarter of 2015. This increase was primarily due to the increase in the number of fulfillment employees associated with the expansion of the Company’s fulfillment network into lower-tier cities and rural areas, as well as the growth in consumable product offerings with lower average order size.

Marketing Expenses.  Marketing expenses increased by 48% to RMB2.1 billion (US$0.3 billion) in the first quarter of 2016 fromRMB1.4 billion in the first quarter of 2015. Non-GAAP marketing expenses4 increased by 61% to RMB1.8 billion (US$0.3 billion) in the first quarter of 2016 from RMB1.1 billion in the first quarter of 2015. This increase was primarily due to the increased brand advertising activities and new business promotions in the first quarter of 2016.

Technology and Content Expenses.  Technology and content expenses increased by 58% to RMB1.1 billion (US$0.2 billion) in the first quarter of 2016 from RMB0.7 billion in the first quarter of 2015. Non-GAAP technology and content expenses4 increased by 52% to RMB1.0 billion (US$0.2 billion) in the first quarter of 2016 from RMB0.7 billion in the first quarter of 2015. This increase was primarily due to an increase in the number of R&D staff and other spending in mobile, big data and new businesses.

General and Administrative Expenses.  General and administrative expenses increased by 85% to RMB890.0 million (US$138.0 million) in the first quarter of 2016 from RMB479.9 million in the first quarter of 2015. Non-GAAP general and administrative expenses4 increased by 64% to RMB579.7 million (US$89.9 million) in the first quarter of 2016 from RMB353.5 million in the first quarter of 2015. This increase was primarily due to the increase in spending in various new business initiatives.

Loss from operations and Non-GAAP Loss from operations.  Loss from operations for the first quarter of 2016 was RMB864.9 million (US$134.1 million), compared to RMB822.6 million for the same period last year. Non-GAAP loss from operations for the first quarter of 2016 was RMB295.7 million (US$45.9 million), compared to RMB318.0 million in the first quarter of 2015. Non-GAAP operating margin of JD Mall for the first quarter of 2016 was 0.5%, compared to negative 0.1% for the first quarter of 2015. Non-GAAP loss from operations of New Businesses, including JD Finance, O2O, technology initiatives and overseas business for the first quarter of 2016 was RMB0.6 billion. Non-GAAP EBITDA margin5 for the first quarter of 2016 was 0.4%, compared to negative 0.2% for the first quarter of 2015.

Share of results of equity investees.  Share of results of equity investees for the first quarter of 2016 was RMB164.0 million loss (US$25.4 million), compared to nil for the same period last year. This increase was primarily due to losses picked up from the Company’s equity method investments in Bitauto and Tuniu.

Net Loss Attributable to Ordinary Shareholders and Non-GAAP Net Loss Attributable to Ordinary Shareholders.  Net loss attributable to ordinary shareholders for the first quarter of 2016 was RMB909.8 million (US$141.1 million), compared to RMB710.2 million for the same period last year. Non-GAAP net loss attributable to ordinary shareholders6 for the first quarter of 2016 wasRMB205.4 million (US$31.9 million) as compared to RMB205.6 million in the first quarter of 2015.

Net Loss Per ADS and Non-GAAP Net Loss Per ADS7.  Net loss per ADS for the first quarter of 2016 was RMB0.66 (US$0.10), compared to RMB0.52 for the first quarter of 2015. Non-GAAP net loss per ADS for the first quarter of 2016 was RMB0.15 (US$0.02)as compared to RMB0.15 in the first quarter of 2015.

