JD.Com Inc(ADR) (NASDAQ:JD), China’s largest online direct sales company, today announced its unaudited financial results for the quarter ended June 30, 2015.
Second Quarter 2015 Highlights1
- Net revenues for the second quarter of 2015 were RMB45.9 billion (US$7.4 billion), an increase of 61% from the second quarter of 2014. Net revenues from services and others for the second quarter of 2015 were RMB3.3 billion (US$0.5 billion), an increase of 108% from the second quarter of 2014.
- Net loss for the second quarter of 2015 was RMB510.4 million (US$82.3 million) and net margin was negative 1.1%. Non-GAAP net loss2 for the second quarter of 2015 was RMB15.7 million (US$2.5 million) and non-GAAP net margin was negative 0.03%.
- GMV for the second quarter of 2015 was RMB114.5 billion (US$18.5 billion), an increase of 82% compared with the second quarter of 2014. JD Mall GMV for the second quarter of 2015 increased by 92% year-over-year.
- Annual active customer accounts3 increased by 72% to 118.0 million in the 12 months ended June 30, 2015 from 68.5 million in the 12 months ended June 30, 2014.
- Fulfilled orders in the second quarter of 2015 were 305.6 million, an increase of 87% from 163.7 million for the same period in 2014. Fulfilled orders placed through mobile accounted for approximately 47% of total orders fulfilled in the second quarter of 2015, an approximately 290% increase compared to the same period in 2014.
“We are pleased to report a strong performance for the second quarter, as China’s consumers increasingly look to JD.com for authentic products and the best online shopping experience,” said Richard Liu, founder and Chief Executive Officer of JD.com. “During the quarter, we enhanced our mobile offering, partnered with premium international brands and expanded our JD Worldwide cross-border e-commerce initiative. Looking ahead, we will focus on serving Chinese consumers by investing in innovative business initiatives that leverage JD.com’s core expertise in e-commerce and logistics.”
“We are encouraged by another quarter of strong top-line growth, led by our JD Mall business,” said Sidney Huang, JD.com’s Chief Financial Officer. “China’s e-commerce market remains extremely dynamic and in order to achieve long-term sustainable growth and economies of scale, we will continue to invest selectively in high-growth initiatives while maintaining our focus on customer experience and operating efficiency.”
Announcement on Yonghui Investment
On August 7, the Company entered into definitive agreements with Yonghui Superstores Co., Ltd, a leading hypermarket and supermarket operator in China. Under the agreements entities within the Company group will subscribe for newly issued ordinary shares of Yonghui at a purchase price of RMB9.00 (approximately US$1.45) per share with a total consideration of RMB4.31 billion(approximately US$700 million). Upon the completion of the transaction, the Company will hold a 10% equity interest in Yonghui and have the right to nominate two directors (including one independent director) on Yonghui’s board of directors. In addition, the Company and Yonghui have formed a strategic partnership to strengthen supply chain management capability primarily through joint procurement, and will continue to explore development opportunities in O2O initiatives and other areas of potential strategic cooperation.
Recent Business Developments
- In June and July, JD.com launched Japanese Mall, Australian Mall and U.S. Mall, three new channels on JD Worldwide dedicated to offering authentic imported products to customers in China. They join Korean Mall and French Mall, both of which launched in the first quarter of 2015.
- In early May, as part of JD.com’s O2O strategy, JD Daojia officially launched its crowdsourced delivery platform, which leverages part-time delivery people to provide two-hour grocery delivery service in partnership with offline stores in selected urban areas.
- Leveraging its cold chain delivery capability, for a limited time in June JD.com offered delivery of unpasteurized “original beer” to customers in six cities including Beijing, Shanghai, Tianjin, Langfang, Suzhou and Jiaxing, featuring brands including Tsingtao and Suntory.
- As of June 30, over 90% of JD Crowdfunding projects have been successfully financed, including over one hundred projects above the one million RMB level.
- In May, JD.com led a US$70 million Series C round of investment in FruitDay, a leading fresh produce e-retailer in China.
- During the second quarter, JD.com extended its leadership in fulfillment capabilities among e-commerce companies in China. As of June 30, 2015, JD.com operated 166 warehouses in 44 cities and a total of 4,142 delivery stations and pickup stations and its delivery network covered 2,043 counties and districts. JD.com’s 211 same-day and next-day delivery program covered 135 and 951 counties and districts, respectively, as of July 31, 2015.