Cash Flow and Working Capital

As of March 31, 2016, the Company’s cash and cash equivalents, restricted cash and short-term investments totaled RMB34.5 billion(US$5.4 billion). For the first quarter of 2016, free cash flow8 of the Company and net cash provided by financing activities related to JD Finance were as follows:

  For the three months ended
    March 31, 2015   March 31, 2016   March 31, 2016
    RMB   RMB   US$  
    (In thousands)
Net cash provided by operating activities     2,408,784       2,357,442     365,608  
Add: Impact from change in balances of financial products of internet financing activities9     1,161,623       1,598,936     247,974  
Less: Capital expenditures     (1,249,637 )     (1,042,011 )   (161,602 )
Free cash flow     2,320,770       2,914,367     451,980  
Net cash provided by financing activities related to JD Finance           10,590,458     1,642,441  

Net cash provided by financing activities related to JD Finance for the first quarter of 2016 includes net proceeds from JD Finance’s Series A financing, short-term borrowing and nonrecourse securitization debt of RMB6.6 billion (US$1.0 billion), RMB0.9 billion(US$0.1 billion) and RMB3.1 billion (US$0.5 billion), respectively.

Net inventories decreased to RMB20.4 billion (US$3.2 billion) as of March 31, 2016 from RMB20.5 billion as of December 31, 2015. Inventory turnover days10 for the 12 months ended March 31, 2016 and March 31, 2015 were 37.3 days and 35.3 days, respectively.

Accounts payable primarily include accounts payable to suppliers associated with the Company’s online direct sales business and those to third-party sellers on the Company’s online marketplace. From late 2013, the Company started to provide supply chain financing to the Company’s suppliers of the online direct sales business. As of March 31, 2016 and December 31, 2015, the balances of financing provided to the Company’s suppliers that affected accounts payable balances amounted to RMB4.7 billion (US$0.7 billion) and RMB4.7 billion, respectively. The Company’s accounts payable turnover days11 for the online direct sales business excluding the impact from supply chain financing for the 12 months ended March 31, 2016 and March 31, 2015 were 46.3 days and 41.9 days, respectively.

Accounts receivable primarily include amounts due from customers and online payment channels. From early 2015, the Company started to provide consumer financing to its customers. As of March 31, 2016 and December 31, 2015, the balances of current portion of financing provided to the Company’s customers that affected accounts receivable balances amounted to RMB9.1 billion (US$1.4 billion) and RMB7.7 billion, respectively. The Company’s accounts receivable turnover days12 excluding the impact from consumer financing were 3.1 days both for the 12 months ended March 31, 2016 and March 31, 2015.

As of March 31, 2016, the ending balances of the consumer financing and supply chain financing were RMB11.5 billion (US$1.8 billion) and RMB6.2 billion (US$1.0 billion), respectively.

Second Quarter 2016 Guidance

Net revenues for the second quarter of 2016 are expected to be between RMB64.2 billion and RMB66.2 billion, representing a growth rate between 40% and 44% compared with the second quarter of 2015. This forecast reflects JD.com’s current and preliminary expectation, which is subject to change. (Original Source)

Shares of JD.com Inc closed last Friday at $25.2, up $0.35 or 1.41%. JD has a 1-year high of $38 and a 1-year low of $21.55. The stock’s 50-day moving average is $26.90 and its 200-day moving average is $27.80.

On the ratings front, JD.com has been the subject of a number of recent research reports. In a report issued on May 3, Jefferies Co. analyst Cynthia Meng assigned a Buy rating on JD. Separately, on April 15, Merrill Lynch’s Eddie Leung reiterated a Hold rating on the stock and has a price target of $37.

According to TipRanks.com, which ranks over 7,500 financial analysts and bloggers to gauge the performance of their past recommendations, Cynthia Meng and Eddie Leung have a total average return of -3.7% and 26.9% respectively. Meng has a success rate of 40.0% and is ranked #3063 out of 3828 analysts, while Leung has a success rate of 56.0% and is ranked #230.

Overall, 2 research analysts have assigned a Hold rating and 5 research analysts have given a Buy rating to the stock. When considering if perhaps the stock is under or overvalued, the average price target is $34.75 which is 37.9% above where the stock closed last Friday.

JD.com, Inc. is engaged in the sale of electronics products and general merchandise products, including audio, video products and books. It also offers online sales of home appliances, digital communications, computers, home merchandise, apparel, baby book, food, and others. The company was founded on June 18, 1998 by Liu Qiang Dong and is headquartered in Beijing, China.