- JD.com had approximately 76,000 merchants on its online marketplace and a total of 84,322 full-time employees as of June 30, 2015.
Second Quarter 2015 Financial Results
GMV and Net Revenues. GMV for the second quarter of 2015 was RMB114.5 billion (US$18.5 billion), up 82% from the second quarter of 2014. GMV from the online direct sales and online marketplace businesses totaled RMB64.7 billion and RMB49.8 billion, respectively, in the second quarter of 2015, an increase of 65% and 110%, respectively, from the second quarter of 2014. GMV from electronics and home appliance products was RMB59.0 billion in the second quarter of 2015, an increase of 70% from the second quarter of 2014, while GMV from general merchandise and others was RMB55.5 billion in the second quarter of 2015, an increase of 97% from the second quarter of 2014. As a percentage of total GMV, GMV from general merchandise and others increased to 48.5% in the second quarter of 2015 from 44.8% in the second quarter of 2014.
For the second quarter of 2015, JD.com reported net revenues of RMB45.9 billion (US$7.4 billion), representing a 61% increase from the same period in 2014. 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 second quarter of 2015. Net revenues from online direct sales increased by 58%, while net revenues from services and others increased by 108% in the second quarter of 2015, as compared to the second quarter of 2014, primarily due to the increased revenues from the Company’s rapidly expanding online marketplace and third-party logistics services.
Cost of Revenues. Cost of revenues increased by 57% to RMB40.0 billion (US$6.5 billion) in the second quarter of 2015 fromRMB25.5 billion in the second quarter of 2014. The increase was primarily due to the growth of the Company’s direct sales business and the increased traffic acquisition costs directly related to the online marketing services provided to merchants and suppliers.
Fulfillment Expenses. Fulfillment expenses, which primarily include procurement, warehousing, delivery and customer service expenses, increased by 62% to RMB3.3 billion (US$0.5 billion) in the second quarter of 2015 from RMB2.0 billion in the second quarter of 2014. This increase was primarily due to the increase in the number of fulfillment employees associated with the expansion of the Company’s fulfillment infrastructure to smaller cities as well as the expansion of delivery services provided to merchants on the Company’s marketplace.
Marketing Expenses. Marketing expenses increased by 86% to RMB2.0 billion (US$0.3 billion) in the second quarter of 2015 fromRMB1.1 billion in the second quarter of 2014. The increase of marketing expenses was primarily due to the increased brand advertising and other marketing activities, including advertising expenditure on both online and offline channels for the special promotional campaigns in June 2015 to celebrate our anniversary.
Technology and Content Expenses. Technology and content expenses increased by 87% to RMB784.6 million (US$126.6 million) in the second quarter of 2015 from RMB420.0 million in the second quarter of 2014. This increase was primarily due to an increase in the number of technology employees, which included the addition of research and development talent, as well as senior technology employees hired to continuously improve the Company’s mobile and big data technologies.
General and Administrative Expenses. General and administrative expenses increased by 35% to RMB614.1 million (US$99.0 million) in the second quarter of 2015 from RMB455.4 million in the second quarter of 2014. Non-GAAP general and administrative expenses4 increased by 67% to RMB429.4 million (US$69.3 million) in the second quarter of 2015 from RMB257.0 million in the second quarter of 2014. The increase of non-GAAP general and administrative expenses was generally in line with our expanded scale of operations.
Net Loss and Non-GAAP Net Loss. Net loss for the second quarter of 2015 was RMB510.4 million (US$82.3 million), compared toRMB582.5 million for the same period last year. Non-GAAP net loss for the second quarter of 2015 was RMB15.7 million (US$2.5 million) as compared to RMB11.8 million in the second quarter of 2014. Non-GAAP net margin for the second quarter of 2015 was negative 0.03% as compared to negative 0.04% in the second quarter of 2014.
Net Loss Per ADS5 and Non-GAAP Net Loss Per ADS6. Net loss per ADS for the second quarter of 2015 was RMB0.37 (US$0.06), compared to RMB5.86 for the second quarter of 2014. Non-GAAP net loss per ADS for the second quarter of 2015 was RMB0.01(US$0.00) as compared to RMB0.01 in the second quarter of 2014.
Cash Flow and Working Capital
As of June 30, 2015, the Company’s cash and cash equivalents, restricted cash and short-term investments totaled RMB25.2 billion(US$4.1 billion), and fair value of our investments in publicly listed companies (within investment in equity investees and investment securities) totaled RMB8.9 billion (US$1.4 billion).
||For the three months ended
||June 30, 2014
||June 30, 2015
||June 30, 2015
|Net cash provided by/(used in) operating activities
|Add: Impact from internet financing activities7
|Less: Capital expenditures
|Free cash inflow
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 June 30, 2015 and December 31, 2014, the balances of financing provided to the Company’s suppliers that affected accounts payable balances amounted to RMB3.9 billion (US$0.6 billion) and RMB1.5 billion, respectively. The Company’s accounts payable turnover days8 for the online direct sales business excluding the impact from supply chain financing were 42.5 days in the second quarter of 2015 and 40.7 days in the second quarter of 2014.
Net inventories increased to RMB17.7 billion (US$2.9 billion) as of June 30, 2015 from RMB12.2 billion as of December 31, 2014. Inventory turnover days9 were 34.5 days in the second quarter of 2015 and 34.3 days in the second quarter of 2014.
Transaction with Tuniu Corporation (“Tuniu”)
On May 8, 2015, JD.com and Tuniu entered into a series of share subscription and business cooperation agreements to jointly provide superior leisure travel products and high-quality online travel shopping experience, pursuant to which the Company subscribed to 65,625,000 newly issued ordinary shares of Tuniu. Together with the previously held 12,436,780 ordinary shares ofTuniu, upon completion of the transaction on May 22, 2015, JD.com held approximately 28% of Tuniu’s issued and outstanding shares, and adopted equity method of accounting to account for such investments. JD.com will report its interest in Tuniu one quarter in arrears, which will enable the Company to provide its financial disclosure independent of Tuniu’s reporting schedule.
In May 2015, the board of directors approved a 10-year compensation plan for Mr. Richard Qiangdong Liu, the Company’s chairman and chief executive officer. Under this plan, Mr. Liu will receive RMB1.00 per year in cash salary and zero cash bonus during the 10-year period. He has been granted an option to acquire a total of 26,000,000 Class A ordinary shares of the Company, representing approximately 0.9% of the Company’s total shares outstanding, at an exercise price of $16.70 per share (or $33.40 per ADS) under the Company’s Share Incentive Plan, subject to a 10-year vesting schedule with 10% of the award vested on each anniversary of the grant date. The Company will not grant any additional equity incentive to Mr. Liu during the 10-year period.
Appointment of Chief Public Affairs Officer
As part of an organizational restructuring implemented to efficiently manage the continued rapid growth of the Company, JD.comtoday announced the appointment of Ye Lan to the position of Chief Public Affairs Officer, effective immediately. In his new role, Mr. Lan’s responsibilities will include overseeing a number of key operational areas, including the Company’s public affairs team.
In his previous position, Mr. Lan served as JD.com’s Chief Marketing Officer beginning in 2012 and was instrumental in driving the Company’s sales and marketing performance.
Third Quarter 2015 Guidance
Net revenues for the third quarter of 2015 are expected to be between RMB43.2 billion and RMB44.7 billion, representing a growth rate between 49% and 54% compared with the third quarter of 2014. This forecast reflects JD.com’s current and preliminary expectation, which is subject to change. (Original Source)
Shares of JD.com closed yesterday at $32.81. JD has a 1-year high of $38 and a 1-year low of $21.78. The stock’s 50-day moving average is $33.58 and its 200-day moving average is $31.51.
On the ratings front, JD has been the subject of a number of recent research reports. In a report issued on May 11, Suntrust Robinson Humphrey analyst Robert Peck maintained a Buy rating on JD, with a price target of $37, which represents a potential upside of 12.8% from where the stock is currently trading. Separately, on the same day, Brean Murray Carret’s Fawne Jiang reiterated a Buy 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, Robert Peck and Fawne Jiang have a total average return of 11.4% and 3.9% respectively. Peck has a success rate of 59.2% and is ranked #310 out of 3728 analysts, while Jiang has a success rate of 42.9% and is ranked #1258.
The street is mostly Bullish on JD stock. Out of 5 analysts who cover the stock, 4 suggest a Buy rating and one recommends to Hold the stock. The 12-month average price target assigned to the stock is $39.50, which represents a potential upside of 20.4% from where the stock is currently trading.
JD.com Inc is an online direct sales company in China. The Company acquires products from suppliers and sell them directly to its customers through its website and mobile applications.